The Autumn Statement 2023 ended up delivering very little for the dental profession. Chancellor of the Exchequer, the Rt Hon Jeremy Hunt, seemed keen to create headlines around “the biggest tax cuts ever for businesses since the 1970s”. However, these appeared to be just that – headlines and not much else.
Alcohol, business rates and NICs
For practice principals, the best news I can offer is that alcohol duty has been frozen again! Aside from this, there weren’t any real wins for those who run limited dental companies and have employees.
A small win is the news that the small business rates multiple has been frozen for another year, so your business rates shouldn’t go up again in that time. Many of the benefits discussed only really apply to larger companies. The full expensing introduced in the Spring Budget has been made permanent, meaning that businesses can continue to claim 100% capital allowances, though it only applies to plant and machinery. That said, the Annual Investment Allowance of £1 million has been available to practice owners for some time now, which is, in essence, exactly the same thing. Only very large organisations, perhaps corporates, will therefore benefit further from the full expensing scheme being made permanent with investments over the £1 million threshold.
If you don’t run your practice as a limited company, or if you work on a self-employed basis, the amendments to National Insurance Contributions (NICs) will be of note. Class 2 NICs were abolished altogether, which will be positive for all dentists and dental hygienists/therapists working on a self-employed basis. This will save you £3.45 per week. A slightly more impressive saving will be possible from the decrease in class 4 NICs, which will fall from 9% to 8% on profits between £12,570 and £50,270 from April 2024. Someone earning £35,000 will save £220, while a person taking home £50,000 will save £370. Across both changes, you will be around £450-500 better off at the end of the year.
Perspective is key
The rise in National Living Wage (NLW) will be good news for many, with everyone over the age of 23 receiving a £1.02 per hour hike in their wages, which is a pretty substantial increase. Young workers will also benefit from the rearranging of the age brackets, with 21- and 22-year-olds qualifying for the same £11.44 per hour as their older peers from April 2024, unless they’re on an apprenticeship scheme.
For business owners, even if you’re not paying your dental nurses and reception team the NLW, employees often value their worth based on the proximity of their salary to the NLW. The general expectation from staff on wages closer to the NLW, is for salaries to rise at a similar rate.
Great for individuals, but from a practice valuation perspective, this will have a less positive impact. Raising salaries by £1 an hour for 10 members of staff that work 40 hours a week, means increasing costs by £400 a week, £20,800 per year – that’s before the additional costs of Employer’s National Insurance and pensions, which equates to another £3,494. Some of this could be offset by fee increases to patients. But given that many practices introduced fairly significant fee rises last year to counter the growing costs of materials, staff and other out-goings, it’s necessary to consider whether a patient base could afford a further uplift. Either way, an increase in cost of £24,294 per annum without any offset means a reduction in EBITDA of the same. At a multiple of 7 x EBITDA, this is a potential reduction in valuation of £170,060.
Other small wins
There were a few other small wins for practice principals and professionals in the field worth mentioning. The first is that the Military Veterans Employment Scheme has been extended, so you don’t pay any NICs for individuals joining your team as their first civilian job, when you are paying them upwards of £50,270 annually.
The concept of a “pot for life” will be welcomed by many people who, theoretically, will be able to access their pension accrued in different jobs at different companies more easily. Individuals will need to speak to their employers to organise their desired pension fund.
Finally, for professionals with young children and who have individual incomes in the household of less than £100,000, they will be entitled to 15 hours of funding over 38 weeks a year, starting from the term after their child’s 2nd birthday.
Better for some than others
In summary, the Autumn Statement was targeted towards middle earning individuals, who will benefit from small reductions in their outgoings relating to tax and childcare, with the likelihood of a pay rise too. For business owners running limited companies, there was almost nothing new at all.
If you would like any bespoke advice or guidance on how to optimise your financial situation or enhance your practice value, speak to an expert at Dental Elite.