Update: On the 17th October 2022, Chancellor of the Exchequer Jeremy Hunt brought forward a number of measures from his planned Medium-Term Fiscal Plan on 31 October. This has affected previous measures announced in the mini-budget on the 23rd September 2022.
The new Chancellor, Kwasi Kwarteng, was under pressure to deliver measures to control spiralling household and business costs in today’s emergency mini-budget…
Iain Stevenson, Head of Dental at Wesleyan Financial Services, said: “Small businesses have needed help with running costs and dentists are no exception. Many practices are facing increasing costs due to the cost-of-living crisis, coupled with retention and pay increase considerations for staff, which are resulting in growing pressure on the bottom line.
“Measures such as cutting National Insurance and scrapping the planned increase Corporation Tax alongside the business energy relief scheme will go some way to help address challenges. The new investment zones may create opportunities for dentists looking to expand their practices or start their own businesses.
“There was also a welcome development of making permanent the temporary £1 million level of the Annual Investment Allowance (AIA), which was due to expire after 31 March 2023.
“When it comes to personal finances, we know that many dentists are struggling with rising costs. The reversal of the National Insurance increase will see small increases in take-home pay, but more help is needed to ensure dentists can cover their living expenses. We know that some are reducing their contributions to their pension or even withdrawing funds from savings to cover costs. This can have serious long-term implications and should be carefully considered and ideally done with financial advice.”
Here’s a breakdown of the top measures introduced:
Impact on dentists’ personal finances
Energy Price Guarantee
Kwarteng reiterated the new £60bn energy package designed to ease pressure on UK households, meaning energy prices for average UK households are expected to go no higher than £2,500 per year for the next two years. This will be coming into effect from 1 October 2022.
These measures will be a huge relief to many dentists across the UK, as average energy bills were predicted to be above an eye-watering £6,600 by April 2023. This is in addition to the £400 Energy Bill Support Scheme for households announced in May.
It is worth remembering, this cap is enforced as a limit on the average energy bill, some homeowners could pay more or less depending on energy usage.
Some good news for those looking to step onto or move up the property ladder with no Stamp Duty levied on the first £250,000 of a property purchase and the threshold for first-time buyers rising from £250,000 to £425,000.
First-time buyers can also claim relief on properties valued up to £625,000, rising from £500,000. These changes are immediate.
Income Tax and National Insurance
The Chancellor announced cuts to income tax, slashing the basic rate to 19% in April 2023, which will provide nominal support to newly qualified dentists in their DFT and those earning within the basic rate bracket. Top earners will be happy to hear the additional tax rate of 45% has been scrapped, meaning only the 40% rate will be applicable for incomes above £150,00 per annum*.
* UPDATED 3rd October - This measure was subsequently scrapped by Chancellor Kwasi Kwarteng.
This year’s National Insurance increase had a big impact on dentists and dental practices alike.
Today it was announced that the 1.25% rise will be reversed from 6 November, meaning on average 28 million people will keep an extra £330 of their income – as dentists are traditionally higher earners, this will be expected to be higher.
Dental practices have been dealing with increased staffing costs due to the 15.05% employer contribution, which was increased from 13.06%.
The reversal of the National Insurance increase will go some way to supporting the profession, either with a nominal amount of extra take-home income or by reducing staff cost pressures.
Impact on dental practices
Energy bill relief scheme
Support for dental practices in the face of soaring energy bills has been amongst the most in-demand measures dentists will have been looking for.
The energy bill relief scheme will be introduced to reduce costs for small businesses, including dental practices. No action is needed, it will be applied automatically. It’s due to start on 1 October 2022 and will see dental practices receive an equivalent level of support as homeowners.
There is one key difference – instead of the two-year guarantee, businesses have only been given a six-month safety net.
UK dental practices will pay Corporation Tax on profits over £250,000. Today it was announced the planned increase to 25% from 19% next year has been abolished.
A 6% saving on profits will be welcome news to practice owners who have been battling with rising operational costs caused by energy prices, staff costs, retention and recruitment challenges, to name but a few.
New investment zones
The government will introduce Investment Zones across the UK, offering time-limited tax incentives for businesses that invest and expand within them, including the West Midlands, Tees Valley and Somerset.
No stamp duty will be applied on purchases of land and buildings for business development in those zones – but house purchases within the zones will still be subject to the tax.
Businesses will not pay business rates on newly occupied or expanded premises.
There may be potential in these zones for dental practices, although more details are being released as to who qualifies, and in Kwarteng’s own words, “full details on implementation are yet to be determined”.
The £1m level of the Annual Investment Allowance (AIA), the so-called super deduction, which was due to expire after 31 March 2023, will be made permanent.
This means businesses can deduct 100% of the costs of qualifying plant and machinery up to £1 million in the first year.
This is good news for dentists investing in their practices – whether that’s upgrading airflow equipment to maximise surgery capacity or investing in equipment – and will help make tax simpler for them.
If you’re unsure of what these changes mean for you in terms of opportunities or risks to your personal or business’ financial position, book a no-obligation financial review with a Specialist Financial Adviser from Wesleyan Financial Services.
Bear in mind that the value of investments can go down as well as up and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in future.