How much do doctors make after taxes and insurance

Understanding what taxes you pay and why it is essential. How much money do you really take home from that extra fill-in shift? I asked Liz Densley, FCA CTA of Honey Barrett Specialist Medical Accountants to give us an overview of the various income thresholds that affect the tax liability of doctors in England for the 2020-2021 tax year.

Physicians who are employed under paye see deductions on their payroll and think they pay a lot of taxes, but they don’t really consider what rates they pay and when.

At first glance, it’s simple – pay the base tax rate (20%) until you make £50,000 and then pay a higher rate (40%), but there are a lot of different income levels to consider understand the tax effect, and there are a host of different effective tax rates.

Reading: How much do doctors make after taxes and insurance

tax free

First, let’s consider what you can have without paying taxes:

  • The first £1,000 of self-employment income can be tax-free. there is an auto-negotiation allowance of £1,000 which can be used in lieu of claiming specific expenses if it is beneficial.
  • The first £1,000 of property rental income may be tax-free; Similar to business relief, if expenses are less than £1,000, you can claim relief instead.
  • £12,500 personal allowance: this amount can be earned tax-free as long as total income is less than £100,000
  • first £2,000 of dividends are taxable at 0%
  • The first £1,000 of savings income for a base rate payer, or the first £500 for a higher rate payer, is taxable at 0% (if you are a 45 %, all savings are taxable)
  • effective tax rates

    as income increases, the rates at which it is taxed change:

    • £50,000 of taxable income before personal allowance: the level at which the highest tax rate (40%) starts
    • £50,000 (higher income of a couple living together, married or not): the level at which child benefit starts to be recovered through the tax system
    • £60,000 – the level at which child benefit is fully recovered
    • £100,000 – the level at which the personal allowance starts to reduce
    • £125,000 – the level at which personal allowances are completely forfeited (note that the effective tax rate on the portion of income between £100,000 and £125,000 is 60%)
    • £150,000 – the level at which the additional tax rate (45%) starts
    • £200,000: the level at which reduction of the annual pension allowance should be considered
    • £240,000 – income plus pension income – the level at which the annual pension allowance starts to reduce.
    • £312,000 (earnings plus pension contributions): the level at which the annual pension allowance is reduced to the minimum figure of £4,000
    • Income Tax Thresholds for Doctors We have not mentioned other deductions – National Insurance Contributions, Student Loan repayments, superannuation contributions and tier rates – or ways to reduce taxable income or extend the basic rate band.

      if you’re close to any of these limits, it’s worth seeking professional help to see if anything can be done, or at least to quantify what it may cost you, so you can decide if it’s worth working on more sessions or not . .

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      We’ve set out a couple of examples below showing how much an extra pound of income would earn for someone at various income levels:

      example 1 – alternate gp with pension and student loan

      below is a simplified example of how much is available for gp alternates in the pension plan with student loan repayments (but excluding any tax on child benefits and excluding any other sources of income)

      GP Locums with pension and student loan

      pension contributions are based on a substitute working every day; In reality, when annuity is taken into account, where there is no salaried appointment or a GP appointment for the whole year only, pension contributions will be higher for all earnings below £111,377. if you’re earning between £111k and £125k, any extra effort you put in will leave less than 1/3 of the earnings in your pocket.

      Example 2 – GP partner with fully pensionable incomeGP partner with fully pensionable income

      As you can see, for a gp member in the pension plan, paying student loan repayments, between £111,000 and £125,000 of income there is almost no net tax payment – only about 17-18% of additional earnings in that band will come into your pocket (keep in mind, though, that you’re earning a pension and paying off your student loan). gps will have fewer available resources than hospital doctors or substitutes because they have to fund their own employer’s retirement.

      If you find yourself in the unfortunate position of also having an annual allowance charge, it could actually cost you money to earn £1 more in that band.

      See also: International Student Health Insurance – VisaGuide.World

      A table for a hospital doctor is more difficult to simplify because not all income will be pensionable and the level rate is based on the annual equivalent. National insurance contributions will be higher though in a job, but national insurance in self-employment will be lower where there is also substantial employment income.

      interaction with spouses

      How income is divided between spouses can also make a big difference. for example, if one spouse earns £99,998 on their own, before pension contributions, and the other earns nothing but claims child benefit for 4 children, the net tax payment would be £58,983 £.

      If, on the other hand, they each earned £49,999, then the combined take-home pay could be as high as £70,269! £11,285 more! This may be a somewhat contrived example, but it illustrates that taxes are something to consider when deciding who will take care of the children.


      Understanding the tax rates that apply to your income level might make you think twice about working harder or even save you some taxes, so don’t take everything at face value!

      liz densley is a specialist medical accountant who can be contacted here.

      The tax rates referenced in this article apply to England for the 2020-21 tax year. This article does not represent advice or guidance.

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