10 Crucial Questions About Labour Budget 2024 You Were Afraid to Ask

How does the new 2024 autumn budget affect you as a doctor, dentist or NHS healthcare professional? How does it affect you as an individual, as an investor? Now, you might be feeling anxious and a bit of a mix of curiosity and concern. And with a lot of the noise in the media, especially financial media, you might be wondering, how is any of this my business? How does it affect me personally? My wallet? Well, that's what we're addressing in this video with the top 10 questions and also we'll provide the answers. These are the top 10 questions that have come from our colleagues, doctors, healthcare professionals worrying about how this labor budget affects them. Now, since Rachel Reeves, the Labor Chancellor, unveiled this budget just a few days ago, we've been flooded with questions from our Money Wise Doctor community on our blogs as well as in our private private community. With the 40 billion pounds in new taxes marking the biggest tax hike since 1993, there's a lot to unpack. Let's jump right into the top questions and if you have any new ones, pop them in the comments. Now, if you're new here, I'm Dr. Andy Egwim. I'm a former salary GP. I'm an investor and entrepreneur. I started Money Wise Doctor after reaching a level of financial independence which allowed me to leave my salary GPO two years ago. Now, what Money Wise Doctor does is to help doctors and healthcare professionals make smarter financial decisions and avoid costly mistakes, especially when it comes to investing taxes and just generally not doing dumb stuff with our money. Now let's get into how this budget could affect your wallet. Let's start with the first question, fiscal drag. There's a lot of questions around fiscal drag. It's not nothing new. The question is can you break down fiscal drag and how it could affect my income? So that's from a doctor in the community. Excellent. So this is a great question. Fiscal drag is when your income goes up, usually to try to keep pace with inflation. But tax thresholds stay frozen so you, you end up getting dragged into higher tax brackets even though your buying power hasn't really increased because inflation is eating away at the higher pay anyway. So it makes you feel a bit poorer and really you get more cash but you can't really buy more. So it's a hidden tax sort of, that reduces your take home pay. But there's a bit of a good news there, just a tiny bit. From 2028, 2029 tax A, the tax threshold will start adjusting with inflation and that could ease some of the pressures. However, I wish they implemented it immediately, just like they did with the other increasing tax policies like capital gains and stamp duty land tax that we're going to address here as well in this video. Now, for more on tax bans, you can check out my previous video, the last video titled UK Labour the Impact on Doctors and NHS Staff. So that might give you some more ideas about the tax bans. Question two, what changes were made to capital gains tax and how did they affect my isa? Right, this is an interesting one. So another great question now, just before the budget announcement, I had to make a strategic move by selling my non ISA investments and here is why. Because of these changes we anticipated, the capital gains tax or CGT can be quite impactful. There are taxes that you're taxed on when you make a gain, when you sell stuff like stocks or houses. So there's no direct changes that can affect you if you have your investments in an isa. But if you have investments outside isa, there are some changes. So the basic CGT rate is rising from 10 to 18% and the higher rate is increasing to 24%. So this means that when you sell non ISR assets, you will face bigger tax bills. So it's really important. Choosing the right investment vehicles is now more critical than ever. So I would not be investing in a non ISA account until I've exhausted my isa. So how will the increase in employer national insurance affect me as a doctor? That's the next question. When? Well, if you're a salaried doctor, like a resident, this change won't hit you directly. But for GP partners, private practice owners, it's quite significant really, because their employer NI is increasing from 13.8% to 15% and the threshold to start paying it would also drop. So more people have to pay from £9,100 to £5,000. So this means higher operational costs that could affect practices and even small businesses generally. So your income as a GP partner or a private practice owner could actually be impacted. Basically, it means that more salaries will be incurring this charge, leading to increased costs for healthcare employers. Some businesses may respond. I don't know how they might respond. They might respond by cutting cost, delaying hires or just adjusting salaries. We'll see how this all plays out. But there's some small good news as well. For small businesses, there's an increase in employment allowance up to 10,500 now, which could offer some partial relief. I've detailed this again in my Halloween budget analysis video, so give that a watch for a deeper dive. Question 4. So what's the deal with VAT on private school fees. Now, this one is tough for families sending their kids to private school, not because they are stupendously wealthy, but because they just want to provide better opportunities for their children. So this is it. Starting from January 2025, there will be a 20% VAT added to fees, private school fees. And private schools will also lose their business rate relief in April 2025. So this could mean a significant financial burden for doctors and healthcare professionals who have their children in private education. For example, I've mentioned this in the previous video. We have an NHS consultant. She's a consultant and the wife's a consultant. In a Molly Wise lecture community, they mentioned how they're both NHS consultants, they've been driving the same car for over a decade, scraping and saving just to afford private schooling for their little ones. Now, this VAT change, as they describe it, felt like a. A punch to their gut and, and, and maybe I don't know how that feels for you as well. Well, let's look at question five. Will the budget changes affect my isa? I think we've answered this already, but yeah, well, it's some good news here. The annual ISA allowance remains unchanged. You can still contribute up to £20,000 into your individual ISA and £9,000 into your junior ISA, all tax free. With other tax hikes on the horizon, now might be the time to maximize these allowances. We don't know if there may be more tax rises, so remember, your ISA allowance resets at the end of a tax year, so make sure you use it before 4-1-5, before you invest money through a general investment account. I think it's always a good idea to use up your ISA first. Remember, it's use it or lose it at the end of tax year is gone. Question 6. Should I worry about income tax rates? As a resident doctor, I quite like the sound of that. Surely resident doctor sounds better than junior doctor. Yes, but addressing the question, while income tax rates didn't change directly in this budget, some might say change through the back door. Fiscal drag still applies. So as your salary rises to inflation, more of your income could get taxed at a higher tax rate over time. Now, if you're a resident doctor, you may not get hit with a 60% tax trap for now, but as you move up in your career to become a GP or hospital consultant, it will become something you need to really think about and plan for. The 60% tax trap. We'll have an article on that on the website. Now, how does the budget Impact pensions. I'm an NHS consultant with both NHS pension and private pension. Alright, this is important, especially for those planning their estate starting from 2027, so roughly almost two years. And plus inherited pensions will now be subject to inheritance tax. So if the pension holder dies after the age of 75, they have to pay inheritance tax. Now think about it, if you die after 75, then you have to pay inheritance tax. But if you die before 75, don't have to pay inheritance tax. It's sort of a bit of a funny one really, and it's something you need to be discussing with your financial advisor who I think you should go with an independent financial advisor that understands doctors and healthcare professionals. But there's a quick personal note on this inheritance tax stuff because my dad just turned 75 and yes, I know he doesn't look a day older than 50 and while I'm not expecting any financial inheritance from him, beyond the precious gift of a good name, strong values and a loving family, this 75 year cutoff for taxing inheritance pensions, it strikes me as very odd. I mean it raises questions about incentives it creates. I mean, I'm not suggesting anything here, but as the late Charlie Munger, that's Warren Buffett's investment business partner, wisely said, show me the incentives and I'll show you the outcome. Just consider if someone passes before the age of 75, if you die before 75, the pension avoids inheritance tax. But after 75 the beneficiaries, your family, will have to pay a hefty inheritance tax on the pension. I'm just saying it could create some unintended situations here. Some second other thinking is useful here. I hope the Labour government has really put that into consideration. It's worth highlighting, don't you think? Again, not suggesting anything here, but alright, let's move on to the next question and tell me what you think about that in the comments. Question 8 what can I do to stay tax efficient with a new budget? That's what we are all asking. But here's the thing, I can't offer you specific advice because I'm not a tax advisor, I'm not a specialist medical accountant and I don't know your full financial picture, but there are a few things, a few pointers that might be useful, a few general strategies that could help you. So number one, or basically broadly use tax efficient accounts, max out your allowances and claim your tax relief on professional expenses. So contrary to what many people expected, Labor's new budget has left the ISA allowance untouched. This means that £20,000 is individual ISA allowance and the £9,000 junior ISA allowance remains the same. So that provides a substantial tax free growth opportunities for investment for you that you can use. So make the best of it. Here's what that could look like. One is your individual ISA. So if you can afford it, utilize the full £20,000 ISA allowance per year per individual to protect your investment from things like capital gains tax and dividend tax and of course your savings, your saving interest from tax as well. Number two, family ISA and SIP contributions. So use a family strategy. Each individual has a £20,000 annual ISA limit and you can open a Junior ISAs for children under 18. Of course the annual limit is £9,000. Now the individual ISA allowance includes obviously your cash ISA, stock and shares, ISA and lifetime ISA if you need it, all combined. So in a family of four you could get up to about £58,000 annual ISA allowance and it's all tax free. If you can max out your ISAs. And again you can apply the same thing to your genius SIP and your SIP in terms of pension allowance. So yeah, of course you can max out your sip. Your pension allowance, including NHS and any private pensions like your SIPP self invested personal pension, you are allowed up to £60,000 in annual contributions tax free. If you haven't yet opened a sip, consider looking at a few options and I will suggest one that I like. For a detailed comparison, see our SIP comparison guide on moneywisedoctor.com or watch the video here on the channel where I review the different SIP platforms and also obviously share the one I prefer based on fees, Visa views and other things. Now out of all this platform I went for Invest Engine and I'll tell you why I went for investing in one is a low platform themes is 0.15% with a cap. It makes it highly cost effective for larger portfolios. So no matter how much your portfolio grows, you won't have to spend more than 200 pounds on fees and there are no extra drawdown fees. I think I like that. I like to predict, I like to be able to predict how much I'm going to pay. I don't want any hidden fees. Two super easy to use platform with a very friendly, lovely graphics friendly interface. You can easily automate your investments and not have to worry about them on regular basis. You can set up your pension and maybe review it quarterly or annually, whatever works for you. I think it's good to do it at least quarterly or annually to see what's happening, especially if it's a self invested pension. Last one I think Investing In I think is my preferred option. I've gone with for C but obviously do your own research, find what works for you and think about what you you're really looking for in the platform. So I have a special gift from Investing in for our subscribers here. If you open a SIP account with investingine using my special link in the description, you can get up to £50 bonus as an opening bonus to welcome you. Unfortunately this bonus is only available if you use my link. If you go straight to Investing in, they've confirmed that will not be available to you. So use the link in the description to sign up and using the links also supports the channel at no extra cost to you and we may receive some referral bonus for coffee and that's it. But thank you anyway. If you check the link in the description you can use the link to sign up for investingine. But there's one caveat. You must invest at least £100 and hold it for 12 months in order to retain that bonus. Let's jump right into the next question. Does this budget affect property investment? You bet it does. Yes it does. The SDLT or stamp duty land tax, whatever that tax is on second homes has risen from 3% to 5% effective from October 31. So if you are planning on buying a second property for buy to let or anything like that, you need to pay more in tax. You may want to factor that in. By by the way, I think stamp duty land tax is one of the most funny taxes and one day we'll talk about it. So question 10 drum roll if you've gotten to this point, Employment allowance. What does that even mean? Well, employment allowance is like a discount that small businesses or practices get to reduce their employer national insurance bill, so reduces their NI. So it's been increased to 10,500 now. So that can ease some of the burden, you know, on this whole Budget Changes to reduce the financial Pitch well, there's a bonus question if you've gotten to this point, why is reviewing my estate plan now more crucial? Okay, so of course it all seems a bit obvious now. But to answer the question, here are a few things to look at with the rise in taxes and maybe some more changes might come. So pensions have become subject to inheritance tax from 2027. So it's more important now to review your estate plan is more crucial. Consideration options like setting up your life insurance, put them in a trust now life insurance in a trust falls outside your estate for inheritance tax. So your family and beneficiaries will get the full cash payout rather than paying a hefty inheritance tax on it. I have a free guide on this. Check it out on the channel or check the links in the descriptions. Also, consider making tax free gifts to reduce your estate taxable value. Finally, stay proactive and review your plan regularly. Annually at least, or quarterly. Now here's the important one if you found this insight valuable, here's how to get even financially smarter with your money. Hit that subscribe button and share this video. Share it widely. Yes, share it with your friends, your colleagues, and even those colleagues that you don't really like that much. I promise I won't get mad if you share my video to your friends and colleagues. Excellent. Now if you have any more questions or thoughts or you just want to sort of comment on the video on the budget, drop them in the comments below. I'll do my best to respond or I'll call in some Moneywise doctor Approved financial experts for anything I can answer. Don't Forget to visit moneywisedoctor.com for a lot of free guides on everything from investing ISAs, claiming tax relief on your professional expenses, to even guides on mortgages, life insurance, income protection, and more. So thanks for tuning in and I'll catch you in the next video. Okay then, Bye bye.