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A Budget boost for dentists

If you are a dental or orthodontic business with ambitious plans to expand your dental practice, the Budget may have given you the impetus you need. Nathan and Linda point to significant changes quite clearly designed by Chancellor Rishi Sunak to give a post-pandemic boost to business.  There is a new ‘super-deduction’ of 130% for limited companies investing in their business alongside initiatives to provide finance, notably the Recovery Loan Scheme and the doubling of grants to take on new apprentices.

Business boosters

The so-called ‘super-deduction’ is available for limited companies purchasing equipment from 01 April 2021 until 31 March 2023 – this could allow a dentist with an incorporated business to cut their tax bill by £25 for every £100 they invest. You cn find out more about capital allowances here.

The government announced details of a recovery loan scheme designed to ensure access to loans and overdrafts of £25k+. The government will guarantee 80% of the loan to help encourage lending and ensure access to viable businesses.

The grant for taking on apprentices over 25 will be doubling from £1,500 to £3,000 per apprentice. For under 25s the grant increases from £2,000 to £3,000.

A sting in the tail?

Dentists who trade through a limited company may have noted the proposed increase in Corporation tax from 19% to 25%, starting from April 2023. There will be a lower profits limit of £50k below which the current 19% rate will continue; the full rate of 25% will be for companies with profits over £250k. The profits of most dentists are likely to fall between those points and for them there will be a tapering called “marginal relief.”

One of the benefits of trading through a Limited Company is the opportunity to optimise your tax position with careful planning to ensure you achieve the right amount of dividends, salary, pension contributions, and benefits in kind. With the change to corporation tax rates this does not change.

Annual Investment Allowances (AIA)

Unincorporated dental practices cannot benefit in the same way as incorporated practices but in 2021 they will still be able to claim the capital allowances at 100% of up to £1m under the AIA. This will apply to the first year following the purchase rather than being written off at 18% over a period of years.

The current annual investment allowance (AIA) limit is due to reduce from £1m to £200k in December 2021, and whilst £200k seems high, the apportionment between periods could reduce this to £50k so care is required to avoid losing out.

Timing is everything with the AIA if you are to get optimum tax relief. You could save significant tax in that period depending on when you make the acquisition.

Rishi Sunak also had some important changes to pensions which could impact dentists:

  • The widely anticipated cut in top & higher rate tax relief on pension contributions did not materialise in the 2021 Budget announcement but will no doubt return to the agenda in the not too distant future. So, if cashflow permits, we recommend you consult both your accountant & your Independent Financial Advisor (IFA) about scope to maximise your contributions in the next year ahead of the next Budget.

  • The pensions Lifetime Allowance was frozen at the current level of £1,073,100.00 until April 2026 which means that many more individuals will be needing to take specialist advice on ways of managing this issue. Those with even relatively modest NHS pensions complemented by personal pension savings can easily be impacted by this so it pays to ensure your advisers are familiar with the NHS superannuation scheme and the way those benefits impact not only the Lifetime Allowance but the Annual Pensions Savings Allowance too. Get your accountant & IFA working together with you on these matters to avoid unexpected tax charges being incurred.

  • On all the changes announced in the budget, whether relating to allowances, incentives or incorporation, make sure you speak to a dental specialist business advisor.

Are you a potential RBD client? Please do make contact and see if we can help you.

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