Dental News
Autumn 2024

Welcome to our Autumn 2024 Dental News

In this issue we look at

Autumn Budget 2024 and employers national insurance increase

NHS Remediable Pension Statement update and Remedy Process

Self-employed training and course costs – HMRC guidance updated

Changes to Tax relief claims for employment expenses

Staff entertaining & trivial benefits

Autumn Budget 2024

On 30 October 2024, Chancellor Rachel Reeves presented her first budget to parliament. This was a budget intended to restore stability to our economy and to begin a decade of national renewal. Investment will be funded by revised debt rules to facilitate additional borrowing and a hefty £40 billion of tax rises.

Headlines included:

  • Immediate increases to capital gains tax rates with further uplifts in relation to some business disposals from both April 2025 and April 2026.
  • Immediate increases to Stamp Duty Land Tax, including for those buying residential property when they already own at least one dwelling.
  • Confirmation that 20% VAT will apply to private school fees for the school term beginning in January 2025.
  • Increased costs for many employers from April 2025 through both increases to the national minimum wage and significant reforms to employers’ national insurance contributions.
  • Another change in approach for businesses utilising double-cab pick up vehicles, coming into effect in April 2025.
  • Plans to restrict inheritance tax agricultural and business property reliefs from April 2026.
  • Plans to include an individual’s undrawn pension fund in their inheritance tax estate from April 2027.

Please click the link below to download the Autumn Statement pdf where we talk more about the Budget and what it means for you.

Budget 2024 - Increase in Employers National Insurance

The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025:

  • An increase in the employers’ NICs rate, from 13.8% to 15%;
  • A decrease to the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000*; and
  • A widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500. In particular, the employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

* A higher secondary threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

This increase in employers’ NICs is undoubtedly a blow to some businesses including dental practices and, indirectly, employees. Combined with the increases in the NMW and potential costs associated with reforms in employment law, these measures will stretch dental practice wage budgets and potentially lead to slower growth in some employee wages or higher costs for patients. NHS practices or mixed practices where more than 50% of its overall income is derived from the NHS remain ineligible to claim the employment allowance and may feel the impact of the NIC rise further. There are calls from the dental sector for these excluded practices to be entitled to similar relief to ease the financial burden.

Download the Autumn Budget Summary PDF

NHS Remediable Pension Statement Update and Remedy Process

The first batch of NHS Remediable Pension Savings Scheme Statements have now been issued by NHS Pensions to affected members of the NHS Pension scheme, as a result of the McCloud remedy. These statements provide information to members detailing revised pension growth and pension input amounts in both the 1995/2008 and 2015 schemes between 1 April 2015 and 31 March 2022. It will also include details for the following year ended 31 March 2023.

If members had pensionable service between 1 April 2015 and 31 March 2022 and were always in the 1995/2008 scheme, there is no change to pension input amounts. Members will therefore not be issued with a statement and will not need to check their tax position with HMRC.

Retired members who started receiving pension benefits before 1 October 2023 will be contacted by NHS Pensions regarding a choice of benefits at a later date.

Although all remediable statements should have been released to members by 6 October 2024, we are aware that a large proportion of members are yet to receive one. As the largest Public Service Pension scheme in the UK, NHS Pensions have advised that although they have made substantial progress with preparing calculations, they are having to send statements in phases which may mean some members may have to wait longer than planned.

The remediable statements begin the process of adjusting member’s NHS pension and their Self-Assessment Tax Returns that have been previously filed.

In order to ascertain the position of those affected by the remedy, a significant amount of work may be required to re-calculate threshold income, adjusted income, tapered annual allowances and potential changes to tax charges for the 8 years from 2015/16 to 2022/23. Any changes will then need to be administered and reported to HMRC along with potential pension charges, using HMRC’s online digital service.

Please note that the deadline to report Annual Allowance Charges to HMRC is 31 January 2025. If the calculations show there are no changes to your annual allowance tax position, you do not need to report anything to HMRC.

Humphrey & Co are of course available to assist with this and our fees will be dependent on the level of work involved.

The NHS has offered to compensate for professional costs (up to £1,000) incurred in conjunction with the pensions adjustment.

Further details regarding the NHS Cost Claim Back Scheme can be found here: The NHS Cost Claim Back Scheme | NHSBSA.  

Given the very tight reporting timeframe, it is vital that you forward your NHS Remediable Pension Statement (along with your 2024 NHS Pension Annual Allowance Statement) to your contact at Humphrey & Co immediately upon receipt who will be able to advise further.

Please note that given ongoing delays in the issue of statements and challenges faced by professional advisers to review and arrange to correct pension tax charge positions by the deadline, there are increased calls to extend the January 2025 deadline but at the time of writing, the government has not announced a further extension.

Self-employed Training and Course Costs – HMRC Guidance Updated

HMRC have recently updated guidance on tax relief available on training or course costs for the self-employed.

The changes now mean that costs of any training in an individual’s business will be tax deductible if the course is for an existing business area and is either

  • updating existing expertise or knowledge or
  • provides new expertise or knowledge.

Expenditure on training which is ancillary to the business, for example, website development, e-commerce may also be allowable for tax relief, subject to an individual’s circumstances. Any training within a new business area or unrelated will not be considered to be allowable.

Previously training expenditure was not allowable for tax purposes if the course provided an individual with new expertise or knowledge. The reasoning behind this was that HMRC considered this to be acquiring a completely new skill or asset for the trade and therefore was “capital” in nature in comparison to a refresher course or update for an existing skill which would be treated as “revenue” expenditure and would be deductible against trading profits.

The change in approach takes into consideration that individuals require acquiring new skills as technology and industry practices advance.

Changes to Tax Relief Claims for Employment Expenses

For expenses which are not reimbursed by employers, employees can claim income tax relief for allowable expenses from HMRC via the PAYE system (for claims up to £2,500). A claim can be made for the current tax year and previous four tax years.

HMRC have recently announced that due to a significant rise in the number of ineligible claims for employment expenses, it has had to suspend processing any expense claims made online in a bid to manage the risk of taxpayer fraud.

Claimants will no longer be able to submit a PAYE employment expense claim either by phone or using the HMRC digital service.

Instead, the new system means that all claims must now be submitted via post using a P87 Claim form and taxpayers will be required to provide sufficient supporting evidence to prove eligibility, before HMRC will consider a claim.

Claimants who have submitted claims since 10 June 2024 using the digital online service and have not received a response from HMRC will now need to resubmit their claim to HMRC via post using the new method.

The changes are likely to impact on dentists who have roles within the NHS and Foundation dentists who may claim tax relief on professional expenses incurred during FD and dental core training years. This will include potential claims for membership to professional bodies and professional indemnity insurance premiums.

Under the new system, examples of the following type of evidence that will be required will include:-

Evidence

  • Subscriptions to approved professional bodies such as General Dental Council (GDC)/British Dental Association (BDA) – copies of receipts or other evidence showing how much was paid
  • Professional Indemnity premiums (Medical Protection Society/Dental Defence Union/Dental Protection) – copies of indemnity policy or receipts/other evidence showing how much is paid.
  • Examination fees - copies of receipts or other evidence
  • Working from home – employment contract stating employee must work from home

If the claim is successful, a basic-rate tax payer will be due a tax repayment of 20% on the professional expenses incurred.

Flat rate expenses such as uniform, work clothing, laundry and cleaning can be claimed online using the digital claim route and will not be subject to the new requirements.

Any claims for Flat rate expenses made digitally and employment expenses claimed via a Self-Assessment Tax Return will still be subject to increased compliance checks to assess eligibility, with potentially further evidence requested by HMRC.

HMRC are currently reviewing whether the digital service can be reinstated in the future.

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 if should you require advice.