Several aspects of the Spring Budget 2024 are likely to affect dentists and their teams. Linda Giles and Nathan Poole set out their chief observations on a budget that portrays the government as committed to reducing taxes for working people while ensuring higher earners pay more tax.
National Insurance Contributions (NIC) are due to be reduced in April 2024:
- A reduction from 10 per cent to eight per cent for employees
- A reduction from nine per cent to six per cent for the self-employed
However, the additional two per cent rate on earnings over £50,270 stays in place.
The threshold for personal allowances remains frozen. Linda and Nathan say those earning between £26,000 and £60,000 will be better off in the 2024-25 tax year, gaining more from the reduction in NIC than they lose in income tax due to the threshold freeze.
The chancellor plans for the threshold to remain static until 2028. However, by freezing the thresholds that determine when taxpayers start paying NIC and income tax, higher earners lose out. Linda and Nathan are disappointed that Jeremy Hunt has not opted to reduce the tax rate for higher earners who, under the current income tax regime, lose their personal allowance once they bring home more than £100k. Doctors and dentists earning between £100 and £125k effectively pay tax at 60 per cent, a disincentive to full-time working.
Nathan commented, “This creates an income cliff edge when a slower tapering of the personal allowance would be so much better. There are ways to mitigate this rate, especially for those who are incorporated, but it disincentivises owners from taking money out of the company at a time when perhaps spending needs to be encouraged.”
Changes to the child benefit system will also positively impact dental team members and families. The full amount of child benefit will be paid to families where the highest-earning parent earns up to £60k – the current threshold is £50k. Families where the highest earner earns up to £80k will be paid partial child benefit.
Under the current system, when the threshold is breached, families have to pay back the child benefit they have been given. It can be a sensitive issue for working parents to confirm how much their partners are earning and work out what should be paid back. The High-Income Child Benefit Charge portrays the current government as prudently not paying benefits to higher earners. However, it doesn’t work well with the current tax system.
The abolition of the furnished holiday lettings regime came as a surprise. The tax advantages of furnished holiday lets are to be scrapped from April 2025, but how they transition to existing property income taxes is still not completely clear.
For owners of second homes and rental properties who are thinking of selling, the decrease in the top rate of Capital Gains Tax from 28 per cent to 24 per cent will be welcome news. NASDAL believes the government is hoping to incentivise sales to boost the public purse.
Though not dramatic, the changes announced in the budget indicate a clear agenda:
- Scrap NIC altogether and move to a single unified taxation system
- Continued erosion of the tax differential between the self-employed and the incorporated (although there are still more options for the owners of incorporated businesses to minimise their tax outlay with good tax planning)
Nathan said, “Whilst practice team members will hopefully benefit from further reductions in NIC and possibly the relaxation of child benefit rules, generally we see this as a political Budget, putting more money in the pockets of possible voters. What we would like to see is a more positive outlook among consumers - we can only hope the budget helps with this.”