UK budget 2024 - How It Affects You- NHS Professional

All right, 2024 budget. The spring budget has dropped, is packed with tax revisions, NIN reductions and the rollout of the great fresh British isa. But what is the need for you? What is in it for you, especially as a doctor, dentist or nurse or NHS professional? In this video, I'll summarize the relevant changes that could affect us as medics and what this could mean for you. There are many changes in the recent budget, but I've taken out the ones I think are most relevant to us and I'm going to go straight and delve into them now. If you're new to this channel, welcome to Money Wise Doctor. Here we share insights to help doctors, dentists and other healthcare professionals to take charge of their financial future by making smarter financial decisions and avoiding costly financial mistakes. Well, now you know what we do here. Feel free to subscribe or like the video or share it if you find it useful. So let's dive into the Chancellor's new budget. Now, there are many new changes, but I'm going to draw out the four top ones. The biggest ones I think that are relevant to us. Number one will be the national insurance tax cuts. Number two, the child benefit reforms. I think this one affects quite a few families, especially for us working in the nhs. Number three is the new British isa, which has been much anticipated. And number four is the non dumb tax reforms. Now, if you're an expatriate doctor or dentist or healthcare professional, the fourth one may affect you. So listen to the end and so you can get an idea of how it works, on how it can affect you and the best way to navigate it. So let's start with the first, the nin, because that seems to be the one that affects everyone. So we'll go with that. Now, the NIN, there has been a cut in the NIN for that reduction of 2% in the NIN. I know that there's recently, in the past few weeks, the NIN was recently reduced by 2%. Now the government has gone further to drop it by a further 2%. Well, I don't know if it has anything to do with the election around the corner, but we'll take it. Now, what this means for you is that as an NHS professional, if you work, especially if you're an employee, your NIN will go down from 10% to 8%. Your contributions, especially as employees paying class one ninja. So it's putting more money back in your pocket. And for the self employed paying Class 4 contributions, your NIN would decrease from 9% to 6%. I think this is fair considering that I see the NIN sometimes as a double taxation, especially as you're already paying income tax. However, while the court is welcome, the tax thresholds remain frozen. So the minimum amount you earn before you start paying tax, 12,570, is still frozen despite inflation. So in a way I'll say, well, is. It's a little change in the, in the whole thing and it's a little change and it can affect what you take home. Not massive, but as I say, every little helps. Every little helps. All right, so now that I've got the NI out of the way, let's discuss the child benefits. So the child benefits have been in the news quite a bit and it has been a sort of contention for a long time. Affects patient, it affects doctors, healthcare professionals and of course, patients, as long as you have children and you have a certain level of income. Now, in the recent budget, the government has taken a significant step to address the long standing issue of the higher income child benefit charge, which has been a bit of an issue for families, especially doctors and healthcare professionals. Now, previously, if your adjusted net income exceeded 50,000, especially as a family, if your adjusted net income exceeded 50,000, the individual with a higher income will be responsible for paying the tax charge. However, the budget has brought about a welcome change by raising the threshold to £80,000, providing the much needed relief to doctors and healthcare professionals who are navigating the delicate balance of, of work and family responsibilities. Now, let me explain this in case you didn't understand this task and what the changes are. To grasp the impact of this change, it's crucial to understand the fundamental unfairness and flaws of the previous system. Under the old rules, even with a slight increase in income, it could result in the loss of the child benefit you usually get irrespective of the family's overall financial circumstances. And this created a sense of injustice, particularly for families. Let's say, for example, if you had a family where both, let's say Both partners earn 50,000 each, now their joint income will be a hundred thousand, they will be exempt from paying this charge. So they can still get tax, they can still get child benefit, basically. Whereas their neighbor, if one partner earned 50, 60,000 rather than 50, earned 60,000, so it's above 50,000 and the other partner earned 0, so their joint income will be 60,000, but because one partner earned above 50,000, they would have to pay this charge. So that, that seems a bit funny and a bit surprising and it didn't seem very fair. So, well, done to Jeremy Hunt and the government for addressing this child benefit charge. While they haven't removed it entirely, they've increased the threshold to 80,000. So that it seems a bit fairer. I think so, if not in my face. The situation where families with joint income higher than the other families might still benefit from the child benefits while the other farm is with lower income, just because one partner earns more, ends up paying a bit more. All right, Right, so. So that's the child benefit. If you have any questions around this change, please put your comments in the YouTube comment section. I'm very much eager to hear what you think about them, how they affect you and to think if you think they're going to make any real difference to your pockets, especially as a doctor, healthcare professional, if you're a dentist or not. I want to hear what you think about this in these changes and the tax and these changes in the budget, if they're going to make a real change, what you think might have been the change that would have made any real impact to your pocket. Now we're going to go into the third aspect, which is sort of like tuning into savings and investments, which is one of our favorite things to talk about on Money Wise doctor And if you look at savings and investment, the changes that have been introduced, they're both promising news and a bit of disappointment. The disappointment, I'll say, is with the Lifetime ISA. The Lifetime ISA withdrawal charge of 25%. It remains unchanged, which means that if you contributed money to a lifetime isa, popularly known as Lisa or Lisa, but had to withdraw it for any reasons. If you withdraw it for any reason, rather than buying your first home or retirement, you face a hefty penalty. That's a 25% charge. Now, this has been a point of frustration for many people, especially considering the housing market, the rise in the housing prices. You can live around London or the Southwest, you might not be able to buy a house that is less than £450,000. And that's the main. That's the maximum you can buy with elisa. So it's quite difficult. If you can't find a house, it's less than 450,000. You wanted your money back there, you're going to have to pay a charge. So that didn't seem fair. Yeah. So that's the lifetime isa. There's not been any changes. Now there's a British Isaac, which introduces tax efficient investing if you invest in British assets and companies. So now to explain it, the normal ISA allowance is about £20,000 and it allows individuals to invest in any stock market worldwide with tax free returns. However, the new British ISA introduces an additional 5,000 pounds allowance, bringing the ISA to a total 25,000 pounds annually. But don't rush, there's a catch. The additional 5,000 pounds can only be invested in shares of of UK based companies and that could be individual stocks or indexes like the FTSE 100. Now as a doctor and investor, here are my thoughts on this development. On one hand, tax free investing is always a welcome boost for investment returns. However, the restriction to UK companies may not align with the goals of many investors. I'll give you some examples just to explain it a bit better. So if you invest their index funds or ETFs in globally diversified funds, let's say you intend to allocate this extra £5,000 of your £25,000 allowance to UK companies, what this means is that you're putting 20%, that's a fifth of your entire portfolio isa portfolio for that investment year into a single country. That doesn't sound like diversification for me. Now the whole point of index investing is to diversify and avoid the concentration risk. So the concentration risk will occur if you put too much of your portfolio is invested in one company or one sector or in this case one country. So that's basically what's going to happen with that. For instance, the MSCI ACWI index, it covers approximately 85% of the global investable equity market. So it looks at stocks all over the world and includes companies from developed and emerging markets. So if you are going to buy like index fund like global this, if you're considering something like this, the UK companies only occupy about 5 to 10% of that index. So you might end up having more of your portfolio in the UK and less diversified. And, and if you look at it, I don't know if the UK is actually, it's not, I don't, it's not in the top 10, 20 companies. Even if you're an individual investor. If you're an individual investor you are an indexing and you're just looking for single stocks, you're looking for value, which is the style of investing that I started out with at the beginning and that served me quite well. I do recommend that Dr. Look at indexes just because of the time it takes to analyze stocks. But imagine a second scenario. Let's say you're a value investor, you prefer to hand pick individuals stocks rather than investing their index funds. So usually this investor you seek out the best value opportunities globally regardless of the country of origin. I've invested in several countries and most times you're looking for the best value. However, with the restriction of the new British ISA, limiting the additional 5,000 allowance to UK based companies, you as a value investor, your pool of available stocks becomes severely limited and you can't really go and fish in any water you like. You have to put that 20%, 20, 25% of your investment portfolio as far as prices are concerned, inside UK stocks. Well, for a value investor, your goal is to identify undervalued stocks with the best potential for significant returns and it often involves casting a wide net and considering opportunities across various markets. However, with the constraint of only being able to invest that extra 5,000 in UK companies, you're forced to overlook potentially the creative opportunities in other regions. Well, I suppose you have to make a decision whether you want to take the extra 5,000 and invest it in the UK or whether you just want to go ahead and you know, say okay, I'm just going to do the 20k as allowed and then seek for opportunities elsewhere. Of course, if you find better investment, you find better value in the uk. If you find, if, if you decide to do a bit more index in the uk, that'll be fine. At the end of the day. I understand that the whole point of it is to try to improve and boost investment in UK companies and UK economies, but a lot of UK companies and uk, many UK companies, they also trade abroad, they have income from abroad and they also invest in other companies. If you look at companies like Shell, if you look at other bigger UK companies there, there are many countries. Well, we'll see if it works or if it doesn't work. I'll be looking to see more information on the British isa. It's not yet launched. So in that sense, while the new British ISA offers tax efficient investing in UK assets, it may not align with the investment strategy of many investors, including value investors, index investors. So because of the restriction. But either way, my thoughts around this is that usually for some people when investing, the first thing they want to think about is cost and tax and all that, how to keep it low. So if this is something you want to really consider, I think you should wait to get a bit more information about the Brzee isa. It's not yet launched. I think it's going to launch very soon, probably by April. We don't have a clear date yet, so watch out for it. And when it arrives, we're going to be sharing on this channel as well and analyzing it. Now let's jump to the next change and it's quite surprising and it could significantly impact expatriates or IMGs, that's international medical doctors, dentists, healthcare professionals who work in the UK but are not residents here in the uk. Let's say you live abroad, your family is abroad, but you work in the uk, you go back and forth. In fact, the way it was worded on the UK government website, it looked like it was great news until I read it a bit closely. The language was a bit. But when I read a bit closer I saw that there's a major change and it was what we call the non domestic tax change. It is a tax refer reform to, we refer to it as a non dom. So the changes with the non dom. So normally non doms or non domiciled individuals are those who are whose permanent home or domicile is located outside the uk. So historically, and I'll say this has been for centuries in the UK tax system. The UK has offered a specific tax regime for non dumps, so providing them what they describe as a favorable tax treatment. So under this regime, non doms residing in the UK have the option to choose the remittance basis of taxation and I will explain what that really means. Now what exactly does that mean? Well, the remittance basis of taxation allows non dumps to pay tax only on their UK income and on foreign income that they bring into the uk. So you pay tax on whatever money you make inside the uk, whether it's a job or investment. And also if you bring any money from outside the UK into the uk, you pay tax on it. So this was a general treatment for many, many years. So whether you're bringing money from Dubai, from Pakistan, from France, where wherever you bring in, basically you didn't pay tax on it. If you brought it into uk, pay tax on it. But if you made the money and left it there, you didn't pay tax on it. So but there have been big changes in this recent budget. The recent reforms remove that tax exemptions on foreign income and gains arising from April 2025. So that's next day. So anyone who has been tax resident in the UK for more than four, four years will pay UK tax on any newly arising foreign income. And this is quite a big change. I suppose many people don't talk about it because they might not be affected, but I think it can be a massive change, especially for people maybe let's say from the EU or from different country, you resident in the uk but you, you don't, you know, I mean, obviously you have family elsewhere. All right, so I think the most important thing to note here, that there's going to be a four year period, especially, especially if you're new, there's going to be a four year period during which you have a relief and you don't have to pay that tax. And after that four year period, you need to start paying. So pay close attention to this one, you're going to be looking out for more information along those lines. And then I, I think it came quite as a bit of a surprise to me that the Conservative government has done that. But again, they've made the decisions based on what they had, maybe to pay for the NIN cuts. All right, so which of these tax changes do you think would impact you most and which of them do you think will put more money in your pocket? What were the tax changes you were hoping for or did they not affect you at all? What's really important is that for healthcare professionals, doctors and healthcare professionals, wherever you are in the uk, working, irrespective of what you understand or not, one way or the other, changes in the budget and taxes affect the money that we end up with in our pocket. We're looking at several things, including the fact that we say that doctors and NHS healthcare professionals have been quite massively underpaid, given the fact that with the rising inflation and no rise in real wages, and that's why there's been a lot of strikes and all that with BME engineer doctors, it's quite important to pay attention to these things. I think there's also a point about landlords. So there's been a change in capital gains tax which will affect landlords quite positively. I'll say. So the budget brings a reduction in capital gains tax on buy to let properties from 28 down to 24%. So this moves obviously aims to stimulate more property deals and transactions. It could potentially benefit landlords. We can sell sell their properties. It's a significant change and it could impact your investment strategy and tax planning. So if you are paying the highest level of tax on cgt, that's capital gains tax, depending on your usual normal income, it's going to drop now from 28% down to 24%. Right. Again, it depends. You might think, well, I don't have it, I'm not selling a property or I don't have to pay any C duty or anything like that. Well, think of whichever one is relevant for you, that's fine. Now, the next change is not a tax change or the next point is not a tax point. It's basically to say that if you found this video useful and you think it might be useful to someone, a colleague or someone that you think might benefit from it, why don't you click the share button and make sure that they get it right? So thank you for listening, and thank you. I'll be interested to hear your comments in the YouTube comments below. Tell me which of these tax changes would impact you, and tell me if there are any tax changes you are hoping for in the budget that you didn't see. And as always, staying informed and seeking professional advice is essential to capitalize on these changes and safeguard your financial future. Alright, till the next video. See you then. Bye bye.