Budget briefing: What do dentists need to know?

An unprecedented budget

This was a Budget preceded by months of leaks and media speculation, and one that may ultimately be best remembered for an unprecedented leak that stole the Chancellor’s thunder.

However, it also contained several revenue-raising measures that will affect dentists for years to come.

Here, Iain Stevenson, Head of Dental at Wesleyan Financial Services, reviews the main announcements.

Spotlight on taxes

The Chancellor froze income tax thresholds for a further three years, until 2031.

This ongoing freeze means that, as income rises to keep pace with inflation, practitioners will find themselves pushed into higher tax brackets – a form of fiscal drag that reduces take-home pay without any headline rate changes.

Left unaddressed, this erosion of real income risks fuelling a growing sense that tax policy is working against the profession. This concern could add further pressure to workforce retention across both NHS and private practice, while also squeezing practices at a time when staff costs are rising due to increases in the minimum wage.

From 2028, the Chancellor also announced a so-called “mansion tax” on properties worth more than £2 million.

This annual charge will be applied on top of council tax and includes four bands, rising from £2,500 for homes valued between £2 million and £2.5 million, to £7,500 for properties worth £5 million or more.

Pensions, savings and investments

Thankfully, the Chancellor decided not to remove the option to take 25% of a pension pot as a tax-free lump sum, up to a maximum of £268,275. This stability will reassure dentists who have been anxious about possible changes.

For now, this continuity helps maintain confidence in retirement saving. We would encourage dentists to use this as an opportunity to review their long-term retirement plans – or start one if they haven’t already.

The Chancellor also chose to maintain the triple lock on the state pension, which will continue to increase in line with CPI inflation, average earnings growth or 2.5% – whichever is highest.

However, she did announce a cap on the amount savers can contribute to their pensions through salary sacrifice schemes, now limited to a maximum of £2,000 per year.

From April 2029, salary-sacrificed pension contributions above £2,000 will be treated as ordinary employee pension contributions, meaning they will be subject to both employer and employee national insurance contributions.

The Chancellor also moved to reform Individual Savings Accounts (ISAs) from April 2027, with the aim of encouraging more retail investors.

While the £20,000 annual investment limit remains, £8,000 of that must now be invested into a stocks and shares ISA – although those aged over 65 will be exempt from this requirement.

Another important consideration for investors is the Chancellor’s decision to increase tax rates on dividends, savings and property income - all by 2%. Dividend tax will rise by 2% from April next year, and savings and property taxes from April 2027.

Anything that encourages more dentists to begin investing gets our backing – but it’s crucial to take time to understand what’s available before committing your money to the stock market.

When it comes to investing, there is no single solution that works for everyone. What makes sense for you depends on your personal financial goals and your comfort level with market fluctuations.

Take “smoothed funds”, for instance – these can sit within a stocks and shares ISA and help even out the highs and lows of investing. If you’re new to investing and the idea of daily market movements makes you anxious, this type of approach could be worth exploring.

Cost of living impact

Motorists were singled out in the Chancellor’s revenue-raising measures.

After 16 years of being frozen, fuel duty will be defrosted in September 2026. At this point, phased increases will be introduced until April 2027, after which the rate will rise annually in line with inflation.

Owners of electric vehicles will also be affected by a new road-usage charge of 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. The government says this represents around half the fuel duty paid by petrol car owners.

This will come into effect from April 2028 and will rise each year with inflation.