What the latest Budget means for the dental industry
The latest Budget – announced on Wednesday – saw a crack down on the impact of coronavirus and removed thousands out of the pensions ‘taper tax’ threshold.
Rishi Sunak revealed a £12 billion spending pledge to help counter the economic impact of the COVID-19 pandemic.
This includes a £5 billion commitment to help the NHS and other services in their bid to control the outbreak.
Additionally, statutory sick pay will be paid from day one, as opposed to day four. Dental staff will have SSP in full for up to 14 days of illness.
Nick Ledingham, Chairman of NASDAL and director at specialist dental accountants, Morris and Co, said: ‘In light of coronavirus, Mr Sunak opted for a reflationary Budget.
‘This is to encourage spending and calm people’s fears about their income if they are ill or self-isolating.
‘The Bank of England has announced a reduction in the Base Rate. It fell from 0.50% down to 0.25% to help boost the economy. The Chancellor also announced a series of short-term measures to help both dental practices and employees.’
Earners lifted out of ‘taper tax’
Additionally, Mr Sunak removed around 200,000 higher earners out of the pensions ‘taper tax’ threshold.
The maximum amount an individual can save into their pension and earn tax relief on is £40,000.
The taper allowance means the annual amount you can earn tax relief is reduced by £1 for every £2 over a certain threshold.
For high earning NHS staff, this meant many received high tax bills, encouraging earners to cut down their working hours or even retire early.
However, from 2020-21, the threshold income will increase from £110,000 to £200,000. Dentists with an income below this figure will not be affected by the tapered annual allowance.
As a result, fewer dentists will be handed high tax bills for saving into their pensions.
This ‘threshold income’ includes annual earnings, as well as income from investments, property and savings.
At the same time, only when an individual’s adjusted income exceeds £240,000 will it begin to be tapered.
Now, the minimum amount to which the annual allowance can be tapered down to will drop from £10,000 to £4,000.
This will only affect dentists earning more than £300,000. They will see a reduction in their allowance and, therefore, are likely to pay more tax.
The British Dental Association (BDA) says the latest move does not rectify the problem of higher earners being disincentivised to work.
The chair of the BDA’s pensions committee Paul Blaylock said: “For the last three years we have consistently raised the problems caused by pensions tax in the provision of NHS dentistry.
‘The Budget announcement to take many individuals out of the taper to the Annual Allowance will be welcome by many who have faced such tax charges in recent years.
‘However, it does not completely remove the problem that many higher earners are disincentivised to work. It also does not remove the perverse incentive to retire early for many in the NHS.
‘It is imperative that public service pension schemes allow workers flexibility to build up lower pensions in exchange for a lower pension contribution.’
Business rates were also scrapped for dental practices with a rateable value of less than £51,000.
Any small businesses currently not paying rates will be able to apply for a £3,000 grant in the coming year.
Additionally, cooperation tax will remain at 19%. Structures and buildings allowance will increase from 2% to 3%.