The Chancellor of the Exchequer, Rachel Reeves, has unveiled her second Budget since Labour came into power in 2024. Arguably the most speculated upon Budget in memory, several measures were announced in the days before the official reveal, while the Office for Budget Responsibility inadvertently leaked their findings and, therefore, the contents of the Budget itself, two hours ahead of schedule.
But, amid the chaos, what were the key points?
National Insurance (NI) and income tax thresholds have been frozen for an additional three years, beyond 2028. This will pull more people into higher bands over time. Meanwhile, the amount under-65s can pay into cash ISAs has been capped at £12,000 per year, with the rest of the £20,000 annual allowance now reserved for investments.
When it comes to work and payslips, the legal minimum wage for over-21s will increase to 4.1% in April, from £12.21 to £12.71 per hour. For 18 to 20-year-olds, the minimum wage will rise to 8.5%, from £10 to £10.85 per hour, forming part of a plan to establish a single rate for all adults.
Basic and higher income tax rates on property, savings and dividend income will rise by 2%.
The “triple lock” policy has resulted in basic and new state pension payments being set to increase by 4.8% from April, which is more than the current rate of inflation. Meanwhile, the amount workers can sacrifice from their salary to avoid paying NI on pension contributions is to be capped at £2,000 per year from 2029.
As widely rumoured, properties in England worth more than £2 million will face a council tax surcharge between £2,500 and £7,500, following a revaluation of homes in bands F, G and H.
“The decision to keep income tax rates unchanged offers little comfort to dentists facing the reality of frozen thresholds,” said Iain Stevenson, Head of Dental at Wesleyan. “This ongoing freeze means that as incomes rise to keep pace with inflation, practitioners find themselves pushed into higher tax brackets – a form of fiscal drag that reduces take-home pay without any headline rate changes.
“Left unaddressed, this erosion of real income risks fuelling a growing sense that taxation policy is working against the profession – a concern that could add further pressure to workforce retention across both NHS and private practice.”
Responding to the fact that there have been no changes to the pension lump sum, Iain Stevenson added: “It’s good news that the tax-free lump sum remains untouched. That stability will reassure dentists who have been anxious about possible changes. For now, this continuity helps maintain confidence in retirement saving, and we’d encourage dentists to use this as an opportunity to review their long-term retirement plans – or start one if they don’t have one yet.”
Wilf Moralee, Regional Manager at Wesleyan, added: “A 2% rise on dividend tax is not surprising but still puts more pressures on the additional work done by dentists. It increases the incentive to leave it in the limited company to avoid the tax, but then an increased chance of paying Capital Gains Tax at the back end.
“It means that dentists with limited companies should really consider how best to structure their limited companies and how to time and structure any withdrawals from the company to ensure the biggest benefit for their families. Options like utilising employer pension contributions and investing within the company are really effective ways to maximise the cash at exit, but should be done so with advice from a specialist, as annual allowance can create complications.”
