Budget reaction

Financial expert Jon Drysdale analyses today's budget and says most dentists will pay less tax

08 July, 2015 / business
 Jon Drysdale  

George Osborne, delivered his second Budget of 2015 today. Following the promises made in the election campaign the main focus was, unsurprisingly, on cuts to welfare spending. Nevertheless, there were items of interest to dentists as Jon Drysdale explains.

Two tax measures will benefit most dentists

First, the higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17. This will undoubtedly benefit many dentists as the majority are higher rate taxpayers. The amount people will have to earn before they pay tax at 40 per cent will increase from £42,385 in 2015-16 to £43,000 in 2016-17.

Second, the tax-free Personal Allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016. The tax-free Personal Allowance – the amount people earn before they have to start paying Income Tax – will increase to £11,000 in 2016-17.

Buy–to-let landlords lose tax break

Many dentists invest in buy-to-let property – a strategy that is already under pressure from decreasing yields. Landlords who currently receive tax relief at 40 per cent and 45 per cent on their costs – including mortgage interest – will be restricted to claiming 20 per cent. This is to be phased in by April 2020 and puts further pressure on buy-to-let yields.

Incorporated dentists: dividend tax rates reformed and corporation tax reduced
The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased and are likely to affect those dentists who take income in the form of dividends. However, Corporation Tax will be cut to 19 per cent in 2017 and 18 per cent in 2020.

Pension reform

A major ‘root and branch’ reform of pensions was announced with a Green Paper for consultation to be published shortly. The implication is that tax relief on pensions may be reduced and tax-free access to pension pots further eased.
Those dentists with incomes over £150,000pa will be restricted to claiming tax relief on no more than £10,000 of pension contributions. This may make the NHS pension significantly less viable for dentists with this level of income.

 

Comment

Jon Drysdale, an independent financial adviser from Chartered Financial planners PFM Dental, says: “This budget didn’t contain too many surprises, although dentists who have incorporated will need to consider their remuneration strategy carefully due to dividend tax reform. Landlords were hit with the withdrawal of some tax relief and this may see buy-to-let yields fall significantly.

Jon Drysdale is an independent financial adviser for Chartered Financial Planners PFM Dental. He specialises in pension and wealth management advice exclusively for dentists.
For more information visit www.pfmdental.co.uk

Related Post

Dental profession reacts to sugar tax announcement While the announcement of a sugar tax has been hailed as a positive step in the right direction, the news has received a mixed reaction from the denta...
Budget holds good news for dentists The headlines from Chancellor George Osborne’s latest budget may focus on the fragility of the economy and further cuts to public spending, but there ...
New associates shunned by high street mortgage len... The top five lenders in the UK will not lend to newly self-employed dentists, regardless of income, according to a firm of dental financial planners. ...

Tags: Budget / financial / Jon Drysdale / PFM Dental / tax

Categories: News

Comments are closed here.