Autumn Budget: A view for dental practice owners, personal financial planning and practice sales.
After the endless speculation the budget has finally arrived and thanks to an over eager OBR employee it left the starting blocks some time before the Chancellor had finished tying her laces!
Frozen tax thresholds and phased in measures mean that the tax rises will come broadly from 2028 onwards. The tax take is set to increase to a record high of 38.3% of GDP by 2029-30. Much of the tax rise will fund greater levels of welfare spending.
Running Your Business and Taxation
General income tax rates are unchanged but there are new tax rates for dividends, property and savings income which are 2% higher than the current income tax rates. The 2% uplift applies to basic rate, higher rate and the additional rate except for dividend income where there is no increase to the additional rate. This may swing the dividends versus salary pendulum more towards salary but at least they haven’t introduced national insurance on dividends.
If you’re investing in new equipment or a make-over for the practice the annual investment allowance has been maintained with a new 40% allowances for unincorporated businesses.
Capital Gains Tax, for those of you looking to sell, appears to have escaped any new increases and there are no changes to the reliefs or exemptions currently available. Remember, some of last year’s changes come into effect from April 2026 so always a good idea to plan ahead for practice sales. No move yet to increasing rates to income tax levels. Holdover relief still available for passing shares in trading companies to children.
Business RatesThe chancellor mentioned increasing business rates on properties worth more than £500,000. This was aimed at ‘warehouse giants’, however this could affect dental practices with property values in excess of £500,000. We await further explanation from HMRC as to who will pay these higher rates.
Electric cars have been a tax efficient option for many limited company directors. There will be a 3p per mile vehicle excise duty for electric cars and 1.5p per mile for plug in hybrids. It is important to remember that if it is a company car, these expenses will get tax relief in the company.
Sadly, no delay for making tax digital so that’s important to gear up for – sole-traders from April 2026 and Companies / Partnerships from April 2027.There may be some devil in the detail when it gets fully published but, as ever, contact us if you need any advice.
Wealth Management and Financial Advice
On the face of it this was a budget without surprises. The long lead in has led to much speculation, namely on the removal of pension tax free cash and or pension tax relief and a potential gifting tax on those trying to avoid inheritance tax. In brief, none of these measures were announced and no doubt some individuals will have acted unnecessarily, especially on pension tax free cash. It remains the fact that pensions are exempt from Inheritance tax until at least April 2027.
It is worth bearing in mind that there will be at least 3 more budgets between now and the likely latest General Election (August 2029). So, it may be worth making the most of the available pension tax relief rules as these were unaffected in this Budget. By way of reminder: every £1000 contributed to a pension will cost Higher Rate tax payers only £600 and Additional Rate tax payers £550. Are you making the most of the available relief and the generous £60,000 annual limit on pension contributions?
ISA allowances remain largely unaffected although there are some changes planned from April 2027 –the investment ISA allowance of £20k remains but the Cash ISA allowance will be limited to £12k. Those over 65 retain full £20k cash allowance.
For those of you who take dividends from a limited company, own investment properties, or have dividend income from investments will see a 2% tax rise on this income from the 26/27 tax year. So it is worth exploring alternative investment options such as ‘International Bonds’ which would allow your investment to grow without attracting income or capital gains tax. These are also useful as part of an inheritance tax mitigation strategy as they can be passed to the next generation without creating taxable gains.
Investment markets reacted positively, not least to more bullish forecasts on economic growth and debt reduction – good news for investors. There remains fiscal headroom which may in turn all interest rates to fall with inflation already slowing. This will be good news for borrowers. As ever taking independent advice on your financial planning is worthwhile.
Practice Values and Selling
Thankfully the Autumn budget has been pretty quiet on matters impacting the taxation of dental practice sales. Previously we have seen the rise in Capital Gains Tax from 20% to 24%. The Business Asset Disposal Relief (BADR) still remains in place for the first £1 million of (lifetime) gain, and there has been no change to the rate. As a reminder this was changed last year, with the first £1,000,000 of gain being taxed at 14% until April 2026 which then rises to 18% thereafter.
The national living wage which will be increasing by 4.1% from £12.21 to £12.71, and workers aged 18-20 seeing an 85p per hour rise to £10.85. For some practices the increase in staff increases will impact the EBITDA.
With little market reaction to the budget and no negative news on things that are likely to impact purchasers, there is no doubt that the market will remain strong. With interest rates predicted to fall further next year, borrowing cost will continue to reduce. The activity of both private buyers and Corporates has increased over the last 12 months and we expect the levels to continue.
