How will Budget 2025 affect you and your practice?
How will Budget 2025 affect you and your practice?
After months of speculation the 2025 Budget was revealed in unexpected fashion with some surprising omissions. Yet several measures will have an impact on GPs and their practices.
People costs
The Government confirmed significant increases in the National Minimum Wage rates from 1 April 2026: the rate for over-21s will increase by 50p per hour to £12.71, workers aged 18 to 20 will get an 8.5% increase to £10.85 an hour and 16 to 17 year-olds will get a 6% increase to £8 an hour.
One consequence of successive rate increases in recent years is pay compression – ie a much narrower gap between those paid at the minimum rates and those in skilled roles. This increases the risk of practices inadvertently breaching their overall NMW compliance, so practices will need to review their NMW compliance carefully before April 2026.
Capital investment
The Government is reducing the main rate of writing down allowance from 18% to 14%. This change will affect those with substantial main pool balances that have not been claimed as first-year allowances or offset against the Annual Investment Allowance (AIA). However, partnerships with a corporate member cannot claim the AIA so, for them, the new 40% first-year allowance from January 2026 is a welcome boost.
Corporate structures
Tax on dividend income will increase by 2% for basic and higher rate taxpayers but not for additional rate taxpayers. Therefore, for most GPs operating through a corporate structure, there should be no tax increase on dividends from their business.
Practice vehicles
While planned increases in car benefits in kind rates will go ahead, there were no immediate changes to fuel duty – although from September 2026, the current 5p cut in rates will gradually unwind returning to March 2022 levels by March 2027. For practices that have already moved to electric vehicles or plug in hybrids, the proposed 3p per mile charge from 2028 will be another cost to factor into future practice budgets.
Rental income
From 6 April 2027, the income tax rates on property and savings income will increase by 2% across all bands (ie to 22%, 42% and 47%). These rates apply to England, Wales and Northern Ireland only - not to Scotland. This will be a direct tax increase for GPs letting rental property to their practice and will mean that rents are effectively taxed at the same rate as partnership profits.
Personal investments
Income tax rates on savings income will increase by 2% across all bands to 22%, 42% and 47%.
Equally, the dividend rate increases referred to above, apply to all dividends received outside of an ISA wrapper. For those keeping their ISA investments in cash, from April 2027, an annual cash subscription limit of £12,000 will be introduced for anyone aged under 65.
Those taking more risks with their investments may welcome news that the limits for companies qualifying for Enterprise investment scheme and Venture Capital Trust investment increase significantly from April 2026. Investors should then be able to choose from a wider list of larger companies. However, the income tax relief for individuals investing in qualifying VCT shares will decrease from 30% to 20% (although £200,000 per year VCT dividend exemption continues).
Read our full Budget analysis or contact or team for help and advice.