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