Budget Briefing: What do dentists need to know?

Introduction

This Budget was trailed as one that would back small businesses and help households that are struggling with the cost of living.

With the rumour mill unusually quiet in the run up, all eyes were on the Chancellor John Healey on the big day.

Here, Iain Stevenson, Head of Dental at Wesleyan Financial Services, reviews the main announcements of interest to dentists and considers the measures from previous Budgets which are only now coming into effect.

Spotlight on taxes

On tax, the Chancellor announced a new Pension Tax Allowance, meaning pensioners with income up to the value of the new State Pension, is expected to rise by 3.9% to £13,036.40 a year from April 2027, will not pay Income Tax during this Parliament.

While this is welcome, the Chancellor left Income Tax thresholds untouched, which will stay frozen until April 2031.

It’s a move that means the Treasury can avoid any headline rate changes on employment income but still push ever more practitioners into higher tax brackets, boosting revenue for the Exchequer.

This erosion of real income will pile further financial pressure on dentists, who are already grappling with rising practice costs and a growing tax burden.

Amid climbing inflation, more dentists are being pulled towards the £100,000 threshold, where they face an effective 60% marginal income tax rate.

For practice owners balancing increasing overheads with the demands of delivering patient care, this is another squeeze on the financial rewards of running and growing a dental business.

Pensions, savings & investments

The main development for savers and investors was the Chancellor’s decision to reverse the ISA reforms due to come into effect in April 2027.

Under the proposed changes, under-65s would have seen their Cash ISA allowance fall from £20,000 to £12,000, while the Stocks and Shares ISA allowance would have remained at £20,000, in a bid to encourage investment.

Keeping the Cash ISA allowance at £20,000 may be welcome news for dentists who favour cash savings, but it does little to encourage those who have yet to consider the potential benefits of investing.

Also in April 2027, for the first time, most pensions will be included in estates for Inheritance Tax purposes.

This will prompt many dentists to revisit their retirement planning, as pensions have historically been a popular way to pass on wealth.

There are alternative tax-efficient strategies, but expert advice should be sought, as the rules can be complex.

I’m sure you will also have seen the Prime Minister’s pre-Budget announcement that the State Pension triple lock will change. Under the adjusted triple lock, it will rise by the highest of inflation, 2.5%, or the amount needed to return or maintain its value relative to earnings at 2029/30 levels.

This change does not come into effect until April 2030, which may seem some way off, but it’s good practice to regularly review your estate and pension arrangements with an expert adviser.

They will consider all incoming policy changes in the round to ensure your plans are as efficient as possible.

Business asset disposal relief

After ruling out tinkering too much with Capital Gains Tax in the run up to the event, the Chancellor announced a reduction in the lifetime Business Asset Disposal Relief limit from £1 million to £500,000 from April 2027.

For dentists, it represents another squeeze on hardworking professionals who have been navigating a shifting tax and savings policy landscape for years, and if you think you could be affected you should review your current arrangements alongside an expert adviser.

The cost of living

The cost of living continues to bite in 2027, and the Chancellor’s response was 'targeted and temporary', as promised.

Motorists were among the beneficiaries, with the Chancellor extending the planned 5p increase in fuel duty, which had been due to take effect from 1 January 2027.

Energy bills were also in the spotlight, with the Chancellor unveiling plans to scrap standing charges on domestic gas bills by the end of 2027, or shortly afterwards. However, with costs shifting to gas unit rates instead, the impact on household bills will depend on how much gas people use.

In 2026, NHS dentistry is under real strain, with many feeling that the current NHS contract doesn't adequately reward them for the work they do, and practice costs across the board continue to rise.

Against that backdrop, today’s Budget is perhaps a missed opportunity to start addressing the need for better funding, fairer remuneration and less bureaucracy, alongside meaningful reform of a system that is increasingly difficult to work within.