The Know. Dentistry. Loss of higher rate tax relief on buy to let mortgage interest. Residence nil rate band. Autumn. Inside find out about...

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1 Inside fd out about... Autumn 2017 Annual Allowance Tax charges SFE Update Buyg a practice Page 4 Page 5 Page 6 Welcome to our Autumn newsletter, we are startg with a short summary of some of the tax measures which have come to force for 2017/18. Loss of higher rate tax relief on buy to let mortgage terest The new rules will heavily restrict the tax relief on mortgage terest and can hit landlords very hard, especially those who have highly fanced properties. The government have announced that they are restrictg tax relief on buy to let mortgage terest to 20%. Interest will no longer be an allowable deduction computg your rental profits, and stead you will obta a 20% tax credit on the terest which will be deducted from your annual tax liability. This will affect dividuals who let residential property and claim a deduction for mortgage terest. Those who let commercial properties and/or furnished holiday let properties are not affected by these new rules, and neither are those who own properties through limited companies. The new rules are beg phased from April 2017 over three years so will not be fully force until April Residence nil rate band The additional nil-rate band is beg phased from 6 April 2017, so that by 6 April 2020, a couple could leave 1m their wills without any IHT beg payable. The additional nil-rate band is available where a residence is passed on death to a direct descendant. The additional nil-rate band will be 100, , 125, , 150, , and 175, It will then crease le with Consumer Prices Index (CPI) from onwards. Contued on page 2 Heidi Marshall Partner Telephone:

2 2 Contued from front page Any unused proportion of the additional nil-rate band will be able to be transferred to a survivg spouse or civil partner irrespective of when the first of the couple died. The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants. The qualifyg residential terest will be The new 19% corporation tax rate is now place. Losses arisg after 1 April 2017 can now be used flexibly agast the company s come from any source. limited to one residential property but personal representatives will be able to nomate which residential property should qualify if there is more than one the estate. A property which was never a residence of the deceased, such as a buyto-let property, will not qualify. Where an estate has a net value of more than 2m, the additional nil-rate band will be withdrawn at a rate of 1 for every 2 over this threshold. Changes affectg companies Employment tax changes The public sector has seen a huge change with responsibility for operatg the personal service company (PSC) tax rules shiftg to the public sector company (or agency or third party) payg the PSC. A very specific shakeup but with wide rangg repercussions! Changes to the way salary sacrifice operates LISA New Lifetime ISAs (LISAs) have been troduced for those between the age of 18 and 40. Individuals can save up to 4,000 per annum with the government toppg their savgs up by 25% on any contributions made before their 50th Tax-Free Childcare Workg parents can now start applyg for two new government childcare schemes launchg this year Tax-Free Childcare and 30 hours free childcare. This means that workg parents of children, who were aged under 4 on 31 August 2017, can now apply through the new digital childcare service for Tax-Free Childcare and receive a government top-up of 2 for every 8 that they pay to their Tax-Free Childcare account. All parents of disabled children (under 17 years old) are now also able to apply for Tax- Free Childcare. In addition, parents of 2-3 year olds, who are eligible for a 30 hours free childcare place from September 2017, can apply through the childcare service and start arrangg a place with their childcare provider. The Childcare Choices website provides formation on the government s childcare for most benefits kd has now changed significantly, with the tax and NIC benefits of salary sacrifice significantly restricted. New arrangements usg salary sacrifice will see the benefit provided beg subjected to the same tax as the cash come sacrifice for all but a very few select exclusions. birthday. The money can be withdrawn tax free for one of two reasons: 1. The purchase of their first property (up to a maximum of 450,000) 2. To fund their retirement after the age of 60 schemes and explas how parents can preregister or apply. It also cludes a childcare calculator to show eligible families how much they could receive. For parents across the UK, Tax-Free Childcare will cut childcare costs by up to 2,000 per year for each child under 12 years old, or 4,000 per year for disabled children under 17 years old. The programme will be rolled out through the year, with all eligible parents able to receive it by the end of From September 2017, workg parents of three and four-year-olds livg England will also be entitled to the new 30 hours free childcare offer, worth around 5,000 per child. Parents will only need to make a sgle application for both schemes when their children become eligible. Annual Allowance Tax charges See page 4 Tel:

3 3 Cat Cloud accountg team Time is what we want most, but what we use worst. How much time do you spend lookg at the keys on your keyboard rather than lookg at your practice s direction and growth? If too much is the answer then we may have the ideal solution for you and your bookkeepg procedures time for the new fancial year. Cloud Accountg is becomg very popular with the dental practices we act for as they reap the benefits now and look forward to the future. Cloud Accountg is accountg software you access via the ternet. Cloud Accountg packages offer the same security level as onle bankg and can be available from anywhere the world (as long as there is an ternet connection). So, if like many of our clients, you need to be able to work more than 9-5..Cloud Accountg can support you to do so. Packages range from only 9 per month and the monthly subscription fee also allows you to benefit from software support and automatic updates, which can be costly with desktop accountg packages. Dodd & Co have a specialist team of Cloud Accountg experts who can setup and tra Interested how much time you can save and takg the advice of William Penn to use your time well? - William Penn a typical dental practice with a day. So what are the benefits of Cloud Accountg and why should you use it? Automatic bank feeds saves data puttg due to a read only copy of transactions beg brought from your bank account which reduces time, duplicates and correct entries. Real time formation can enable accountants to prepare accounts shortly after your year end, if you keep the data up to date. The reportg functionality can reduce the need for excessive spreadsheets. Cloud accountg software is deemed easy to use so you will be able to use the system quickly and efficiently no time. If you can shop onle you can use Cloud Accountg! You can process your payroll with Cloud Accountg therefore savg time by not runng two systems or savg costs by not outsourcg the payroll. It can help accountants provide on-gog busess advice and tax planng due to the data beg available real time, not months after year end. Give the Dodd & Co specialist Cloud Accountg Team (CAT) a call on

4 4 Annual Allowance Tax charges What is the Annual Allowance? The annual allowance (AA) is the maximum amount you can contribute to a pension and obta tax relief. The AA limit is currently 40,000 although dividuals with high earngs (>150,000) may see this reduced to 10,000. For those a defed contribution scheme (e.g. Standard Life) the position is fairly straightforward. It is contributions paid which are compared to the AA limit. For those a defed benefit scheme (i.e. the NHS pension scheme) the position is much more complicated. A calculation must be done to establish the crease value of your pension pot durg the tax year. It is this crease value which is compared to the AA limit. The amount of superannuation contributions made is therefore irrelevant for workg out your AA position this type of scheme. In very broad terms, if the crease the value of your NHS pension durg the year is more than 2,100, you will probably exceed the current 40,000 limit and may be subject to an AA charge. How is my AA calculated? The growth your pension pot is calculated by creasg your pension pot at the start of the tax year by flation ( le with HMRC rules) and deductg this from the pension pot at the end of the tax year. Generally, if the growth is less than 40,000, there is no AA charge. If the growth is more than 40,000 there will be an AA charge on the excess. If you contribute to both the NHS pension scheme and a defed contribution pension scheme, you will need to take both to account when calculatg your AA position. Unused relief In a tax year where your AA has not been used full, it is possible to carry forward the unused allowances to offset agast a future tax year where the AA is exceeded. This is known as unused relief. Unused allowances can be carried forward for a maximum of 3 tax years. How am I taxed? The excess AA (after any unused relief has been offset) is taxed at your highest tax rate. If you have an AA tax charge which is excess of 2,000, it may be possible for you to elect for your pension scheme to pay all or part of this on your behalf usg Scheme Pays. Am I likely to be affected? If you answer yes to any of the followg, you may be affected: 1. Do you earn excess of 100,000? 2. Have you had a significant crease membership? (e.g. a change from part-time to full-time). 3. Have you had a significant pay rise or recently purchased an NHS practice? 4. Do you make large contributions to a personal pension? 5. Have you purchased additional NHS pension by sgle payment? The pension rules are complicated and changg all the time which makes it more important than ever to have an advisor who clearly understands the NHS pension scheme and the tax position surroundg it. Contact: Claire Hebdige or Lette Hall claireh@doddaccountants.co.uk or lette@doddaccountants.co.uk Buyg a practice See page 6 Tel:

5 5 SFE Update There have been a number of amendments to the fancial entitlements of NHS dentists. The GDS/PDS contract values have been uplifted by 1.14%, with the uplift beg back-dated to 1 April In respect of Foundation Dentists (FDs): The traee s salary is now 2, per month (31,356 per annum). This is an crease of 26 per month (312 per annum). The traer s grant is now 785 per month (9,420 per annum). This is an crease of 8 per month (96 per annum). Service cost is 5,347 per month (64,164 per annum). This remas the same as the 16/17 year. As this crease has only been announced now but is effective from 1 April, practices with an FD will need to backdate the crease for previous months. How much does a Foundation Dentist receive? An FD s gross pay is 2,613 per month (31,356 per annum), on which superannuation at 9.3% is deducted. Tax and national surance is deducted from this, leavg the FD with a monthly net pay of 1, Gross Pay 2, % (243.01) National Insurance (231.96) Income Tax (282.33) Net Pay 1, How much does the prcipal/traer receive? The trag practice receives reimbursements for the FD s gross salary and employer s national surance contributions relatg to the FD. In addition, the traer receives a monthly grant of 785 and the practice receives a monthly amount of 5,347 to cover service costs. The service cost is not superannuable, however the trag grant is.

6 6 Buyg a practice 2017 could ve been the year that saw goodwill values tumble... Despite large corporates ceasg to be acquisitive there is still a flurry of activity respect of practice sales/purchases. The market appears set to rema the same throughout 2018 too. Why is the market remag particularly active? In one word; confidence. Dentists are more willg to make the leap from beg an associate to a practice owner, lower earng rates quite possibly beg a motivatg factor. Banks and private lenders are also comfortable lendg for practice purchases, with low terest rates available from banks with specialist departments/managers. In essence, the market is viewed as low risk and high return. So, what s the catch? Despite market confidence from high-performg practices, there are practices out there that under-perform. Therefore, there can be pitfalls when tryg to choose the right practice for you. To combat this, and to ensure you make the correct buyg decision, you should surround yourself with a team of specialist dental advisors. Whether you are a first time buyer or a micorporate, Dodd & Co can help you through the buyg process. The assistance does not stop once the practice purchase has completed preparation and analysis of the annual accounts (along with optional management accounts) and guidance based on these accounts post completion is all part of the service Dodd & Co provide. We offer a fixed price shoppg list for all dentists lookg to buy a practice. This breaks down each step of buyg a practice and provides clarity of the costs volved. Where will we be? See page 8 Tel:

7 7 Fd it Fund it Run it As mentioned, as the market is extremely active at the moment, there is an abundance of practices for sale to choose from. Therefore, it is important to choose a practice that suits you. For the majority of people, the location and size of practice will be the ma determg factors. The price of a practice is simply a function of these two variables (amongst other considerations too). Usg a specialist sellg agent will assist you seekg out your perfect practice. Once this is found, a specialist dental accountant will help evaluatg the accountg records of the practice, assessg its potential profitability from its existg patient base/ historic profitability along with future plans of the buyer. As part of our review of the potential purchase, we will also discuss with you the most tax efficient structure which to acquire the practice; be it as a sole trader, partnership or limited company. We will also liaise with your specialist dental lawyer on the tax implications of your sales purchase agreement. There are many banks the UK that can access and offer special, low-rate lendg terms to professionals the sector. These lenders often require 2-3 year forecasts, and on occasion request a busess plan to support the figures. Dodd & Co can assist reviewg your forecasts and busess plan before they are submitted to lenders, alternatively we can prepare the projections on your behalf. We believe our knowledge and experience with this sector enables us to add value to your forecasts and busess plan, ensurg they are presented to lenders the best possible way. Over the years, we have built up strong relationships with managers banks all over the UK. This eases the lendg application process, as we can communicate with the banks directly to answer any questions respect of the fancial projections we have produced. Once a price for the practice has been agreed, the lendg approved and the purchase has completed, it will be time to get to the drivg seat of your new practice! Obviously, you will want to ensure the practice runs and performs how you expect. Aga, Dodd & Co can help with this. We will advise on implementg the most suitable accountg software to keep your books (whether it is traditional or cloud-accountg software), ensurg the process of producg accounts is a relatively quick, timeefficient process. Once the annual accounts have been drafted, we will compare results to the expected results from the forecasts. We also have access to the NASDAL statistics, to ascerta how your new practice is performg compared to national averages. Moreover, if you would like more upto-date accounts on an on-gog basis, we can prepare monthly/quarterly management accounts. If you would like to discuss how Dodd & Co can help you to buy a practice, please contact Michael Blenkharn or Heidi Marshall on , or by at michaelb@doddaccountants.co.uk or Heidi@doddaccountants.co.uk

8 8 Where will we be? Dodd & Co will have their own stand (M54) at the BDIA Dental Showcase 19, 20 & 21 October. Heidi is also gog to be speakg the mi-lecture theatres to give some top tips on what you should (and shouldn t) add to your tick list when purchasg a practice. The times of Heidi s lectures are: Thursday: Friday: Saturday: Heidi and Michael will also be representg NASDAL at the BDIA Dental Showcase on 19, 20 & 21 October, on stand E44 Come and say hello! Pic left to right: Heidi, Joanne, Simon, Michael, Charlotte & Jonathan are your BDIA Team! This newsletter is designed as an formative guide for clients and their advisors. The articles cannot deal with any particular pot depth and they should not be used as a substitute for full professional advice. Accordgly, no responsibility for any loss or damage can be accepted by Dodd & Co Limited as a result of any person or organisation actg upon material contaed this newsletter. Data Protection Policy In the future Dodd & Co or Dodd Wealthcare Limited may contact you by mail, telephone, , fax or other means for marketg purposes. If you do not wish to receive further formation on products / services, please write to: Data Controller, Dodd & Co, Clt Mill, Cornmarket, Penrith, Cumbria, CA11 7HW. FIFTEEN Rosehill Montgomery Way Rosehill Estate CARLISLE CA1 2RW T: F: Clt Mill Cornmarket PENRITH CA11 7HW T: F: No 8 Willow Mill Fell View Caton LANCASTER LA2 9RA T: e: carlisle@doddaccountants.co.uk e: penrith@doddaccountants.co.uk e: lancaster@doddaccountants.co.uk