Changes to pension rules brings good news for dentists
Nathan Poole FCCA
Chancellor Jeremy Hunt took everyone by surprise with his March 2023 Budget announcement that the Lifetime Allowance (LTA) – the limit on the value of an individual’s pension pot – is to be scrapped. Rising inflation was pushing the value of pensions of many senior clinicians above the permitted £1.07m, giving rise to a tax charge of up to 55%. The move should stem the flow of dentists and doctors leaving the NHS prematurely.
Some sort of measure to minimise the punitive effect of the LTA was widely anticipated. What took everyone by surprise, is that the limit was simply abolished across the board. This is good news for dentists. Meanwhile, the Chancellor increased the annual allowance (AA), the maximum that can be saved tax-free in a pension pot in a single year, from £40k to £60k. We welcome both these changes which took effect from April 6th.
Another reform in the Budget is to peg the tax-free lump sum that can be drawn down on retirement to 25% of the current LTA, which is £268,275. Since the LTA is being abolished, it’s not currently clear how this will affect retiring dentists in the future.
Among other steps announced by the Chancellor:
An extension to the availability of free childcare to be phased in between now and 2025 – likely to help businesses with staff recruitment and retention
The Annual Investment Allowance (AIA) giving 100% tax relief on qualifying plant and machinery to unincorporated businesses is permanently set at £1m
The so-called super-deduction which gives 130% tax relief on new qualifying plant and machinery ends on March 31st and will be replaced by a First Year Allowance, effectively 100% tax relief. This lets taxpayers deduct 100% of the cost of certain plant and machinery from their profits before tax. It is effective from 1 April 2023 to 31 March 2026.
A doubling of the jail sentence to disincentivise promoters of unethical tax schemes – we are aware of a few dentists who have fallen victim to such schemes.
The duty on draught beer in pubs is to be frozen!
Do: talk to us about the changes that have been announced
Do: consider how you can use the changes to childcare to your advantage – either personally or to help your team
Do: with any financial changes in your practice, make sure you tap into the expertise of specialist advisors who understand dentistry