Dental News
Spring 2022
Welcome to our Spring 2022 Dental News
In this issue
Spring Statement
NHS Pension – age discrimination remedy
Scheme pays and compensation scheme deadlines (2019/20 deadline 31 March 2022)
New PPE portal
CQC fees for 2022-23
Health & Social Care tax levy and taxation of dividends
NASDAL annual benchmarking statistics
Spring Statement
Chancellor Rishi Sunak presented his Spring Statement on Wednesday 23 March. Our Spring Statement Summary covers the main issues that are most likely to be of interest to you. You will also find useful commentaries to help you understand how the proposed changes may affect you personally.
Highlights
Increase in the National Insurance threshold and Lower Profit Limit
Chancellor Rishi Sunak announced an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit in his 2022 Spring Statement.
Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax and National Insurance contributions (NICs) the threshold will increase from 6 July 2022 from £9,880 to £12,570.
The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4 NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023 the limit is increased further to £12,570.
In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. £3.15 per week is payable where profits are over £11,908.
Temporary increase in National Insurance rates
From April 2022, there will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.
With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.
Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.
For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that upper profits limit.
Income tax reduction
The Chancellor announced the reduction in the basic rate of income tax for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland to 19% from April 2024. This reduction will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government.
The change will be implemented in a future Finance Bill.
Increased Employment Allowance
Employers are able to claim the Employment Allowance which reduces their employer Class 1 NICs each year.
In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible employers to reduce their employer NICs by up to £5,000 per year.
The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses, such as companies under the control of the same person or persons, are only entitled to one Employment Allowance between them.
Please note that dental practices are not eligible to claim employment allowance if NHS income exceeds more than 50% of the overall practice income.
In addition, we have included a detailed calendar of the most important dates for 2022/23 that will help you with tax planning ahead of time. If you have any questions concerning the issues covered in this summary or would like advice on the best possible course of action in a particular area, please do not hesitate to contact us.
NHS Pension – age discrimination remedy
Government changes to remove age discrimination from public service pension schemes (including the NHS Pension Scheme) are now underway, following the McCloud judgement made by the Court of Appeal.
Back in 2015, the government introduced changes to the majority of public service schemes with the changes excluding members which were closer to the retirement age. The pension changes mainly affected members who were in the 1995/2008 NHS Pension Scheme before 31 March 2012 and were transferred into the 2015 NHS Pension Scheme on or after 1 April 2015. The 2015 pension scheme which was seen by many as less attractive, had a retirement date of up to eight years longer than the previous 1995/2008 scheme and subsequently, doctors who were approaching retirement were entitled to carry on in the previous scheme for longer.
The Court of Appeal’s judgement found that the safeguards instilled to protect pension benefits of older members discriminated against younger members of the scheme
If you have joined the NHS Pension scheme after 31 March 2012, you are not affected. For those who were members prior to 31 March 2012, measures will be taken to ensure appropriate redress.
Remedy action
From February 2022, NHS Pensions will be contacting affected members by post to ask members to consider and opt to receive either legacy scheme (1995/2008) or reform scheme (2015) pension benefits for pensionable service between 1 April 2015 and 31 March 2022.
Members who will be contacted first include those members who have already retired, beneficiaries of members who are deceased or members that are planning to retire before 1 October 2023. Once a decision has been made, NHS Pensions will retrospectively apply your choice. Any monies owed to you will be backdated to your retirement date.
Impact on previous excess pension tax charges
It is important to note that any retrospective adjustments applied by NHS Pensions are likely to ultimately impact on member’s tax liabilities.
Pension input figures will be reassessed by NHS Pensions during the remedy period of 1 April 2015 and 31 March 2022, once a member has made their choice. Their respective Pension Annual allowance positions for the 2015/16 to 2020/21 tax years will need to be recalculated and reassessed to establish whether potential excess pension tax charges arise and whether further tax is either payable or repayable as a result of the adjustment. We will be able to calculate and advise members of any amendments to annual allowance tax charges for the above tax years.
If a member has settled an excess annual allowance tax charge via a scheme pays election, the election will need to be modified for the new excess pension tax charge in order to avoid overpaying.
Pension Scheme changes going forward
From 1 April 2022, all active members will be members of the 2015 NHS Pension Scheme and the 1995/2008 NHS Pension Scheme will be closed. Members will not lose any of the pension benefits accrued in the 1995/2008 scheme and benefits going forward will be calculated under the 2015 scheme.
Further information can be found by clicking on the following link:-
Changes to public service pensions | NHSBSA
We strongly advise that you take independent pension advice should the above be relevant to you.
Scheme pays and compensation scheme deadlines (2019/20 deadline 31 March 2022)
The 2019/20 voluntary scheme pays and compensation scheme deadline is 31 March 2022.
Dentists in England & Wales who are members of the NHS Pension scheme and have an annual allowance tax charge arising in 2019/20, will be able to have the charge repaid for this particular year by the NHS Pension Scheme, rather than having to settle personally.
NHS have made a commitment to pay Clinicians and Dentists a corresponding amount on retirement in order to fully compensate for the effect of the 2019/20 Scheme Pays deduction on their income from the NHS Pension in retirement.
In order to be eligible, dentists must: -
- Be a member of the NHS Pension scheme in the 2019/20 tax year
- Be employed or engaged in a clinical role delivering care to NHS patients that requires registration with an appropriate healthcare regulatory body.
- Have a valid registration for the period of the 2019/20 ‘Scheme Pays’ election.
- Have an annual allowance tax charge, in respect of membership of the 1995/2008 and/or 2015 NHS Pension schemes and uses Scheme Pays to settle the annual allowance tax charge.
For dentists who do meet the above criteria, a ‘scheme pays’ election form will need to be completed before HM Revenue & Custom’s deadline of 31 March 2022.
Also, an annual allowance charge compensation policy application form will need to be completed online by the same date. Dentists can access the compensation form and submit to NHS Pensions using Compass.
Again, we strongly advise you take independent pension advice should the above be relevant to you.
New PPE portal
The Department of Health and Social Care (DHSC) have implemented a new PPE portal for Community Health Providers to provide continued access to free PPE required as a direct result of COVID-19. Eligible users will be able to claim PPE for this sole requirement until 31 March 2023.
Any PPE for non-COVID 19 requirements should be purchased through normal channels.
Users will be informed and will receive an invite to migrate across to the new portal.
Eligible dentists can order weekly PPE quantities, based on their composite metric. This is calculated using number of units of dental activity (UDAs) plus (number of units of orthodontic activity (UOAs) x 1.5) per practice per year.
For example, a dental practice that carries out 2,000 UDAS and 1,000 UOAS per year should report 2,000 plus (1,000 x 1.5) to get a composite metric of 3,500.
From 28 February, the DHSC plan to migrate GPs , dentists and orthodontists to the new platform.
Once activated, you can log in and place a weekly order for PPE which will be delivered to the registered user’s address.
CQC fees for 2022-23
The Care Quality Commission (CQC) have announced that fees will not change from 1 April 2022 for registered providers on the basis that the provider’s registration or size has not changed.
Please visit their website for further details using the link below:-
Health & Social Care tax levy and taxation of dividends
There will also be a 1.25% increase in the rate of tax payable on dividends received by those who own shares in companies. This would mean that after the £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year. This will catch many family company director/shareholders who traditionally “pay” themselves by taking a low salary and larger dividends to minimise NICs.
Planning Actions Before the New Rates Commence
Although the end of the tax year is fast approaching, there is time to reduce the impact. Employees could consider agreeing a salary sacrifice arrangement with their employer, for example sacrificing their annual bonus for an additional pension contribution paid by their employer. Such an arrangement would save 1.25% NICs for both employee and employer as well as income tax for the employee.
Employees might also consider a salary sacrifice in favour of an electric company car.
Shareholder/directors of family dental practice companies could consider bringing forward dividend payments to before 6 April 2022. Such a strategy needs careful planning as if the extra dividend takes the taxpayer’s income above certain thresholds, then such planning could backfire.
Please contact us to discuss any planning opportunities.
NASDAL annual benchmarking statistics
NASDAL (National Association of Specialist Dental Accountants and Lawyers) have published their annual benchmarking Report for the financial period 2020-21.
The annual Benchmarking Survey statistics are gathered from the accountant members of NASDAL across the UK who together act for more than a quarter of self-employed dentists. The statistics provide average ‘state-of-the-nation’ figures so NASDAL accountants can benchmark their clients’ earnings and expenditure and help them run their practices more profitably. The basis of the survey figures is 2021 tax returns and accounts with year ends up to 5 April 2021.
In what was an unprecedented year in UK dentistry, these have shown:
- Overall, dental practices see an increase in average net profit per principal from £129,178 to £151,649
- NHS practices see an increase in average net profit per principal: £116,284 to £145,498
- Private practices see an increase in average net profit per principal: £133,192 to £143,418
- Associate average remuneration fallen from £70,514 to £63,304
Our dental partner and NASDAL member, Ian Simpson who conducts the statistical exercise commented, “This year’s benchmarking figures are the first to reflect the seismic change that was the Covid pandemic. The increase in profits seems to demonstrate that despite being closed from late March to early June, practices bounced-back to recover lost revenue in the latter part of the year when pent up demand was unleashed.
The last two years have been tough and although our statistical sample shows a significant increase in profits, it is worth noting that this was not true for all and we are aware of practices and dentists who faced real hardship during and post lockdown. As we look forward to the 2022 figures, we might expect to see NHS practice profits fall back somewhat and a modest growth in private practice profitability.”