The Brexit vote has had an immediate and dramatic effect on the UK’s credit rating and the value of Sterling. The UK is now seen as a less safe place to invest in and less secure to lend money to.

PFM Dental Director, Jon Drysdale, says: “The decision to leave the EU could affect your plans to purchase a dental practice and makes it even more vital to have a robust business plan. Lenders will undoubtedly pass on the increased costs of borrowing although against this it unlikely the Bank of England will impose an interest rate rise.”

The UK remains one of the world’s largest and strongest economies with good banking liquidity, relatively low unemployment and perhaps the potential for improved terms with global export markets. If you subscribe to this view, the cost of borrowing money will probably stabilise and remain at a reasonable rate.

All of this emphasises the need for buyers to examine their business plan and the cost of running a business. Are you being realistic about the interest rate you can achieve? Do your projections stress test for rise in the cost of borrowing?

For more information about PFM Dental services go to: http://pfmdental.co.uk

Jon Drysdale of Chartered Financial Planners, PFM Dental, assesses today’s Budget. Headlines may focus on the fragility of the economy and the need to further cut public spending The Chancellor offered positive news on personal finances which could benefit dentists.

·         Higher rate tax threshold to rise from £42,385 to £45,000 in April 2017. The majority of dentists are higher rate tax payers and will therefore feel the benefit. 

·         Many dentists employ their spouse and will take advantage of the tax-free personal allowance to rising to £11,500 also in April 2017. 

·         Annual Isa limit to rise from £15,000 to £20,000. This is a welcome increase to the alternative savings vehicle for those dentists no longer funding personal pensions (due to lifetime and annual allowance limits). 

·         Dentists trading as a limited company will welcome the changes to corporation tax, cut from 20% to 17% by April 2020. This may somewhat offset previously announced increases to dividend tax effective from April. 

·         Reforms to business rates will mean 6,000 small businesses pay no rates and 250,000 have their rates cuts from April 2017. 

·         Dentists buying a practice with a freehold property are likely to be affected by changes to commercial stamp duty – 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. The freehold of a dental practice is often valued at less than £250,000 so this could be an advantage to many buyers. However, buying a larger freehold practice, especially one in the south east, could make you worse off.

The much anticipated changes to personal pensions and tax relief didn't transpire - but we already expected that didn't we?

A more detailed appraisal of the 2016 budget will shortly be available at pfmdental.co.uk

A review of the top five lenders on comparison website Moneysupermarket.com revealed they will not lend to newly self-employed dentists regardless of income. Chartered Financial Planners PFM Dental undertook the review and found that self-employed dentists without at least two years of accounts were barred from obtaining a mortgage.

Jon Drysdale of PFM Dental commented: "We based our review on a first-time buyer wishing to borrow £180,000 for a house purchase of £200,000. The majority of dental associates would easily afford the repayments and they have virtually guaranteed job security. The good news is that specialist dental advisers are aware of lenders happy to accept mortgage applications from newly qualified associates."

Around 1,000 dentists have now completed Foundation Training in the current academic year and the majority will start associate positions during August and September. The move to self-employment usually results in an immediate uplift in income, causing many dentists to think seriously about their first property purchase.

Jon Drysdale is an independent financial adviser for Chartered Financial Planners PFM Dental. He specialises in pension and wealth management advice exclusively for dentists.

For more information visit www.pfmdental.co.uk

The Chancellor of the Exchequer, George Osborne, delivered his Autumn Statement and Spending Review today. There were items of interest to dentists as Jon Drysdale of PFM Dental explains.

Business rates

By the end of this parliament, local government will keep business rates revenue. Elected mayors will, subject to certain conditions, be allowed to raise business rates as the uniform rate is abolished.

Apprenticeship levy

A levy of 0.5% of employers’ wage bill is to be introduced in April 2017 but will affect less than 2% of UK employers.

Pensions

People collecting the new state pension from April 2016 will receive £155.65 per week.

Tax relief on pension contributions could be subject to further change and a decision was expected today but now seems to have been delayed until the Budget next March.

Buy to let and second homes

From 1 April 2016 people purchasing buy to let properties and second homes will pay an extra 3% in stamp duty.

Comment

Jon Drysdale, an independent financial adviser from Chartered Financial planners PFM Dental, says: “After much speculation, prediction and guesswork the Chancellor delivered a fairly benign Autumn Statement. There was little to worry high earners and dentists will be relieved that income tax rates remain unchanged. For once, pensions remain off the agenda, probably in anticipation of the consultation (underway) Osborne announced in the last Budget. This is due to report in 2016 - watch this space.”

For more information visit www.pfmdental.co.uk

The Chancellor of the Exchequer, George Osborne, delivered his second Budget of 2015 today, 8th July 2015. Following the promises made in the election campaign the main focus was, unsurprisingly, on cuts to welfare spending. Nevertheless, there were items of interest to dentists as Jon Drysdale explains.

Two tax measures will benefit most dentists

First, the higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17. This will undoubtedly benefit many dentists as the majority are higher rate taxpayers. The amount people will have to earn before they pay tax at 40% will increase from £42,385 in 2015-16 to £43,000 in 2016-17.

Second, the tax-free Personal Allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016. The tax-free Personal Allowance – the amount people earn before they have to start paying Income Tax – will increase to £11,000 in 2016-17.

Buy–to-let landlords lose tax break

Many dentists invest in buy-to-let property – a strategy that is already under pressure from decreasing yields. Landlords who currently receive tax relief at 40% and 45% on their costs – including mortgage interest – will be restricted to claiming 20%. This is to be phased in by April 2020 and puts further pressure on buy-to-let yields.

Incorporated dentists: dividend tax rates reformed and corporation tax reduced

The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased and are likely to affect those dentists who take income in the form of dividends. However, Corporation Tax will be cut to 19% in 2017 and 18% in 2020.

Pension reform

A major 'root and branch' reform of pensions was announced with a Green Paper for consultation to be published shortly. The implication is that tax relief on pensions may be reduced and tax-free access to pension pots further eased.

Those dentists with incomes over £150,000pa will be restricted to claiming tax relief on no more than £10,000 of pension contributions. This may make the NHS pension significantly less viable for dentists with this level of income.

Comment

Jon Drysdale, an independent financial adviser from Chartered Financial planners PFM Dental, says: “This budget didn’t contain too many surprises, although dentists who have incorporated will need to consider their remuneration strategy carefully due to dividend tax reform. Landlords were hit with the withdrawal of some tax relief and this may see buy-to-let yields fall significantly.

Jon Drysdale is an independent financial adviser for Chartered Financial Planners PFM Dental. He specialises in pension and wealth management advice exclusively for dentists.

For more information visit www.pfmdental.co.uk

The Chartered Insurance Institute (CII) has awarded PFM Dental (Financial Advice) Chartered Financial Planner status, the financial planning industry’s gold standard of excellence and integrity. PFM Dental, which offers independent financial advice, a professional dental sales agency, practice valuations, and chartered accountancy services, is the first organisation dedicated to advising dentists to be awarded Chartered Financial Planner status.

To be awarded Chartered Financial Planner status, an organisation has to have CII approved financial qualifications well beyond the minimum requirements, be able to demonstrate relevant experience, adherence to the CII's Code of Ethics and Conduct and a commitment to continuing professional development.

PFM Dental director, Jon Drysdale, commented: "Because such high standards of professionalism, capability and ethics are required, Chartered Financial Planner status is conferred on fewer than 10 per cent of UK financial advisory firms. We are delighted to be the only financial advisers dedicated to the dentistry profession to meet the criteria."

PFM Dental offers independent financial advice exclusively to dentists. For more information visit www.pfmdental.co.uk

The Chancellor of the Exchequer, George Osborne, delivered the last Budget of this parliament today. Jon Drysdale highlights items of interest to dentists.

Tax cuts

Big tax cuts for income tax payers and help for savers through greater flexibility on ISAs. With the majority of dentists being higher rate tax payers, this is positive news.

Simplification of the tax system was announced with the annual tax return removed - more details to follow. The fuel duty increase will be frozen again.

The personal tax-free allowance will be raised to £11,000 in 2017. The higher rate tax threshold, which affects most dentists, will rise to £43,300 in 2017/18.

Pensions hit

On a more negative front, the Lifetime Allowance on pensions is to be reduced to £1m from next year. This is likely to significantly impact dentists with NHS pensions. It remains to be seen what transitional protection will be offered to those breaching the new reduced allowance. The change is potentially going to encourage dentists to draw their NHS pension earlier than planned to avoid a Lifetime Allowance charge. 

Savings

Four major new steps on savings were announced:

1. Greater access to pension annuities. 

2. A more flexible ISA with annual savings limit increasing to £15,240 (2014/15) and allowing withdrawals and re-contributions in the same year without losing tax-free allowance.

3. 'Help to Buy' ISA for first time buyers with a 25% top-up – effectively tax relief on ISAs.

4. First £1,000 of interest on savings income to be tax-free.

Business

Corporation tax will be cut to 20% in two weeks time, with small business rates also to be cut. Class 2 National Insurance to be abolished.

Comment

Jon Drysdale, an independent financial adviser from PFM Dental, commented: “While there are positives in this budget for dentists the most worrying single announcement today is the further cut to the Lifetime Pension allowance to £1m. Many dentists are already subject to a charge as the allowance has fallen in recent years. Hopefully, some transitional protection will be available and we will be following developments on this closely. The need for specialist advice in this area has never been greater." 

PFM Dental offers independent financial advice exclusively to dentists. For more information visit www.pfmdental.co.uk

PFM Dental's popular preparing retirement seminars will be held again this year, beginning in Rochdale on Friday 8 May – convenient for dentists in the Greater Manchester and Oldham areas and beyond.

The programme has been developed for 2015 to include, by popular request, a longer session on wealth management. With ongoing changes in pension and tax rules, taking the appropriate steps to maximise income on retirement has never been more critical.

Seminar coordinator, Jon Drysdale of PFM Dental, says: "This is our sixth year of running these seminars and feedback has always been overwhelmingly positive. Because we've had many enquiries about wealth management in recent months, we've developed this session to cover the topic in greater depth."

As in previous years, the seminar programme includes sessions by experts on selling a dental practice, including on the legal and accountancy issues.

Similar seminars will take place in York on Friday 15 May, Sheffield on Friday 18 September and Edinburgh on Friday 25 September. More events are planned – visit the PFM Dental website for the latest information.

Places are £50 and must be booked in advance – numbers are limited. Lunch is included and each seminar qualifies for five hours of verifiable CPD.

To book your place, call Samantha Hodgson on 0845 241 4480 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Visit www.pfmdental.co.uk for more information.

The Chancellor's Autumn Statement delivered two significant blows to dentists looking to incorporate their business. Jon Drysdale explains

Entrepreneur’s Relief (ER) will be denied on any gain arising from the transfer of goodwill to a related company. Dentists may be familiar with the 10 per cent Capital Gains Tax (CGT) rate where ER was available but under the new regime the applicable rate of CGT will be 28 per cent for higher rate tax payers. The ability to create a director’s loan account to shelter future profits against income tax is still there but is far more expensive. This change alone will make incorporation not viable in many cases.

Corporation Tax relief will no longer be given on the amortisation of goodwill transferred from a connected party. This was potentially available where goodwill was created (or acquired) by the individual dentist or partnership after April 2002 and then transferred to a related company that they controlled.

Gift Relief (s.165) and Incorporation Relief (s.162) remain available and may be appropriate in certain circumstances.

Jon Drysdale, an independent financial adviser from PFM Dental, commented: “The draft legislation proposals are effective from 3^rd December 2014 even though the 2015 Finance Bill may not be enacted until next summer.

"If you are in the process of incorporating your dental practice you should consult your accountant urgently to consider your options in light of these changes."

PFM Dental offers independent financial advice exclusively to dentists. For more information visit www.pfmdental.co.uk

The Chancellor, George Osborne, delivered the last Autumn Statement of this parliament today. Jon Drysdale of PFM Dental highlights items of interest to dentists.

Tax and duty

The personal tax-free allowance is to be increased and the higher rate tax threshold increased from £41,861 to £42,385 – the first increase in line with inflation for five years.

Reform of stamp duty means an estimated 98 per cent of home buyers will pay less, while those purchasing very high value properties will pay significantly more.

Small businesses

The Funding for Lending Scheme (FLS) has been extended by one year. This government-backed lending is available to small businesses, including dentists, through the major high street banks.

A full structural review of business rates was announced with Small Business Rate Relief to double again and rates capped.

Savings

The £15,000 ISA limit is to be increased to £15,240 from next April. ISA tax-free savings can be passed to spouses on death from next April.

Pensions

There was confirmation that the 55 per cent pensions death tax charge on unused pensions is to be abolished.

Jon Drysdale, an independent financial adviser from PFM Dental, commented: “The vast majority of dentists are likely to benefit from the increase to the higher rate tax threshold and the reform of stamp duty. Existing and future practice owners will welcome the continuing support for small businesses through the extension to the Funding for Lending Scheme and the capping of business rates."

PFM Dental offers independent financial advice exclusively to dentists. For more information visit www.pfmdental.co.uk

Dentists who apply for their NHS pension while erroneously listed on open NHS contracts could well experience delays receiving their payments warns independent adviser, Jon Drysdale.

As an example, he cites a West Yorkshire dentist whose NHS pension was delayed because his former employer failed to notify several Local Area Teams (LATs) that he was no longer on the performers list for NHS contracts in various locations. The dentist, who held a regional dentist position with a large dental corporate until earlier this year, submitted his pension application to NHS Pensions in July 2014 with a view to retiring in November. However, the Pensions Team at NHS Dental Services were unable to send his completed application to the NHS Pensions payments department for processing until the relevant contracts had been closed. The dentist in question was not notified of the delay and now faces an initial period of retirement without his pension.

Jon Drysdale, an independent adviser with pension specialists PFM Dental, says "The delay in paying his NHS pension was caused by the failure on the part of the corporate to carry out the necessary procedures when the dentist left their employment. The lack of communication about the delay made matters worse. I strongly urge all dentists applying for their NHS pension to check they are no longer listed on open NHS contracts – this is one of the many important points we make on our one-day retirement seminars.”

Jon Drysdale, a director of PFM Dental, runs a series of retirement planning events to help dentists plan effectively for retirement, including NHS pension options. For more information visit: www.pfmdental.co.uk

With PFM Dental's practice purchase seminar on Thursday 18 September in Warrington fully booked well in advance, it was obvious the associate dentist participants were very interested in owning their own practice.

Organised in association with RBS (healthcare banking), Goodman Grant (dental solicitors), PFM Townends (dental accountants) and plan providers, Patient Plan Direct, a wide range of topics were covered in presentations and Q&A sessions. These included the current market, applying for competitive finance, legal and accountancy considerations and the benefits of a capitation scheme.

Jon Drysdale, an independent financial adviser at PFM Dental says: "We have run this course for four years and the Warrington event saw the highest attendance yet, with nearly 40 associates. Concerns over pay and job security, combined with the desire to build a valuable business asset, means more associates would like to buy a practice.”

The next practice purchase seminar for associate dentists is on 20^th November in Watford (evening). Places can be booked by emailing This email address is being protected from spambots. You need JavaScript enabled to view it. or calling PFM Dental on 0845 241 4480.

For more information about purchasing a dental practice visit www.pfmdental.co.uk

An estimated 30,000* individuals, including many NHS dentists with pension benefits valued at more than £1.25m, are likely to benefit from HMRC’s Individual Protection from today (18 August). Dentists with NHS pension ‘added years’, personal pensions and those with deferred benefits can also take advantage of the newly available protection.

By having Individual Protection you are able to set your Lifetime Pension Allowance (LTA) up to a maximum of £1.5m, potentially saving a tax charge of £137,500. HMRC is offering the protection as a lifeline for those affected by the £250,000 reduction to the LTA in April 2014. The application 'window' stretches to April 2017, although those looking to retire before then are advised to take action now.

Jon Drysdale, an independent financial adviser at PFM Dental says: "Dentists retiring within the next 12 months need to deal with this issue immediately or face potentially large penalties. Getting the necessary figures at short notice from NHS Pensions will be a challenge, so seeking specialist advice early on is paramount."

Unlike Fixed Protection 2014, the new Individual Protection allows the continuation of active pension contributions.

To complete your Individual Protection application you will need to apply to NHS Pensions for a valuation of benefits.

For more information contact pfmdental on 0845 241 4480 or visit www.pfmdental.co.uk

*Source: HMRC Tax Information and Impact Notes 'Reducing the pensions tax annual and lifetime allowances'.

_{Many of the 970 dentists who undertook Dental Foundation training in 2014 will move to a self-employed associate job shortly, if not already. Chartered accountant Adam Hemingway at specialist dental accountants PFM Townends and independent financial adviser Jon Drysdale share their top 10 financial tips for dentists embarking on self-employment.}

1. Don’t forget to register with HMRC

It's important to let HMRC know that you're self-employed as soon as possible. If you don't tell them, you may have to pay a penalty. Your accountant will be able to register on your behalf and receive copy correspondence from HMRC. This means you won’t miss important deadlines.

2. Save for tax National Insurance and Student Loan repayments 

It is important to know how much tax to pay and when you need to pay it. Your accountant should calculate this for you. Don’t rely on anecdotal evidence of how much you will need to save. For associates with largely NHS income it should be possible to accurately predict the amount of tax you will need to pay. You should save for this from the start of your new job, even though you may not have to pay any tax or student loan repayments for some time. Remember that you’ll need to set up a direct debit to pay Class 2 National Insurance contributions straight away.

3. Record keeping is important

Being a self-employed associate means you are now running your own business. Keeping accurate records of income and business related expenditure will ensure your accountant advises you on the correct amount of tax to pay and claims the appropriate tax relief where possible. Make sure you retain practice payslips as these contain important information such NHS Pension deductions.

4. Set up a bank account for your new business

You don’t need a ‘business’ bank account but it is advisable to set up a new current account which into which your practice income is paid. Business related expenditure should be taken from this account. This ensures business income and expenditure is separated from the multitude of personal credits and debits.

5. Claim back business expenses against tax

Associates can claim for the cost of some courses and study materials incurred before they started their first job and ongoing training. It is important to provide your accountant with records of any expenditure related to work. A dental accountant will know what claims are acceptable.

6. Check the NHS Pension portal

The annual reconciliation report (ARR) is completed online and this is your opportunity to make sure your pensionable pay is recorded correctly. This will affect your pension at retirement so it is important to get it right. A dental accountant will be able to confirm you have made the correct NHS Pension contributions and deal with any queries relating to the online portal.

7. Use your ISA allowance

A total of £15,000 can be deposited in a cash ISA account in any one tax year. This is a bank account where interest is not subject to income tax. It is a good place to hold the savings you make for your tax liabilities. A cash ISA can be linked online to your current account for easy access. Rates tend to be low.

8. Get your income protection in order

Most associates will expect a stepped increase in their income and subsequently personal expenditure is likely to rise. It is important to protect this income as employer sick pay is no longer available or will be limited. Existing income protection polices may not provide sufficient cover especially if you signed up to a plan in your final year at University. The sooner you do this the less expensive it will be.

9. Save for a house deposit

Most lenders will require a deposit of 10%, although some lenders will allow 5%. Many high-street mortgage lenders won’t lend unless you have at least 2 years self-employed accounts so finding a lender sympathetic to dentists is important. Use a specialist dental financial adviser to source the best mortgage for your requirements.

10. Use specialist advisers

We have witnessed some serious problems for clients who have been ill-informed by an accountant who isn’t dentally aware. Many times this involves NHS Pension rules for associates, failure to claim business expenses correctly, or a general misunderstanding of the NHS Pension portal. We therefore strongly recommend that you engage a dental accountant who has chartered status and is regulated by the ICAEW. (Institute of Chartered Accountants in England and Wales).

Visit: http://pfmdental.co.uk/sections/view/26/associate | Call  01904 656 083

iPad Mini offer for all new associate dental clients PFM-ipad-advert-August-2013.pdf 

Location, location, location?

Martyn Bradshaw explains why location is important but not everything when it comes to practice values

Our national press love a headline quoting a statistic on the average house price or the average wage. Statistics containing an ‘average’ often make a good story because they divide opinion. However, some should be treated with caution.

Practice values are often subject to similar treatment and while surveys might contain some useful guidelines on the general state of the market, they often fail to uncover the finer points of valuing the goodwill of your dental practice.

There is no doubt that there is a significant variance in the values of practices in the south east of England, the major English cities and more remote locations. The same can be said of Scotland, with practices commanding higher prices if they are in or close to Glasgow, Edinburgh or Aberdeen.

Price hotspots

Hotspots by location tend to be town centres/highly populated areas. This is simply because these areas enjoy a higher concentration of dentists seeking to buy a practice. In these locations the majority of sales are likely to be to dentists wanting to be ‘owner occupiers’ as they are the largest group of interested buyers. Typically these hotspots are (but not restricted to):

• Within the M25, Birmingham and other Midlands cities, Manchester and the north west cities, Bristol, Newcastle and cities in west and south Yorkshire.
• Likewise, the major Scottish cities of Glasgow, Edinburgh and Aberdeen will command higher prices than the less populated areas of Scotland. Interestingly, Scottish practices often enjoy interest from buyers across the UK, largely due to the (non-contract based) nature of NHS income.

When hotspots are less important

Body corporates are as active as ever and are seeking to purchase across the country. Do they pay different values dependent on the areas? Not generally. Their assessment of goodwill value relies on the ‘super profit’ that the practice generates (a multiple of the earnings before interest, tax, depreciation and amortisation – known as EBITDA). This calculates a value, regardless of where the practice is.

It would be wrong to say that location doesn’t influence the price a corporate will pay for your practice. Location becomes important if a corporate has a foothold in a particular area. Running a group of practices in proximity will bring economies of scale, which is a key mantra to the investors behind corporate dentistry. Therefore, the location factor on price in this case is more regional than national.

What impacts on price other than location?

Obviously, the location of a practice isn’t something practice owners can change so if yours is not in a price hotspot, what can you do to increase its value? Most patients will come from the locality – which can sometimes be quite a small area depending on the transport infrastructure and other factors. There are exceptions, but few general dentistry practices find it possible, despite good marketing campaigns, to broaden the area from which patients attend. Offering specialised services (cosmetic dentistry being an obvious one) can, however, be effective in drawing patients from further afield.

The biggest single factor affecting values is probably the basis of the treatment provided. Some practices sell for significantly over the asking price due to the high volume of offers at the closing date for sealed bids. These tend to be NHS practices. The banks see strength in an NHS income stream and will lend readily as such, hence the high number of finance-ready buyers available. An NHS practice in a northern city or even a more remote location is very likely to command a higher price than a private practice in the south east.

While private practice values may be enjoying a value resurgence due to the improving economy, buyers are more likely to pay 'top dollar' for those practices where capitation scheme income is greater than Fee Per Item income. Again, banks are more comfortable lending on this proposition as they perceive the income stream to be more secure.

Turnover is vanity, profit is what matters

To understand how we might break a value assessment down even further, let’s consider two similarly-equipped NHS practices with the same turnover, in the same city, in the same street. One has a consistently higher level of profit than the other due to lower staffing costs or better cost control. I know which would command the higher price.

Martyn Bradshaw is a practice valuer and sales agent with PFM Dental. For further information on PFM Dental visit pfmdental.co.uk