Managing cost increases from April 2025
Managing cost increases from April 2025
The Government had widely trailed that increases in the National Minimum Wage (NMW) and employer’s NIC were coming but the scale of the Budget changes – particularly on NIC - shocked many businesses. There is some time to prepare before April, but the options for managing down increased costs for GP practices may be rather limited. For example, while other businesses might be able to reduce costs by increasing pension contributions for employees instead of salary, this is not an option for GP practices.
While most practice staff are likely to be earning well above NMW level, if there are part time practice staff that are on low wages, the practice may feel some pressure to increase their salaries in order to retain experienced staff. There may be a double hit here with the fall in the starting threshold of employer’s NIC to £5,000 likely to increase the NIC cost for part time staff.
On the basis that every little helps, if your practice operates on a corporate model rather than as a GP partnership and you continue to have company vehicles, reducing the value of the benefit in kind, for example by offering cars with lower or no CO2 emissions, will help to reduce your NIC costs.
The benefit rates for EVs will remain much lower than for combustion engines cars for the next few years. And with the changes to the treatment of double cab pick-ups (those made available for the first time from 6 April 2025 onwards will be taxed as cars rather than vans) it would make sense for drivers either to renew their pickups before April, or just stick with the existing vehicle until the transitional rules end in 2029.
Interestingly, for practices operating as a company, the effective marginal tax rate for withdrawing profits as a dividend compared to a salary will remain marginally higher despite the increase in NIC payable.
On a more fundamental level, it is worth noting that practices operating as partnerships will be less affected by the employer’s NIC rise and indeed that the cost of engaging locums on a self-employed basis will not rise.
When it comes to budgeting for these increase costs, campaigning has already begun on the need for additional funding from the NHS. While the Department of Health has stated that further details will be announced following concerns raised by GPs after the Budget, judging by past performance, it seems unlikely that we will know the final position on extra support much before the start of the new tax year.
For help and advice on all employment tax costs and forward budgeting, please get in touch with our team. For more information please contact Sarah Lock or Sarah Moss.
While most practice staff are likely to be earning well above NMW level, if there are part time practice staff that are on low wages, the practice may feel some pressure to increase their salaries in order to retain experienced staff. There may be a double hit here with the fall in the starting threshold of employer’s NIC to £5,000 likely to increase the NIC cost for part time staff.
On the basis that every little helps, if your practice operates on a corporate model rather than as a GP partnership and you continue to have company vehicles, reducing the value of the benefit in kind, for example by offering cars with lower or no CO2 emissions, will help to reduce your NIC costs.
The benefit rates for EVs will remain much lower than for combustion engines cars for the next few years. And with the changes to the treatment of double cab pick-ups (those made available for the first time from 6 April 2025 onwards will be taxed as cars rather than vans) it would make sense for drivers either to renew their pickups before April, or just stick with the existing vehicle until the transitional rules end in 2029.
Interestingly, for practices operating as a company, the effective marginal tax rate for withdrawing profits as a dividend compared to a salary will remain marginally higher despite the increase in NIC payable.
On a more fundamental level, it is worth noting that practices operating as partnerships will be less affected by the employer’s NIC rise and indeed that the cost of engaging locums on a self-employed basis will not rise.
When it comes to budgeting for these increase costs, campaigning has already begun on the need for additional funding from the NHS. While the Department of Health has stated that further details will be announced following concerns raised by GPs after the Budget, judging by past performance, it seems unlikely that we will know the final position on extra support much before the start of the new tax year.
For help and advice on all employment tax costs and forward budgeting, please get in touch with our team. For more information please contact Sarah Lock or Sarah Moss.