On Thursday 17 November, Jeremy Hunt delivered the government’s Autumn Statement on how they plan to rebuild the UK economy and ease the pressure caused by the cost of living crisis.
From a dental perspective, the statement left many industry challenges unaddressed, both from a personal and practice financial perspective, and did little to bring clarity on how some of the new funding will be applied to various NHS healthcare sectors.
However, there were a few key announcements to be aware of:
Income tax
The announcement in relation to the lower and middle-income tax bands is a stealth tax that will hit many working in the profession. Dentists whose income is due to increase over the next two years will have to deal with the frozen tax bands, coupled with high inflation, meaning less in their pockets in real terms.
Higher earners are facing a higher tax bill as the threshold for the £150,000 to £125,140 tax rate is reduced from 6 April 2023. This is a move that won’t make much money for the Treasury’s coffers but means less disposable income for higher earners which will do nothing to help a move into recession.
NHS funding
The £3.3bn funding announced in NHS and social care spending is essential to keep the services that so many rely on running effectively and offers a glimmer of hope for those working under the NHS.
What Hunt failed to clarify, however, was how this funding would be applied and if any will be used to support those buckling under the pressure of trying to operate under NHS dentistry. We will wait with bated breath as to how this will be rolled out in the coming weeks or months.
Inheritance tax
Inheritance tax has once again been targeted for the Treasury’s coffers. The threshold for paying inheritance tax has been frozen since 2009 and is not keeping pace with inflation.
Many dentists face exceeding the £325,000 limit and may not be able to leave their loved ones as much as they’d like to. There are ways to gift some money tax-free, and making the most of these allowances is the only way to reduce the eventual tax burden, so seeking advice here may be beneficial.
NHS Pension rise
Pension tax is a hot topic among dentists and today’s confirmation that the state pension will be set to rise by 10.1% from April 2023 will be another discussion point for the months to come.
The CPI link to the annual allowance could present an additional tax challenge for dentists operating under the NHS, although the think tank, Policy Exchange, has urged reform on this quirk within the NHS pension. While that was not addressed in today’s announcement, there may still be time for the government to address this before the new tax year.
Dividends and Capital Gains Tax
Another small sting in the tail of today’s budget. Capital gains tax allowances and dividends allowances have been slashed meaning even those making modest profits on funds in the market will face a reduction. Making the most of ISA allowances – a crucial tax-free savings vehicle – could be a consideration for everyone looking to minimise the impact of this change.
It’s an issue too for those looking to sell second homes who may now find they hold off on selling to avoid higher capital gains charges.
These tax cuts may be a drop in the ocean for those looking to sell their practice, or directors of limited companies who benefited.
We know that some are having to dip into their savings and pensions to cover living costs, but this should be done carefully and, if possible, with financial advice as it can have a significant impact on future retirement plans.
Got questions?
The Autumn Statement may have left you with questions about whether all is well with your financial plan.
Now might be an ideal time to seek advice and undergo a financial health check. There are many options available to support with some of the challenges presented in the government’s statement.
Book a no-obligation financial review to speak with a Specialist Financial Adviser.
Please bear in mind that advice in relation to inheritance tax planning is not regulated by the Financial Conduct Authority.
Tax treatment depends on the individual circumstances and may be subject to change in future.