Navigating UK tax changes: what healthcare professionals need to know

The UK’s recent tax reforms are poised to make a significant financial impact on healthcare professionals. Whether you work in the public or private sector, understanding how these changes affect wages, pensions, and work-related expenses is essential to staying financially secure. This blog breaks down the key changes, what they mean for you, and the steps you can take to protect your finances.

Key tax changes and their impact on healthcare professionals

1. National living wage increase: what it means for healthcare workers

• What’s changing? From April 2025, the National Living Wage will rise by 6.7% to £12.21 per hour.
• Who benefits? Lower-paid healthcare workers, such as healthcare assistants and support staff, will see a welcome boost to their earnings.
• Challenges for employers: For private healthcare practices, higher payroll costs may lead to staffing adjustments, potentially impacting job opportunities or working hours.

Example:
A healthcare assistant currently earning £11 per hour would see their hourly wage increase by £1.21. Over a 40-hour workweek, this translates to an extra £48.40 weekly or £2,500 annually before tax.

2. Employer national insurance contributions (NICs): public vs private impact

• What’s changing? Employer NICs will rise to 15%, with the contribution threshold lowered to £5,000.
• Public sector: NHS employers are likely to receive government reimbursement to offset these additional costs, limiting the impact on staff.
• Private sector: Private healthcare employers must absorb these costs, which could lead to reduced salaries or hiring freezes.

Example:
A private practice with 10 employees earning above the NIC threshold could face an additional £4,100 annually due to these changes.

Action tip:
Private practice owners should consult financial advisors to explore cost-saving strategies, such as streamlining operations or applying for the increased Employment Allowance (rising from £5,000 to £10,500).

3. Capital gains tax (CGT)

• What’s changing? CGT rates are increasing to 18% (lower rate) and 24% (higher rate).
• Who is affected? Professionals with investments or those selling assets, such as property or practice shares, will face higher tax liabilities.
• What to do: Consult a financial advisor to explore tax-efficient strategies and ensure you minimise your exposure to these higher rates.

Example:
A healthcare professional selling an investment property for a £50,000 gain would pay an extra £2,000 under the new higher rate (24% instead of 20%).

What to do:
Consult a financial advisor to explore tax-efficient investment strategies, such as using ISAs, pensions, or trusts to shield gains from taxation.

4. Pension tax relief and inheritance tax (IHT)

• What’s changing? Pension tax relief remains unchanged, allowing for continued tax-efficient retirement savings.
• IHT thresholds are frozen, but from 2026, larger estates will be subject to new taxes.
• What to do: Maximise your pension contributions to secure long-term savings. If you own significant assets, review your estate plan with a financial advisor to mitigate future IHT liabilities.

Example:
A healthcare professional with an estate worth £600,000 could face an additional IHT bill of £55,000, assuming no mitigating steps are taken.

Action tip:
Maximise pension contributions to secure long-term savings and explore options like gifting assets or setting up trusts to reduce future IHT liabilities.

5. Uniform tax relief: how healthcare professionals can save money

• What’s changing? Healthcare professionals required to wear and maintain uniforms can claim tax relief for related expenses, such as cleaning, repairing, or replacing uniforms.
• Flat rate relief: Eligible healthcare workers can claim £125 annually without needing receipts. Basic-rate taxpayers can receive £25, while higher-rate taxpayers can receive £50.
• What to do: Use HMRC’s online service or submit a P87 form to claim your tax relief. You can backdate claims up to four years, potentially unlocking hundreds of pounds in refunds.

Example:
A nurse who hasn’t claimed uniform tax relief for the past four years could reclaim up to £200 by backdating their claims.

Action tip:
Use HMRC’s P87 form to claim and backdate refunds. If uniform costs exceed £125, keep receipts for higher claims.

Differences between public and private sector tax impacts in healthcare

Public sector: NHS tax benefits and funding

• NIC reimbursement for employers helps protect jobs and workloads.
• Additional NHS funding aims to improve working conditions and reduce waiting times.

Example:
This funding could enable NHS employers to hire additional staff, easing workloads for existing employees.

Private sector: challenges for healthcare practices

• Rising NICs and payroll costs could lead to job cuts or reduced benefits.
• Private employers may need to restructure operations to absorb costs.

Example:
A private clinic may reduce overtime opportunities or reallocate budgets for employee training to cover increased NIC expenses.

Actionable steps for healthcare professionals to optimise finances

1. Maximise financial opportunities

• Review your financial plan to factor in wage increases or potential changes to your income.
• Take full advantage of pension tax relief and increase your contributions to build a robust retirement plan.

2. Claim uniform tax relief 

• If you wear and maintain a uniform, claim the flat rate expense of £125 annually. This simple step can save you money every year, and claims can be backdated up to four years.

3. Consult financial advisors

• If you have investments, assets, or a large estate, seek professional advice to navigate the higher CGT rates and new IHT rules effectively.

4. Stay informed about employer changes

• Keep track of how your employer implements these changes, particularly in the private sector. Advocate for clear communication about any adjustments to contracts or benefits.

5. Explore additional tax relief resources

• Investigate other available tax relief options, such as professional fees or subscriptions related to your role. These can further optimise your finances.

Building a financially secure future for healthcare professionals 

While tax reforms bring challenges, they also offer opportunities for smarter financial planning. Whether you work in the NHS or private healthcare, understanding these changes and taking proactive steps can help secure your future.

Frequently asked questions (FAQs)

Q: What happens if I forget to claim uniform tax relief for previous years?

A: You can backdate claims for up to four years, potentially reclaiming hundreds of pounds.

Q: Can I claim uniform tax relief if my employer covers some cleaning costs?

A: Yes, but the claim must be adjusted to reflect the costs you’ve personally incurred.

Sources:

1. HM Revenue & Customs (HMRC): Job expenses for uniforms, work clothing, and tools
2. MoneySavingExpert: Uniform tax refunds and reclaiming expenses
3. UNISON: Tax relief for NHS staff
4. The Guardian: Government decisions on pension tax relief
5. Reuters: Employer National Insurance contributions
6. GOV.UK: National Living Wage increase