Chancellor Jeremy Hunt has revealed his spring budget – but what does it all mean for dental professionals and their finances?
Today (Wednesday 15 March) saw Chancellor Jeremy Hunt announce the latest package of financial measures amidst the current cost of living crisis.
According to the Office for Budget Responsibility (OBR), the UK will not enter a technical recession this year.
Hunt revealed a number of financial measures, including:
- The lifetime allowance – which refers to the total amount workers can accumulate in their pension savings before paying extra tax – has been abolished
- The pensions annual tax-free allowance will rise by 50% from £40,000 to £60,000
- Parents working 16 hours a week with children aged nine months to five years will get 15 hours free childcare
- Businesses will be able to offset 100% of UK investments against their profits to bring down tax bills.
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Iain Stevenson, head of dental at Wesleyan Financial Services, said: ‘Dentists – and patients – will benefit from the government’s proposals to offer corporation tax relief on new investments.
‘Practices are always looking to see how they can invest to improve the quality of service for their patients. Under today’s investment measures, incorporated practices will be able to offset some of their tax bills for investment in equipment.
‘We’re also pleased to see increases to the annual allowance and the scrapping of the lifetime allowance. Anything that incentivises more retirement saving is only a good thing, and this will reduce the risk of dentists leaving the profession to avoid the threat of pension tax charges.
‘However, it’s disappointing to see that the Chancellor didn’t take the opportunity to announce any specific measures for dentistry, particularly increases to the NHS spending budget.
‘In its current state, it’s no surprise that many dentists are questioning whether it’s feasible to continue providing NHS services, rather than transitioning to private care.’
‘A great budget for dentists’
Thomas Dickson is a chartered financial planner at Wealthwide. He says: ‘This is a great budget for dentists.
‘The fact the lifetime allowance has been abolished is significant and likely to save many dentists thousands of pounds of tax in retirement. With the annual allowance also increasing to £60,000 from 6 April 2023.
‘Dentists who were having to opt out of the NHS pension scheme for a period of time, and then return to the scheme to manage their pension tax position (sometimes referred to as ‘doing the hokey cokey’) may now be able to remain in the scheme and continue to accrue valuable benefits, without penal tax charges.
‘Those contributing to the NHS pension that have pension input amounts of more than £60,000 a year will benefit from tax savings of £8,000 to £9,000 a year.
‘Another change is the minimum annual allowance has increased from £4,000 to £10,000, which for many high earners will be a tax saving of £2,700 ever year.
‘This also means that dentists can earn up to £360,000 before their allowance is tapered to £10,000 (previously dentists earning £312,000 only had an allowance of £4,000 a year).
‘The devil, of course, is in the detail – despite the lifetime allowance being abolished, the Pension Commencement Lump Sum (the tax-free element of any pension) has been set at 25% of the current LTA – which is £268,275.
‘This suggests that any dentists who already have a protected right to take a higher PCLS will continue be able to do so and should therefore retain their fixed or individual protection. We may have to wait for legislation in the finance bill to get the fine details on this.’
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