The 2024/25 financial year - what has changed and what does this mean for dentists?

Dental Specialist Financial Adviser, Paul Griffiths, for Wesleyan Financial Services, outlines the new tax rates, new allowances and other changes that have come into effect and explains what these will mean to dentists.

April 6, 2024, marked the beginning of the new tax year - the day on which allowances are refreshed and various other changes come into effect which could potentially impact your finances. Many of my clients in the dental profession ask me what changes they should be aware of and how this will impact them in the coming financial year.  

Personal allowance

Personal allowance describes the amount of money you can earn before you start to pay tax on it. The personal allowance has not changed from 2023/24 and remains frozen at £12,570. However, it is worth noting that anybody earning more than £100,000 will start to lose their personal allowance – it will be lost at a rate of £1 for every £2 you earn above the £100,000 threshold. For example, a dentist earning £120,000 a year, would be entitled to an allowance of £2,500 per year. Any dentist earning above £125,140 per year would lose their personal allowance entirely. However, there may be other ways of preserving the personal allowance such as paying into a pension scheme - this is where the support of a dental specialist financial adviser can be extremely useful – providing tailored advice to suit your individual circumstances in the most effective way for you.

National Insurance (NI)

A number of changes to National Insurance were announced during the recent Spring Budget. For employed dental professionals the contribution rate has been reduced from 10% to 8% and for the self-employed, from 9% to 6%. Although this will mean some extra money back in the pocket of the average dentist, with income tax rates and thresholds having remained frozen since 2021, as wages increase over time, more people will move into higher tax brackets.

Capital Gains Tax (CGT) and Dividend Tax

The CGT threshold has been reduced even further for the 2024/25 tax year. The annual tax-free capital gains exemption – the amount of profit you can make from selling assets – is now down to £3000. This is a significant decrease from the £6000 threshold of 2023/24 when it was halved from the £12,300 threshold of 2022/23. This means that any dentists hoping to dispose of assets may be subject to a hefty tax bill when they come to sell.

The dividend allowance has also halved from £1000 in the 2023/24 tax year to £500 in the 2024/25 tax year.

Pension Allowances

In 2023/24 the Pension Annual Allowance was increased from £40,000 to £60,000 – this has stayed the same, meaning that the amount that can be effectively paid into a pension in the tax year is £60,000 or 100% of UK relevant earnings – whichever is the lowest figure.

Although the Pension Lifetime Allowance (LTA) – the maximum amount anyone could save in their pension over their lifetime without incurring tax penalties (£1,073,100) - was officially abolished last year, there is still some tidying up to do regarding the rules, as there are still limits on how much tax-free cash that can be withdrawn from a pension. It is worth seeking specialist advice for your personal circumstances to consider any tax saving opportunities.

ISAs

In the Autumn Statement of 2023, the Chancellor announced a number of new rules surrounding ISAs coming into effect from April 6. The changes allow people to open multiple ISAs of the same type every tax year and were intended to simplify the scheme and encourage more people to invest by giving them greater flexibility with their money – this is welcome news for dentists. During the Spring Budget, an additional ISA allowance of £5000 was announced – this, however, can only be used when invested in UK companies.

I would always remind my clients the importance of regular financial reviews to ensure that they have the best possible chance of achieving their objectives for their personal finances or business finances. Legislation can change, as can personal circumstances – however, keeping in touch with your adviser on a regular basis, can help you to maximise any opportunities and make the most out of your hard-earned income.

For further support and guidance to plan for the financial year ahead, speak to a dental Specialist Financial Adviser at Wesleyan Financial Services by booking a no-obligation financial review or calling 0800 316 3784 or visit us at The Dentistry Show in Birmingham on 17-18 May 2024, at stand K50.

Tax treatment depends on individual circumstances and may be subject to change in future.

Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.

About: Paul Griffiths is a dental Specialist Financial Adviser at Wesleyan Financial Services, supporting dentists, their families and their practices with financial planning to secure their financial future.

Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.