GPs could be the latest target for tax rises as Rachel Reeves weighs up a new levy which would raise £2 billion a year. The Chancellor continues to scramble to find money to fill the £50bn black hole in public finances and she is expected to announce a wave of tax rises in the November Budget. This may include hitting partnerships with National Insurance (NI), which would impact 190,000 workers, including family doctors.
The Centre for the Analysis of Taxation (Centax), a think tank, presented the plans to the Treasury. Its report says the current exemption from employer National Insurance contributions was an “accident of history”, and that the introduction of “Partnership NICs” would be a “step towards equalising the tax treatment across different forms of income from work”.
The think tank claims that of the £2bn that could be raised, 98% would come from the top 10% of earners in the UK.
Around a tenth of revenue raised would come from family doctors, according to the report, whose practices are typically set up as partnerships.
“Partnerships face significantly lower effective tax rates on their labour costs than companies, for no good reason,” CenTax said. “The tax privilege offered to partnerships results in economic distortions that are bad for productivity and growth.”
The report added that GPs could be reimbursed through their funding settlements so their pay is not cut, which would reportedly cost £200m.
The levy would not only impact doctors, but lawyers, solicitors, accountants and financial advisers. Solicitors would be the hardest hit, as family firms account for a fifth of all partnership income.
A Treasury spokesman said: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT.”