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It’s now commonly recognised that there is a shortage of GPs wanting to become partners and the GP Partnership Review: Interim Report has examined many of the reasons for this.
It notes that ‘the pay differential between a partner and a salaried GP is falling in some practices, and the differential does not compensate for the additional responsibility, risk and workload carried by practices.’
This is undoubtedly true but in my view it only covers part of the problem.
Even where there is an adequate differential between the income of a partner and a salaried GP, this can be seriously eroded because of the high marginal tax rates that are payable as income increases.
This struck home to me when comparing the take home pay of a full-time GP, with a married couple who both work half-time.
The full-time GP earns £120,000 and is the family’s sole earner. The couple earn £60,000 each.
Both families have two children and the GPs have student loans. Even though both families have the same income, after tax and pension contributions the couple working half-time take home an extra £14,000 a year.
|Full-time GP £||Each half-time GP £|
|Employee pension contribution||(17,400)||(7,500)|
|High income child benefit charge||(1,789)||(224)|
|Student loan repayment||(7,584)||(3,075)|
|Take home income||60,056||36,895|
The position gets even worse if our full-time GP decides whether to earn some extra money with some out-of-hours shifts.
I have seen situations where the combination of the reduced personal allowance on income in excess of £100,000, the tapering of the pension annual allowance when income exceeds £110,000, and the repayment of the student loan, means that take home pay can actually be lower even though gross income has increased.
We have reached a situation where it is not worthwhile for GPs – who are willing and able to work more – to do so because the improvement in their take-home pay is so small.
This leads to the position where GPs decide not to offer themselves for out-of-hours shifts, because the increase in take-home pay is insufficient reward for the time put in.
While there is public acceptance that those who earn more should pay more tax, in my view the marginal tax burden on higher earners is now too high. At a time when there is a shortage of GPs this is a self-defeating position in which the Government finds itself.
This article first appeared in the Winter 2018/19 issue of AISMA Doctor Newsline, the newsletter of the Association of Independent Specialist Medical Accountants.