Dental News
Spring 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.  

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.

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:

1. 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.
2. 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.