Chancellor Jeremey Hunt’s key message in today's Autumn Statement was that the economy had turned a corner, the scourge of high inflation had been defeated and it was time to turn to growth.
This also meant that he could afford some giveaways after his government had been criticised for imposing the highest level of taxation the UK had ever seen.
So, what do the announcements made in the Autumn Statement mean for dentists?
Iain Stevenson, Head of Dental at Wesleyan Financial Services said: “The cut in National Insurance will be welcomed by many dentists who are classified as self-employed, easing financial pressures at a time when the cost of living remains such a challenge.
"Dental practice owners will also be happy that the 100% capital allowances on qualifying expenditure has now been extended. This will allow them to plan their investments in equipment and premises with more certainty, enabling them to broaden their range of services and capitalise on the opportunities that offering private cosmetic work can bring, for example.”
Find out more here on what the breakdown of each announcement may mean for you as a dentist:
National insurance cuts – for dental trades
Cuts to tax rates can only be welcomed during the cost-of-living crisis that we've been experiencing and one of the key announcements was the 2% cut to National Insurance for employed people – which falls from 12% to 10% on earnings from £12,570 to £50,268.
He also announced a 1% cut for the self-employed, which includes many associate dentists, as well as scrapping an extra charge of £3.45 a week. He said that is worth £450 a year to the average employed person and £350 to the average self-employed person.
Whilst we know dentists are in a higher demographic in terms of take-home pay, they've still been negatively affected by national insurance. This, at a time of high inflation, has had a significant impact on take home pay and therefore a reduction to national insurance rates is a very welcome change that will have an immediate impact on the monthly affordability of dentists and plan for their futures.
There was much speculation around possible changes to income tax which is currently paid at 20% on earnings between £12,570 and £50,270 a year, at 40% on earnings between £50,271 and £125,140 a year, and at 45% on any earnings above £125,140 – it is not welcome news for dentists that these thresholds will not go up every year in line with inflation but will remain frozen until 2028. This means that more dentists will move into higher tax bands as a result. We can remain hopeful for changes to this in the Spring statement.
Savings and investments
One of the key announcements was the relaxation of the rules around the Individual Savings Account (ISAs) - products which enable people to save and invest without paying tax on the profits. In today’s announcement, Jeremy Hunt stated that from April 2024 there will be the flexibility to open accounts with multiple ISA providers as opposed to only one of each type of ISA per year.
This will allow dentists to take advantage of any new deals that become available as well as making limited transfers between ISAs – although £20,000 per year remains the maximum amount that can be put into ISAs. Many dentists have been pressed over recent years regarding what they can save for their future; being able to have multiple ISAs is a positive step that can help dentists to save and invest for their futures.
James Needham, Chief Product Officer at Wesleyan, said: “The ISA reforms announced by the Chancellor today are a positive step and we’d encourage any strategy that helps more people save and invest for the future.
“There’s no doubt that ISAs can be a productive savings and investment vehicle and the reforms announced today could certainly make them more attractive to more people, giving investors the opportunity to access better deals and making the ISA market more competitive.”
Business investment
The Chancellor’s decision to extend the Full Expensing tax break – which was due to expire in 2026 but has now been made permanent - allows practice owners to deduct the cost of investments in equipment from their profits. This means they will pay less Corporation Tax and comes as very welcome news for incorporated dental practices.
The move to make full expensing permanent will help dental practice owners to better plan their investments and to expand their range of services and capitalise on the opportunities that these may bring, whether that be offering implants or cosmetic dentistry.
Do you need further support?
Today’s announcement may leave you with unanswered questions with regards to your financial planning. Book a no-obligation financial review with a Specialist Dental Financial Adviser at Wesleyan Financial Services.
Please note Tax treatment depends on individual circumstances and may be subject to change in future.