Dental News
Spring 2023
Welcome to our Spring 2023 Dental News
In this issue
Budget 2023
Tax data card 2023/24
Check your National Insurance record before 31 July 2023
Government Gateway and Personal Tax accounts – reminder
NHS Pension Annual Allowance Tax Charge - Voluntary Scheme pays election deadline
NHS Clawback issues
Net Pensionable Earnings (NPE) and how to check them
Business rates reimbursement for NHS practices
Making Tax Digital for Income Tax postponed
Budget 2023
On 15 March 2023, Jeremy Hunt, Chancellor of the Exchequer, revealed his first Spring Budget. There was a focus on managing inflation and government debt, encouraging those who have left their jobs to return to the workforce, and increasing business investment.
Here are some of the key measures announced in the Spring Budget that will affect businesses and individuals across the UK:
- The Main rate of corporation tax, paid by companies on taxable profits over £250,000 has been confirmed to increase from 19% to 25%. Companies with profits below £50,000 will pay at 19% and companies with profits between £50,000 and £250,000 will pay at an effective marginal rate that is between 19% and 25% from 1 April 2023.
- The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million. The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023.
- From 1 April, companies can fully deduct investment in new qualifying plant and machinery to lower their taxable profits. In addition, a 50% first year allowance will be available for assets qualifying for the special rate pool such as integral features.
- From 6 April 2023, the Company Share Option Plan (CSOP) employee share options limit will increase from £30,000 to £60,000. Additionally, restrictions on the types of shares eligible for CSOP options will be lifted.
- The Government is increasing the availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6th April 2023.
- The Energy Price Guarantee which caps how much suppliers can charge per unit of energy used will stay in place until June 2023.
- 30 hours of free childcare to be provided for one and two-year-olds to help parents in England return to work will be rolled out in stages from April 2024. The new scheme will eventually cover all children from the age of nine months.
BUDGET 2023 - Pension tax relief
There was also good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023. The LTA has caused some high earners, particularly doctors, to retire early as tax charges apply on crystallisation of pension funds if the LTA (currently £1,073,100) is exceeded.
Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275.
Another pension limit increased by the Chancellor in the Budget was the pension Annual Allowance (AA) which increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years.
For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).
The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023.
Note that an individual’s pension contributions can be very tax efficient depending on their level of income.
The taxation rules for pensions are complex as there have been numerous changes in recent years so please talk to us about your pension contribution strategy.
Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow!
For further details please see our more detailed Budget Summary released last week and please talk to us if you need guidance on any of the changes announced last week.
Tax data card 2023/24
A copy of our 2023/24 Tax Rates Card, which summarises many of the rates and allowances fundamental to our business and personal lives is available to download here. We are sure that you will find it as a useful point of reference throughout the coming tax year.
Our tax card is intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice, please do not hesitate to contact us.
Check your National Insurance record before 31 July 2023
To qualify for the maximum state pension at retirement a person must have 35 qualifying years of NI contributions.
There is currently an extension in place to make voluntary NI contributions to plug any gaps in NI dating back to April 2006. After the extension has ended, it will revert to the normal 6 year timeframe meaning that in the 2023/24 tax year, it will only be possible to make contributions going back to the 2017/18 tax year.
Due to a recent surge in demand for the top-up of National Insurance contributions, the government have now extended the original deadline of 5 April 2023 by a further four months to 31 July 2023. Individuals with gaps in their National Insurance records now have further time to assess their National Insurance position.
You can check your National Insurance (NI) record online at https://www.gov.uk/check-national-insurance-record to see:
- what you’ve paid, up to the start of the current tax year (6 April 2022)
- any National Insurance credits you’ve received
- if gaps in contributions or credits mean some years do not count towards your State Pension (they are not ‘qualifying years’)
- if you can pay voluntary contributions to fill any gaps and how much this will cost
Government Gateway and Personal Tax accounts – reminder
Of course, we at Humphrey & Co are always on hand to assist you with providing and managing your tax information. However, we do recognise that there may be instances where you may need access to this tax information. HM Revenue & Customs provide a secure online facility to allow individuals to check, update and manage their tax details, with the aim of contacting HMRC more quickly and easily.
The service allows you to
- Check your income Tax estimate and tax code
- Checking your state pension
- Checking income from employment and how much tax you have paid in the previous 5 years
- Checking or updating your Marriage Allowance.
- Telling HMRC about a change of address
- Check or update benefits you receive from employments such as company car and medical insurance benefits.
- Find your NI number and Unique Taxpayer Reference (UTR) (if applicable)
To sign up , please visit Personal tax account: sign in or set up - GOV.UK (www.gov.uk)
To do so, you will need to register for a Government Gateway account and provide personal data to prove your identity. When applying for a government gateway account for the first time, you will need to provide your National Insurance number or postcode plus 2 of the following:-
- A valid UK passport
- UK Photocard driving licence issued by the DVLA
- A payslip from the last 3 months or P60 from your employer
- Details from a Self-Assessment Tax Return if you have submitted one previously
- Information held on your credit record
- Details of a tax credit claim if you made one
Once you have enrolled, you will then be able to access the Personal Tax account.
NHS Pension Annual Allowance Tax Charge - Voluntary Scheme pays election deadline
The 2021/22 voluntary scheme pays election deadline is 31 July 2023.
Dentists in England & Wales who are members of the NHS Pension scheme and have an annual allowance tax charge arising in 2021/22, will be able to have the charge repaid for this particular year by the NHS Pension Scheme, rather than having to settle personally.
In order to be eligible, dentists must: -
- Be a member of the NHS Pension scheme in the 2021/22 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 2021/22 ‘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 July 2023.
NHS Pensions have also extended the voluntary scheme pays deadlines for the 2020/21 tax year to 31 March 2023.
We strongly advise you take independent pension advice should the above be relevant to you.
NHS Clawback issues
NHS Dental Practices in England continue to face recruitment issues and in particular their ability to attract associate dentists to perform NHS work. This may ultimately lead to practices not being able to fulfil their contracted UDA commitments in the 2022/23 tax year. It is anticipated that there is likely to be record clawback in the 2022/23 year and practices may be liable to significant contract deductions. It is vitally important that any potential impact on the practice’s finances is fully budgeted for. If you do require assistance with evaluating your NHS Contract position, then please do get in touch.
Net Pensionable Earnings (NPE) and how to check them
All providers and performers must complete their Annual Reconciliation Reports and have these submitted to the NHS by 30 June each year. With most providers aiming to complete these in April/May (and performers accepting or rejecting these) we thought it would be of benefit to run through this process and the calculations involved.
In accordance with the GDS requirements, providers are required to complete a Net Pensionable Earnings (NPE) declaration annually. This enables the NHS Business Services Authority to ensure that the correct contributions are paid into everyone’s pensions. For the last few years this has been done on the NHS’s online system, Compass, and there is no longer the facility to complete this on paper.
Whilst it can be an overlooked process by performers, it is important it is completed (as accurately as possible) because net earnings are used to calculated certain benefits, such as sick pay. Ultimately it also feeds into your pension records, which affects what you receive in retirement.
The superannuation deducted on behalf of performers each month is calculated on the actual payments (actual net income) made to each performer. This will initially be based on the performer’s allocated proportion of the contract. Variations may happen during the year - this could be where the contract value is reallocated due to events such as long term sickness. These have to be recorded on the Annual Reconciliation Report (ARR) declaration.
The NPE calculation is decided at practice level and most practices use the generally accepted method of calculation. However, within reason, Principals can make amendments to the generally accepted calculation. All performers should check their contract to ensure the calculation appears reasonable and in line with the terms agreed – if you are unsure about anything it is always worth asking questions and discussing, even with your accountant. Generally, NPE is calculated as your actual NHS income, i.e. your UDAs performed at your net UDA rate less lab bills (relating specifically to any NHS work performed).
NPE does not include seniority pay, long term sickness pay, adoption leave pay, maternity and paternity pay, which have to be recorded on the declaration in separate boxes.
Examples
Practice
The maximum superannuable earnings within a practice is 43.9% of the total NHS contract value. So, if there is a contract in place of £200,000 then the maximum superannuable earnings available (for anyone to have) under that contract is 43.9% x £200,000 = £87,800.
Associate
An Associate’s superannuable earnings are the amount they receive after NHS lab bills and other deductions made in respect of the NHS work. As an example, an Associate performing 6,000 UDAs at £10.00 per UDA and having £4,500 of NHS lab bills deducted from them, would have an NPE of £55,500 ((£10.00 x 6,000) - £4,500). This is the figure that should be agreed on Compass for this contract. Remember, where performers work at multiple practices or on multiple contracts, they will need to agree the NPE for each.
Potential Problems
There are some potential problems that both Associates and Principals should be aware of when completing the ARR:
- When working out NPE, only NHS lab fees should be deducted. Not all lab fees shown in the Associate’s pay schedule will relate to only NHS work, therefore Principals will need to ensure these are allocated correctly.
- In the above example the Principal (who lets say also does 4,000 UDAs and holds a contract for 10,000 UDAs at £20.00 per UDA) can only get £32,300 of superannuable earnings. This is because with a contract value of £200,000, the superannuation ‘ceiling’ is £87,800. Therefore, if the Associate is getting £55,500 then this only leaves £32,300 available for the Principal.
This does also work the other way – Principals can benefit from paying the Associate under 43.9% of the Practice’s UDA value (which generally will be in excess of £20.00 per UDA).
You can see from the above there is potential for a Principal to earn a disproportionate sum towards their NPE, even if they are doing a large amount of NHS work. To address this, the Principal would need to adjust the Associates agreed pay rate or alter the NPE calculation at a practice level.
As an Associate, you will be requested to accept or reject the Principal’s NPE calculation within Compass. This is called the Annual Reconciliation Report (ARR) and needs approval by 30 June each year. As your NPE is the figure that is used by the NHS to calculate your superannuation contributions and the NHS contributions too (at 20.6% of your NPE) it is crucial this is checked yearly.
If you have any queries or wish to discuss, then please feel free to speak to us.
Business rates reimbursement for NHS practices
Providers can now apply for reimbursement of 2023/24 business rates from NHS Business services. To do so, qualifying conditions must be met including :-
- The provider pays the business rates (or if a partnership, one of the partners) and
- The NHS Dental services contract value is more than £25,000
Applications and any supporting evidence must be received within 3 months of the first business rates payment being due. Supporting evidence will include a copy of your business rates demand and evidence showing the NHS proportion claimed in the previous year. For any 2023/24 claims, you will submit evidence for the claim made in 2022/23 such as accounts for the 2021/22 tax year and a letter from your accountant (which we will happily provide for our clients for you to forward on!)
Please note that if the provider is entitled to claim small business rates relief, this should be claimed prior to applying for business rates reimbursement.
Making Tax Digital for Income Tax postponed
Making tax digital (MTD) for income tax self-assessment (ITSA) was originally scheduled to start in 2018 and was then put back to 2023 and then 2024. It was announced just before Christmas that the new system of submitting digital information quarterly to HMRC has been delayed yet again! The start date will now depend upon the gross business receipts of the individual.
Self-employed individuals (which will include dentists, associates and hygienists) and landlords with annual gross receipts above £50,000 will need to follow the rules for MTD for ITSA from 6 April 2026. Those with annual gross receipts between £30,000 and £50,000 will be mandated into the regime from 6 April 2027.
Whether MTD for ITSA will apply to those with gross receipts under £30,000 is under review but it would appear that the government have finally increased the starting threshold from £10,000, which they have resisted up until now.
Despite the delay in the mandatory start date for MTD for ITSA, businesses should nevertheless consider whether or not it would be beneficial to keep their business records digitally anyway.
The date when partnerships will be required to join MTD for ITSA has not been set.