Dental News
Autumn 2022
Welcome to our Autumn 2022 Dental News
In this issue
Chancellor’s emergency budget statement - A fiscal U-turn without precedent
NHS Pension Scheme – pension tax ready reckoner for 2022/23
NHS Pension scheme - contribution percentage rate and tier changes
Foundation Dentists (FDs) salary arrangements
Staff entertaining & trivial benefits
Are you an associate thinking of buying your first practice?
Chancellor’s emergency budget statement - A fiscal U-turn without precedent
On Friday 14th October, the then Prime Minister Liz Truss announced a change of Chancellor, from Kwasi Kwarteng to Jeremy Hunt. This was swiftly followed by a series of U-turns culminating in Mr Hunt delivering an ‘emergency statement’ on Monday 17th October. This emergency statement effectively replaces and re-writes the mini-budget of Friday 23 September 2022.
Designed to ensure the UK’s economic stability and provide confidence in the Government's commitment to fiscal discipline, the emergency statement confirmed:
- Income tax – the basic rate of income tax will remain at 20% until economic conditions allow for it to be cut. This had been due to drop to 19% from 6 April 2023. It had already been confirmed that the ‘additional rates’ of income tax for those earning more than £150,000 a year, including the 45% rate on non-savings income, would remain in 2023/24.
- Income tax on dividends – will remain at the current rates of 8.75% in the basic rate band, 33.75% in the higher rate band and 39.35% in the additional rate band. They had been due to each drop by 1.25 percentage points from 6 April 2023.
- Corporation tax - the increased corporation tax rates, already legislated to come in from 1 April 2023, will go ahead. These will take some companies from a 19% rate of corporation tax to 25% or 26.5%. It had been proposed that corporation tax would remain at a single 19% rate.
- IR35 – the off-payrolling rules, as introduced in 2017 and 2021, will remain into 2023/24 and beyond. This keeps the IR35 compliance burden with medium and large sized employers.
The following mini-budget announcements remain:
- The 1.25% rise in NICs will still be reversed from 6 November and the government will not go ahead with the planned 1.25% levy to fund health and social care next year.
- The annual investment allowance will remain at £1 million from 1 April 2023, rather than reverting to £200,000.
- There are to be more than 40 new “investment zones” in England.
- The increased thresholds for Stamp Duty Land Tax in England and Northern Ireland, as implemented from 23 September, will remain in place.
- The Energy Bill Relief Scheme for Business will continue to be subject to a governmental review after 31 March 2023. The Chancellor has now said that any support for businesses will be targeted to those most affected, and that the new approach will better incentivise energy efficiency.
On Tuesday 25 October Rishi Sunak became Prime Minister and has retained Mr Hunt in his position as chancellor. On 17 November, Mr Hunt will present a full autumn statement, including an update on the government’s medium term fiscal plan and Office for Budget Responsibility forecasts. Further changes to fiscal policy are expected to be announced at this time. As this date is after the publication of our bi-annual dental newsletter, our monthly November newsletter will detail these updates. You can sign up to receive our monthly newsletters here:
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NHS Pension Scheme – pension tax ready reckoner for 2022/23
Given the rate of inflation continues to rise and is at it’s highest rate in 40 years, it is likely to affect performer’s pensions and potentially lead to increased pension tax charges in the 2022/23 tax year.
NHS Employers have now created a useful tool for healthcare workers, enabling members of the NHS Pension scheme to obtain a pension growth estimate for the 2022/23 tax year. Individuals will then be able to assess whether an Annual Allowance tax charge may apply.
It will provide members with an overview of their annual allowance pension and also calculate if a tapered annual allowance may apply.
To use the ready reckoner tool, please access using the following link:-
Assessing annual allowance - ready reckoner tool and demonstration | NHS Employers
NHS Pension scheme - contribution percentage rate and tier changes
The Department of Health and Social Care (DHSC) has recently announced changes to contributions into the NHS Pension scheme, following a public consultation held in October 2021.
From 1 October 2022, contribution percentage rates will change and pensionable pay tiers used to determine the rate at which contributions into a pension are made have been updated. The value of pension benefits will be unaffected.
The contribution rates are to be brought in over two phases, with the first commencing on 1 October 2022 and a further change planned in 2023.
The method to assess which tier an individual pensionable pay falls in is also changing. Previously it has been determined on a member’s full-time equivalent pay. However, it will now be assessed on their actual annual rate of pay. For NHS members who work on a part time basis, it may mean that contributions are less as their contribution rate will be based on how much they are paid each year rather than their whole-time equivalent figure.
Please see the new rates and tiers below:-
|
New Pensionable salary tiers from 1 October 2022 |
Contribution rates from 1 October 2022 (based on actual annual pensionable pay): |
Future planned contribution rates (based on actual annual pensionable pay): |
|
Up to £13,231 |
5.1% |
5.2% |
|
£13,232 to £16,831 |
5.7% |
6.5% |
|
£16,832 to £22,878 |
6.1% |
6.5% |
|
£22,879 to £23,948 |
6.8% |
6.5% |
|
£23,949 to £28,223 |
7.7% |
8.3% |
|
£28,224 to £29,179 |
8.8% |
8.3% |
|
£29,180 to £43,805 |
9.8% |
9.8% |
|
£43,806 to £49,245 |
10% |
10.7% |
|
£49,246 to £56,163 |
11.6% |
10.7% |
|
£56,164 to £72,030 |
12.5% |
12.5% |
|
£72,031 and above |
13.5% |
12.5% |
Foundation Dentists (FDs) salary arrangements
Recent changes have been implemented to salary payment arrangements for Foundation Dentists recruited under the Dental Foundation Training (DFT) programme. From 1 September 2022, Foundation dentists (FD) on these 12-month programmes will be paid directly by the NHS Trust and not by the training practice. This treatment differs to Foundation dentists who are on the 2 year Longitudinal Dental Foundation Programme who will continue to be paid by the training practice (and the training practice reimbursed by the NHS via their monthly NHS Contract pay statement).
We advise trainers and practices to review their NHS monthly contract pay statements for September 2022 and establish if any Foundation Dentists will be impacted by the above changes and notify their payroll providers accordingly.
We also advise FDs to check their payslips. Student loan contributions have been erroneously deducted in a significant number of FDs payslips. If you have completed just the one degree then, in most cases, this should not be deducted from you until April 2023.
Staff entertaining & trivial benefits
With the Christmas season suddenly on the horizon, principals will be looking at ways to thank their staff for their contributions and hard work during the year. Whatever your plans are, you do need to be aware of the tax implications of entertaining and making such gifts.
Staff entertainment
As an employer providing social functions and parties for your employees, you have certain National Insurance and reporting obligations.
What you need to report and pay depends on:
- if it’s an annual event
- if it’s open to all of your employees
- if it costs more than £150 per head
- how many events you provide during the tax year
- whether the employee is a director, and how much they earn
You might not have to report anything to HM Revenue and Customs (HMRC) or pay tax and National Insurance. To be exempt, the party or similar social function must be all the following:
- £150 or less per head per year
- annual, such as a Christmas party or summer barbecue
- open to all your employees
Trivial benefits
You do not have to report a benefit for your employee if all of the following apply:
- it costs you £50 or less to provide (per employee)
- it is not cash or a voucher that can be exchanged for cash
- it is not a reward for their work or performance
- it is not in the terms of their contract
This is known as a ‘trivial benefit’. You do not need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
The employee will have to pay tax on any benefits that do not meet all of the above criteria.
If a business provides a bottle of wine in a nice gift bag as a Christmas gift, for example, the value of the gift bag should be included in the value of the gift when deciding whether the total value exceeds the trivial benefits limit.
Staff Christmas Bonuses
Staff bonuses issued must be reported through payroll as these are subject to Income Tax and National Insurance.
Bonuses paid to staff must be included in payroll as additional earnings. If you do have plans to pay a bonus, you will need to speak to your payroll provider in advance of the payment to ensure that this is reported to HMRC at the time of payment.
As always, do feel free to contact us should you require advice.
Are you an associate thinking of buying your first practice?
Many associates consider buying a practice at some stage in their career – whether this is as soon as they can or many years down the line. Prospective buyers will see practices advertised by the various specialist agents, or perhaps get offered an opportunity in their existing practice. Some will be happy to go it alone, whilst others may pool their resources and experience with a colleague to share the risks and rewards. Regardless of the situation, there is always a first time and this is usually the most daunting.
It is a natural progression for many with the financial and personal opportunities being significant.
However, buying a practice is not necessarily an easy process. Now more than ever, there is an increased burden of complying with the CQC and the high goodwill values to contend with.
Despite this, there are things which can be done to make the process as smooth as possible, and increase your chances of a successful purchase.
Do your homework
Regardless of the type of practice you are considering (be it private, NHS or mixed) there will be things which are essential for you, such as the type of income, location etc. and also some criteria which are important but you can be flexible on, such as facilities, equipment etc. Having a list of these items is crucial and should be used to evaluate potential practices. When looking through prospects ask these questions and find out as much as you can, to see if there are any deal breakers or if there are things which are not ideal, but you can work with.
Learning from history
Whilst things may change drastically once you get into a practice – and many associates have big plans and ideas for day one – it is important to scrutinise the past performance of the practice. This will be the best starting point to understand whether the practice can service the loan you may need and also cover your other expenses. The past can be the most powerful tool when looking to the future.
You need to focus on profit margins and particular expenditure, namely staff costs and direct costs (lab fees, materials and associate fees) and also any expenditure that may be unusually large or small.
If a practice is underperforming, this isn’t necessarily a dealbreaker, if there are genuine reasons which can be addressed. However, it is important to understand the reasons for the performance and this should be factored into any offer. A practice that only has potential is usually worth less than a practice with a solid track record.
We would suggest obtaining the last three years’ accounts if possible. As specialist dental accountants, we will help you understand the figures thoroughly and identify any areas of concern and what questions should be asked at this early stage.
The most recent accounts can be analysed in more detail, stress tested using differing scenarios and adjusted for your particular circumstances. This will then form the basis of a cash flow analysis, which is one of the most important parts of the due diligence.
How do I afford it?
Dentists are generally viewed as a safe option for lending. However that doesn’t mean that there are still risks for a lender to consider. This usually means that most lenders require some form of deposit.
It is also now standard for banks to insist on an independent valuation, business plans and additional security to safeguard the loan.
Fundamental to a request for lending is a cashflow forecast. This is a projection of cash coming into the business and cash going out of the business and is usually broken down into monthly totals. Not only is this useful for you as a buyer – as accounting profits can be misleading and ultimately the business needs enough cash at the rights times – but it will inform the bank as to how safe their loan is and the headroom for any repayments.
Presenting your application most favourably may well have an impact on the interest rates available, which could provide the additional cash to secure the finance. Our dental team and specialist contacts will make the process simpler for all involved.
Final thoughts…
Good luck! Buying your first practice is a journey and you may make mistakes. The best way to mitigate these is by taking control of the factors you can e.g. your advisers, the research and asking the right questions. From past experience, clients take great satisfaction in getting deals over the line and relishing their new challenge. For some, thoughts of a second practice are never usually far away…
Once a practice is found, please do contact us. We will be more than happy to talk through your options. We will help you find out all you can about the prospective practice and will ensure you ask the right questions from the start. Our experience with dealing with similar transactions will help you avoid the pitfalls. We can also put you in touch with dental specialist lawyers and practice brokers.