Budgeting for consistency
Just as your copy of the Scottish Dental magazine was going to print, I was sitting watching George Osborne make his second Budget statement as Chancellor looking for new and exciting changes to flag up in this article. Gone are the days of last-minute giveaways. Instead, consistency and longer term Budget plans set out in advance have replaced sudden surprise announcements, which would leave accountants such as myself scribbling away into the night.
Of the new announcements that the Chancellor did make, there are some pleasant sweeteners that may be particularly relevant to those involved in the dental profession, whether employed or self-employed. The major point, which impacts on nearly everyone, is the £1,000 increase in the tax-free personal allowance, bringing this up to £7,475 per annum from April 2011, with a further increase to £8,105 from April 2012.
Not everyone can expect lower tax bills though – this was paid for by decreasing the threshold at which individuals start paying higher-rate tax of 40 per cent from £37,400 to £35,000 from April 2011. There are some winners and some losers as a result of the interaction of the change in this threshold, and the increase in personal allowances.
Lower earners will generally pay less tax, but those earning over £43,875 will pay more. So there is good news for some, and bad news for others.
The 50 per cent ’higher’ higher- rate of tax remains in place. The Chancellor intends this to be a temporary measure, but abolition will not be forthcoming until the economic recovery looks more certain.
There is some good news for practitioners who own their own practice, or indeed a chain of practices. Entreprenuers Relief has not been withdrawn in the Budget and has in fact been increased again from £5 million to £10 million. This will benefit those dentists who have built up a network of practices and then sell these at a capital gain. The purpose of Entrepreneurs Relief is to discount the amount of Capital Gains Tax individuals pay when disposing of assets so that the effective rate of tax on the gain is 10 per cent rather than 18 per cent or 28 per cent.
The Chancellor announced a change to Inheritance Tax to encourage charitable bequests from April 2012. The new measure announced will effectively mean where at least 10 per cent of an estate is passed on to registered charities, the rate of Inheritance Tax applied will be 36 per cent rather than 40 per cent. If you bequeath 10 per cent of your estate to charity then your beneficiaries will neither gain nor lose, but charities of your choosing will gain.
Business Premises Renovation Allowance has been extended from April 2012 for five further years, taking it up to April 2017. This means expenditure on renovating buildings within designated areas of deprivation that have not been used for a year before conversion/ renovation can attract an accelerated tax write-off against the whole relevant cost of the renovation project. This helps keep your tax bills much lower when renovation costs are incurred, rather than a smaller reduction in your tax liability over a longer course of time.
Areas where empty premises can attract Business Premises Renovation Allowance are designated by local authority ‘wards’. In some cases, the majority of a local authority area is designated and therefore eligible (such as areas in Glasgow, Dundee, Fife and both North and South Lanarkshire).
There are examples of practices relocating into eligible buildings that have been very successfully brought back into use. It is clear to see that this allowance has plenty of scope to be beneficial to dental practitioners.
And finally, although this is not a new announcement, I would like to take this opportunity to remind you all that 2011/12 will be the last year that Annual Investment Allowances are available at £100,000, and from April 2012 they will be restricted to £25,000. Annual Investment Allowances allow for an instant write-off of eligible plant and machinery capital investment, thus accelerating tax relief.
I recommend any practitioners who are looking to spend substantial sums upgrading their practices and/or equipment to consider whether to do this before 31 March 2012.
Jayne Clifford is a partner at Martin Aitken & Co. Jayne can be contacted by email ator by telephone on 0141 272 0000. To find out more about Martin Aitken & Co you can visit their website at http://www.maco.co.uk
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