On Wednesday 19 March, chancellor of the exchequer George Osborne delivered his spring 2014 budget. With a particular focus on saving, it included changes to personal allowances that will be advantageous to all tax paying earners, dentists included.
In the budget the chancellor talked of giving support to businesses and of the need for higher investment. To support this, the annual investment allowance has been increased to £500,000 and will run to the end of 2015. Also within the budget the chancellor announced that he wanted to see businesses investing more, but there was little extra to actually encourage this. Historically, capital allowances have been used as a mechanism to persuade business owners to invest sums in their business but there was very little announced that will directly encourage extra investment.
The budget did not include what some would see as much-needed improvements to the business-lending environment. ‘Funding for lending’ currently encourages lending to small businesses, either by way of reduced rates, ‘cash-back’, or fee free loan facilities, and a more decisive move from the chancellor would have been to extend the breath of the scheme.
In terms of practice sales, this budget should not affect what is already a buoyant market, although buyers will compete to obtain a portion of the tranche of money that is allocated for lending to the dental sector. It’s not automatic that a bank will lend, so presenting and packaging a loan request in the right way is absolutely crucial. Loan-to-value and rates vary dramatically, so having a ‘whole of market approach’ is vital to secure the best terms.
However, the budget did include changes to pensions that could impact practice sales further along the line. The lifting of the requirement for people with defined contribution pensions to buy an annuity when taking out their pension, along with other pension changes, may encourage more practitioners to take early retirement, thus increasing the amount of businesses for sale.
Interest rates are another area often affected by the budget. Despite a much more positive economic outlook, the recovery is still uncertain and interest rates look set to stay at or around the current level for some time. This will further encourage savers to use cash stockpiles to invest in all areas of the property market, including the dental sector, and will support current activity. It has become common for family cash to be invested to support first time dental practice buyers and the low interest rate environment will continue to encourage this. Investors need to be aware that effectively this equity comes behind the bank in terms of security, so care needs to be taken when deciding how much to invest, on what terms and into what type of practice.
When exploring the effect that the spring budget 2014 will have on your practice and its value, it is essential to seek advice from experts. Christie Finance understands the specific complexities of the dental market and provides specialist market funding packages to the sector.
To discuss how Christie Finance might help you achieve your future plans please contact Nicholas Baker on 0207 227 0746.