How will the Budget 2012 affect dentists
George Osborne promised a Budget that rewards work, backs business and is on the side of aspiration. But there were no tax giveaways – any cuts in tax are to be paid for by increases elsewhere.
The main changes following the budget which could be of relevance to members of the dental profession are summarised below: –
The tax free personal allowance is £8,105 for 2012/13 and will be £9,205 for 2013/14.
The personal allowance tapers away when income exceeds £100,000. The marginal rate of income tax in 2012/13 is effectively 60% on income between £100,000 and £116,210.
The age allowance will wither on the vine. The allowance for individuals aged 65-75 is £10,500 for 2012/13 and will not be increased thereafter. For individuals aged 75+ it will be £10,660 for 2012/13 and will not be increased.
Higher Rate Threshold
The higher rate threshold, before deduction of personal allowance, at which 40% rates starts to bite, will be reduced from £42,475 in 2012/13 to £41,450 in 2013/14.
Top Rate of Tax
The 50% rate on income above £150,000 will continue for 2012/13, and reduce to 45% in 2013/14. No further reductions have been announced so far.
From January 7, 2013, Child Benefit will be effectively tapered away when one individual in a household earns more than £50,000. The Benefit will gradually taper to nil as income reaches £60,000. The Benefit payment itself will not reduce, but will be clawed back through an additional income tax charge.
General Anti Abuse Rule
A General Anti Abuse Rule will be introduced in April 2013 to tackle ‘artificial and abusive tax avoidance schemes’. Draft legislation will be published as to what this means in practice, and a consultation process will follow.
The so-called ‘IR35’ rules will be clarified and tightened up. These rules apply to individuals providing their services through limited companies. The updated rules will be published later this year and will apply from April 2013.
Cap on Tax Reliefs
From 2013, the maximum saving from certain types of tax relief will be capped. This will not apply to pension contributions or Enterprise Investment Scheme investments. The cap will be the greater of £50,000 and 25% of income.
To discuss any tax planning opportunities please contact David Walker, Healthcare Services Senior Tax Consultant, on 01253 404404.