Autumn Statement 2022
The Government Budgets have not gone down all that well this year, so it was with much trepidation that we all awaited the latest Autumn Statement from Rt Hon Jeremy Hunt last month. While you would have had some more time to digest the information and look into how it will impact you directly, here is a summary of the key points to consider for dental professionals and businesses:
National Living Wage
At a time when cost of living has risen so drastically that nearly 90% of the population has reported a rise in their outgoings, this increase to wages will be a welcome announcement for many! The chancellor actually declared the biggest increase in National Living Wage ever recorded, changing it from £9.50 per hour to £10.42 for everyone over 22-years-of-age. This may be particularly useful to part-time and full-time staff that perform dental nursing, administrative and front-of-house roles in the dental practice.
On the subject of energy, an Energy Price Guarantee will be maintained throughout the colder months of 2022-23, limiting residential annual energy bills to £2,500. The new threshold from April 2023 will be £3,000, but the cap should help to curb some of the increasing costs of living for some people. Somewhat controversially, an Electricity Generation Levy was introduced, providing a windfall tax on all organisations that produce electricity – green energy suppliers included. If and how this impacts the wider population is yet to be seen.
The Big Freeze
For individuals, Income Tax, Personal Allowance and Normal Rate Tax thresholds have all been frozen for an additional two years. This will help to protect people from taxes owed on earnings so that they have a few extra pennies to tackle growing costs everywhere else.
Anyone looking towards retirement will be pleased to have discovered that state pensions will rise in accordance with inflation, which is 10.1%. This will help significantly towards savings for when you stop working.
Higher Rate Tax Threshold
The higher rate tax of 45% will apply to all earnings over £125,140 as of April 2023. This has been reduced from the previous £150,000 and will mean that individuals in this income bracket will take away less from their pay packet.
Corporation Tax will rise to 25% for businesses with profits of more than £250,000 as of 1 April 2023. This could be a difficult pill to swallow for dental practices who have already had to contend with significant increases to overheads like energy and supplies.
Small Business Support
The aforementioned hike in Corporation Tax may be avoided by small dental practices due to the Small Profits Rates. Business rates are also set to be further reduced for certain smaller and high street organisations with approximately £13.6 billion set aside to support them over the next 5 years. Plus, any businesses looking to invest more than £200,00 in the coming years may also benefit from the Annual Investment Allowance that has been frozen at the highest ever permanent level of £1 million.
For practice principals and shareholders, a drop in Dividend Allowance may negatively affect how you organise your pay. The current £2,000 tax-free amount is reducing to £1,000 next year and then even further to £500 in 2024. For anyone who has typically paid themselves partially through dividends, watch out for the new taxes in the future!
In summary, the Autumn Statement did not produce too many surprises and there isn’t too much that should trouble the dental community. A few small tweaks will impact income for some individuals but the vast majority should actually be looking at small to moderate improvements in their financial situations. As always, only time will tell!