Dental Tribune United Kingdom Edition

April 9-15, 20128 Budget 2012 United Kingdom Edition Enrol today! Call for details Limited places available! TR213860 213860_BDJ_Nobel 8/2/12 13:10 Page 1 S ome dentists may be able to breathe a sigh of re- lief following George Os- borne’s 3rd Budget on Wednes- day 21st March. There were no big surprises, not least be- cause The Budget was widely leaked to journalists before- hand. In general, the effect of The Budget is likely to be neu- tral or even positive for many dentists, although it highlights the need for careful tax plan- ning over the next few years. What didn’t happen… Contrary to rumours the Chancellor didn’t remove higher rate tax relief on pen- sion contributions. Those dentists making pension con- tributions in any shape or form can hang onto this generous tax perk for at least foresee- able future. Despite the Liberal Demo- crats pushing for the loss of tax free cash from pensions, this hasn’t happened. This par- ticularly benefits those close to retirement, especially those with significant NHS Pension benefit or large personal pen- sion funds. ‘High earners’ have avoid- ed further raids on income or capital taxes. There were no negative changes to the rate of tax paid by higher rate tax payers, although the loss of the increased personal allow- ance (£9205 in 2013/14) for those with income in excess of £100,000, is likely to be wide- spread amongst dentists. This shouldn’t be ignored and can be mitigated with pension con- tributions. The headlines… The highest rate of Income Tax will be reduced to 45 per centfrom the current 50 per cent for those earning in ex- cess of £150,000, from April 2013. Some careful planning may be required to time the withdrawal of income (salary/ dividends/drawings) to ensure the reduction has maximum personal impact. We advise dentists reassess their busi- ness year end timing with their accountant as this may be criti- cal to saving tax. Stamp Duty on house pur- chases over £2 million is to be increased to a stagger- ing seven per cent. On a pur- chase of £2 million the amount of Stamp Duty paid will be roughly equivalent to the aver- age UK house price (£140,000). Whilst relatively few dentists will be affected by this it may set a precedent for future increases to stamp duty at a lower threshold. The Personal Allowance will increase to £9,205 from April 2013, benefiting those with income under £100,000. If you pay your spouse and have previously set their salary in line with the personal allow- ance you should revisit this. However the level of income at which National Insurance is paid should also be consid- ered. The increase to the per- sonal allowance will unfortu- nately be partially offset by the decrease in the threshold for paying higher rate tax. There- fore the increase to the person- al allowance is likely to benefit dentists to a limited extent. Tax avoidance continues to be a target for the Chancel- lor and is estimated to cost the Treasury £5 billion a year. A General Anti Avoidance Rule (GAAR) is set to be adopted, targeting contrived or artificial schemes. Dentists considering non-standard ways to avoid income tax should exercise caution as such schemes may well be subject to fu- ture legislation. If you are part way through a tax avoid- ance scheme when the loop- hole closes this can be hugely problematic. There was a slight soften- ing of the proposed Child Ben- efit reduction, with the much vaunted ‘cliff edge’ being raised to £60,000 from January 2013 and a phasing in of the cut for those with income more than £50,000. As many dentists earn in excess of £60,000 loss of Child Benefit is likely to be widespread in the dental community. Corporation Tax reductions are likely to benefit incorporat- ed practices over the next three years. However most will fall outside the main corporation tax reduction to 22 per cent in 2014. The ‘smaller profits’ rate has already fallen (as per pre- vious budgets) to 20 per cent, for companies with profits under £300,000. It is this rate that will be applicable to many incorporated dental practices. The good news is that corpora- tion tax rate levied on the slice of profits between £300,000 and £1.5 million, known as the ‘marginal rate’, will fall. Practices considering in- corporation should discuss the impact of this with their accountant. DT A budget summary for dentists Jeff Williamson highlights the areas affecting dentists in the recent Budget ‘Contrary to rumours, the Chancellor didn’t remove higher rate tax relief on pension contributions’ About the author PFM Townends LLP are chartered accountants deal- ing exclusively with dentists. They provide a full range of account- ancy services in- cluding payroll to practices, practice owners and associates. Please con- tact Jeff Williamson on 01904 656083 or visit www.pfmtownends.co.uk for further information. The effect of The Budget is likely to be neutral or even positive for many dentists ‘Tax avoidance continues to be a target for the Chancellor and is estimated to cost the Treasury £5 billion a year’