NHS workers will face a four-year freeze on pay rises of just one per cent per year, the Chancellor George Osborne announced in his summer Budget.

The one per cent pay cap, which will be effective from 2016/2017, is likely to amount to a pay cut in real terms as public sector pay fails to keep pace with inflation. According to the Office for Budget Responsibility, general inflation is forecast to rise to one per cent by 2016 but this bears no resemblance to other inflation such as housing and education which rises at a much faster rate.

Plus higher tax for independent practitioners with limited companies

Mr Osborne also revealed that independent practitioners who receive more than £5,000 from company dividends held outside tax-efficient plans such as ISAs will pay more tax from next April.

From 2016 the government will remove the current dividend tax credit and replace it with a new tax-free dividend allowance of £5,000 a year for all taxpayers, the Chancellor revealed. Doctors who pay themselves dividends from the profits of a company they own could be significantly affected. For dividend income above this allowance, basic-rate taxpayers will now pay 7.5 per cent, while higher-rate taxpayers will pay 32.5 per cent tax and those who pay the additional rate of 45 per cent will face 38.1 per cent tax – on top of the 20 per cent paid by their company.

The pre-Election proposal to cut the pension ‘annual allowance’ for those earning more than £150,000 will now go ahead. From April 2016, the amount which can be paid annually into a pension free of tax will be gradually reduced from £40,000 to £10,000 for those with income between £150,000 and £210,000 a year.

Individuals with buy-to-let properties will face cuts in the amount of tax relief they can claim on mortgage interest payments. Landlords will be restricted to claiming tax relief on finance costs at the basic rate of tax.