Dr James, 0s:

Today we're here to talk about the most recent budget, that being October 2026. Not just generally speaking, but specifically what it means for dentist, and there's a few little changes in there that quite department to our financial budget which we need to watch out for. I'm joined today by Michael Bryan of Humphrey & Co, Expert Accountant & Specialist whenever it comes to dentist and architect. He's gonna share with us his wisdom and knowledge and takeaways from this budget so we know how we can implement them practically into our list. As ever, you can claim your CPD for this episode within the official Dentists Who Invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentist, including how to become as tax efficient as possible, as well as understanding investing. All this content comments as verifiable CPD, and you can download your certificates there and then on completion each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principles, amongst other parts and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. Mike, let's jump straight in. What do us dentists need to know whenever it comes to the most recent budget? And you know, when you and I were talking off camera, and you said to me, you were like, James, it kind of fits into three categories the good, the bad, and the ugly. So on this podcast, that's exactly how we're gonna divvy everything up, except we're gonna do it in the reverse order ugly, uh, bad, and then good, because we always want to end on a high note, of course. So maybe we start there with the ugly. Let's do that.

Mike, 1m 40s:

Let's do it that way around. Yeah, good, bad, ugly. I mean, in summary of the budget, there wasn't loads of big, big changes. Actually, this budget seems to have a lot of smaller changes. Um, unfortunately, uh, the state of the economy is that tax is getting worse, people are going to feel the squeeze more. Um, there are a few things to end on a high, but let's start on the ugly stuff. Um, so the the two that I really want to point out is your business asset disposal relief. So on my good side, I have that CGT rates have not increased. Okay, that was always a fear. We thought they may align them to income. Aligning them to income, in my opinion, is unfair because you're basically paying tax on inflation. If you go back a few years in the UK, we used to have this thing called indexation allowance, which basically meant that any gain was uh uh affected for inflation before you actually paid the tax on the gain. They then got rid of that, and that's why CGT is at a lower rate compared to income tax. Um so aligning CGT and income tax rates together is uh probably not going to happen. Um, and if they did, I think they would need to bring back some kind of indexation allowance. So no changes to CGT rates, but massive for those dentists that uh run businesses, trading businesses, so dental practices generally speaking, but you know, you could have a facial aesthetics clinic or something else, something that you could sell. Um business asset disposal relief is reducing from £1 million per person per lifetime to £500,000 per person per lifetime. Um, now what that means uh in practical terms, uh the business asset disposal relief um rate is 18%. It used to be 10% if you go back a few years. It used to be 10% on 10 million quid if you go back more than a few years. It went to 10% on a million quid two or three years ago, 14% on a million quid uh a year or so ago, and it's now 18% on a million quid. Next year it will be 18% on £500,000. So if you're sitting there as a sole practitioner owning a practice that you've owned for a number of years and you've done really, really well in building this practice up, and the gain, the sales price less the purchase price, is over £500,000. You you will be paying more tax if you sell after April 5th of April 2027. But for someone with a million pounds worth of gain, you're talking £30,000 worth of increased tax. It's not a little bit of tax, it can be a whole chunk of tax that you pay when you exit. There's certainly planning opportunities, think of spouses. We can uh in the UK we have a spouse with exemption, which means that we can transfer uh assets between spouses at nil gain, nil loss. So if you're looking at a typical dentist that has uh a million pound gain, if they share that with their spouse, that's still £500,000 gain each, and therefore their tax won't be affected by this change. Now, for dentists that operate via limited companies, that's not too difficult. But for dentists that are uh sole traders, your spouse would need to be GDC registered for them to become a partner in your business. So for some, it may not be possible, or it may only be possible if you incorporate your dental practice. And incorporating your dental practice is still very, very possible. Uh, it can come with some tax savings, can come with some upfront tax uh on incorporation, and it's something that you need to go through with your accountant, but with proper planning, there's some big tax savings to be made here if if you haven't already thought about it.

Dr James, 5m 44s:

Nice. Well, uh well, not so nice really, because um obviously uh that is going to affect a lot of dentists, but uh as you say, planning opportunities, and I believe if I've got this right, and did I don't know if you said this, there's a two it has to be two years out of the seal, doesn't it? Did you say that? I didn't quite clear it.

Mike, 6m 3s:

I didn't. So the qualifying criteria for business asset disposal relief is that you've owned at least 5% for two years and you're an active member and employee, you work at that business. Now, for planning opportunities, if uh let's say I was a dentist and my wife wasn't a dentist and I ran a limited company as a dental practice, um, so long I give my wife 5% of the shares now, she in two years from now she will qualify for business asset disposal relief as as long as she works in that dental practice as well. Because she then qualifies, if on the lead up to sale I transfer her an extra 45%, let's say, actually, you don't need to wait two years from that date of transfer because she's already qualified for business asset disposal release, because she's already had at least five percent of the ownership for two years. So if you have a spouse that's not uh a shareholder in your business, actually just giving her or him five percent now will allow them to qualify, and then when you come up to sale, you can tweak those percentages quite easily just prior to sale.

Dr James, 7m 19s:

Nice, and just on the capital gains thing, because obviously that is how it relates to BADR, which is specifically a business exit, with more liquid assets, let's say, like I don't know, let's say you hold stocks, you know, or maybe crypto, right, in your own name. Yeah. And I know we're going down a little bit of a rabbit hole now, but just out of curiosity, if you transfer those to your spouse, can that be done instantly, or does that have to be two years out or anything like that?

Mike, 7m 46s:

You can transfer to your spouse without any gain or loss instantly. The problem with uh stocks and shares and crypto and any other investments is that their investments, business asset disposal release will only be for trading businesses.

Dr James, 8m 1s:

Gotcha.

Mike, 8m 2s:

So you've got to be a dental practice or a cafe or a facial assignment clinic or something that is a trading business.

Dr James, 8m 8s:

Sure. Oh, yeah, sure. No, you're absolutely right. There is that side of it, and then that differs between other assets, let's say, like growth assets like stocks, because you can transfer it instantly. There is no it doesn't have to be a certain period out from crystallization. Uh, and then you can you can get you can transfer it to your wife or husband or whatever, and then instantly crystallize that and make use of their three grand threshold on capital gains. If I got that right, absolutely correct.

Mike, 8m 35s:

Yeah.

Dr James, 8m 36s:

Smash in. Yeah, no, I was just curious because so it it it it differs, it they they differ, don't they, in in that respect, as well as the actual you know, meme of attacks and everything along those lines. It's good to know that there is a distinction there, essentially. Anything else to say on that before we move on?

Mike, 8m 52s:

No, no, I don't think so. I think we covered all of that. So the next one that I wanted to put, I only put two things in the ugly category. Um, and then the next one's a bit more stealthier, and they didn't put a lot of information in this in the budget, but it concerns me specifically with dentists and probably more the dental associate here than the dental practice, in that from April 2029, HMRC are expecting to speed up tax collections. Um, so at the moment, if you're self-employed, you're generally being self-employed, if you're a dental associate, um, or you may be a limited company, which has some differences, um you will um we haven't got the the the keys in the detail here, we don't have the detail yet, but you will be paying tax sooner in the year, and there will be a transition year between 29 and uh 2030. The thing that fears me is if you look at two types of dental associate here, you've got the nice and safe and um uh pessimistic dentist, I suppose is the word I'm looking for, that saves for tax as they go. Okay, so if your tax liability is 20 grand for the year ended March 2027, generally speaking, in March 2027, you want 20 grand, say, for your tax. Okay, and if you do that, actually this change in when you pay tax will not be an impact. Well, you won't fee, well, you will if you'll pay tax slightly early, it's bad for cash flow, but actually you'll have the cash saved already. On the flip side of that spectrum, you've got the dentists that are a bit more um fast and loose. Fast and loose, great, uh, great phrase. Um, who may, let's say, well, we're in November now, so let's use this as the scenario, that may say, Oh, my accountants just told me that I need to pay 20 grand in January. Shit, how do I do that? I haven't saved anything. That means I've got to save seven grand for my pay in November, December, and January. And you know, hopefully they're earning 10 grand a month or something like that, and they can actually afford to do that. For that, for those type of clients, actually, what you're gonna find is you're gonna feel like you're paying two times the amount of tax in 2930 because you've got to pay for the year ended 29, but also you've got to pay for the year ended 30 in the same year, and therefore, for those clients, you really, really need to get yourself caught up, and you've got three years to catch yourself back up. So you're gonna have a little bit of a long slog in uh catching yourself up for tax.

Dr James, 11m 34s:

Nice. Well, uh, we've we've we've given people fair warning, I guess you could say, uh, because we've given them three years heads up, but inevitably there'll be people who caught get caught in that trap. Good year for uh people who are in the tax loans business, I should imagine, that year. Um little bit of a way out yet. Uh but listen, it's a very good thing to do to broadcast that as soon as we can. So thank you for that. At least there's only two things in the ugly category.

Mike, 12m 1s:

Quite. I'm sure others will probably try and pigeonhole some bad stuff into the ugly category, but this is more um, I suppose, localized. So I think the the worst of the bad stuff starts at your 4% increase to rental profits and savings tax. So we already knew there was going to be a 2% increase. That was announced previous budget. So broadly, rental profits used to be taxed at 20, 40, or 45%, depending if you're a basic higher or additional rank taxpayer. We knew they were going to 22, 42, and uh 47. Um, but a bit of a curveball, no one was really expecting this. They just decided to increase it by 4%, so an extra 2%. What that means is that your rental profits will be taxed at 24%, 44%, or 49% if you're an additional rate taxpayer with rental profits. And the same for savings income as well. Um, now savings income in comparison to property income, if you invest in property, your property income tends to be a lot higher than what your savings income tends to be because you know interest rates are quite low. But again, to pigeonhole back into your spacial exemption, if I were a higher earner and my spouse was a lower earner, there's no point me holding cash in a bank account that's paying me interest, because I'm going to be paying 44-49% of it away to HMRC. Whereas my spouse, if if she's a basic rate taxpayer, she'll pay 24% of it. And again, you can transfer assets between spouses. One of the good things, uh, which I'll go into now, was that the ICER allowance hasn't been reduced. Okay, so your cash ICER allowance hasn't been reduced. That's going to stay at your 20 grand.

Dr James, 13m 48s:

Which was a backtrack, right? Because they said it was going to go to 12.

Mike, 13m 51s:

It was gonna exactly it was gonna go to 12. They've decided not to do that, probably because they've decided to increase savings tax by an extra 2%. So going up about 4% in total, um, which just puts more weight on ensuring people are using tax uh tax-free wrappers, ISA, pension, premium bonds, those kind of savings that are outside the scope of tax will become more valuable because um tax rates have increased by 4% on interest.

Dr James, 14m 21s:

Interesting. And correct me if I'm wrong, the threshold at which you pay savings tax is 500 quid, isn't it?

Mike, 14m 28s:

You get it's a it's a thousand pounds if you're a basic rate taxpayer. So if your total income's below just under 50 grand or 50,270, it's a grand. Yeah, if you're over that, it's 500 quid, unless you're an additional rate taxpayer, which means your income's over 125 grand, in which case it's zero.

Dr James, 14m 48s:

Ah, okay, one to watch out for then, because there's a lot of dentists that might be in that additional it we were talking about. So technically you should have to.

Mike, 14m 56s:

Oh, but it's not, you know, it's not um the I I saw something the other day and I can't remember exactly what it was. Oh, it was the percentage of minimum wage to higher rate tax. And I think if you went back, I don't know, I can't remember, I'm going off memory now, 10 years or so, you had to maybe earn 10 times or six times national minimum wage to pay higher rate tax. Actually, with the uh the frozen tax band, now uh minimum wage, which I'll talk about in a minute, but minimum wage is £13.25 an hour now. So you would earn £25, $26,000 if you worked full-time on minimum wage. So it's now only two times. If you earn twice the minimum national women's wage, you're paying higher rank tax.

Dr James, 15m 41s:

Yeah.

Mike, 15m 42s:

Which um it's uh just it's fiscal drag is essentially what it is. More there's more earnings, but tax bans haven't increased, and therefore more people are paying tax at higher rates.

Dr James, 15m 54s:

Yes, I get what you're saying. The pro it it goes somewhere to demonstrate the proportion of people who will now likely fall in that category, right? And it shows you how that just hasn't kept pace with that at all.

Mike, 16m 4s:

Because it's yeah, exactly that. And um the the point being a dental associate now, actually, average earnings are probably tipp tipping on 100 grand for a dental associate. So if you're if you're slightly better than the average dental associate, your earnings can easily be 125 grand now. Um, and that means that you're getting no savings allowance. So all interest is taxed at what will be 49% for those people.

Dr James, 16m 33s:

That's the sort of thing that I could see like anybody's gonna get interest in their bank account, right? Like you're gonna get some level of interest, right? Especially if you have your cash, which is allocated towards tax stash in a bank account. So technically, at that level, you should be paying tax on that. How many people do is another question entirely.

Mike, 16m 53s:

This is uh another thing that is, I suppose, a bit bad and ugly in that HMRC are getting hot or hotter on uh how they get their information. And if you have any clients that do their own tax return on HMRC's online portal, actually now the HMRC will be telling them how much bank interest they've earned because the banks have already told them that that that figure. So if you're doing your own tax return and you're not putting your bank interest on there, you'll you'll you'll get an automatic inquiry from HMRC because they've already got that information and something doesn't agree.

Dr James, 17m 28s:

Wow, I'm so glad we kind of went down that rabbit hole because that is super pertinent to most people. Uh interest and any more to say in the bad category? Oh, loads.

Mike, 17m 40s:

Uh what have we got? We've done uh we've done the rental. Um, make sure yeah you're you're looking at those spatial transfers again if that's appropriate to you. Let's just go on to uh we've looked at frozen tax band. We've got uh interesting one for your crypto investors. I say interesting, this was again pretty low level, but stable stable coins will now be taxed probably as income rather than gains.

Dr James, 18m 6s:

Ah man, remember we had those podcasts about that back in the day? Do you remember it?

Mike, 18m 11s:

Yeah, yeah. So uh HMRC's crypto tax is developing, they're getting more aware of the situations. They've decided, and I think it's quite logical, that stable coin actually tracks uh dollar or pound or whatever you're tracking, and therefore it's more akin to money, um, and therefore they will tax it to you on income, which means 20, 40, 45 percent. Or in fact, I think it's probably going to be classed as savings income, so 24, 44, 49%, um, and won't be taxed in CGT. This is just a quick one. We've got uh two more in the bad category. Um, let's go to e-invoicing. Um so making tax digital has been around for uh where are we now? Six months, almost seven, eight months, maybe. Um I will move on to that in the good category in a minute. Um, there is some positives uh from the budget there. But what is happening and what HMRC are building and they're trying to get out by 2029 is e-invoicing, electronic invoicing. I think this will be more for limited companies than sole traders. Broadly, what that means is if um a builder came and, or let's use a painter and decorator, came and painted my offices at work, um, and they wanted a thousand pounds for the privilege of paying that, they will need to issue me an e-invoice, which directly goes into my accounting software, and it's the only way I can get it into my accounting software. Um, and what that will do is that will automatically ensure that if I claim an expense in my uh accounts, the equal and opposite income is going into the painter and decorator's accounts, and it's trying to close that gap between one of the reasons I think MTD came in, which is those cash-based businesses. You'll know the likes, the builders, the tradies, the pizzeria, the nail bar technicians, those businesses that you walk in and there's a sign on the door saying cash only. Um generally, the expectation for those businesses is they want cash because they don't want to declare it to HMRC, they don't want to pay their tax, they don't want to pay their VAT. They will shout from the rooftops that is because they don't want to pay the bank. Um, I'm a bit more cynical and a bit more skeptical. Um, so they're gonna close that loophole where business to business transactions, there's no way of there being uh a gap in the system, if it's my expense, it's someone else's income, and it's gonna be automatic. And Big Brother's watching you, and it will develop over time. And um, I mean, look, I don't think it's a bad thing. I think if we collect, I think it's about 40 billion quid, I think about 20 billion quid of that is associated to SMEs, to small businesses. If we collected an extra 20 billion quid a year in tax, actually we wouldn't be looking at all these tax increases. We would have better, hopefully, we would have better public services and all of that kind of stuff. So it simplifies with HMRC with it. I think I think it's the right thing to do, but unfortunately, it catches all those people that are already doing a good job, already compliant, already doing um the right things with their accountant tax and paying their fair share in tax. And that is just that it's another administrative burden, it's another compliance thing for someone to for a business to to deal with.

Dr James, 21m 28s:

Yeah, I mean, it's I I can I I can see your logic, I hear you, and interesting, good to know.

Mike, 21m 34s:

And that's I believe there's one more thing in the bad category, or one more, yeah, one more. Now, this is also in the good category.

Dr James, 21m 42s:

Okay.

Mike, 21m 42s:

So this is kind of overlap. So we're gonna talk about national minimum wage. National minimum wage is going to go up by 3.9%. Okay, it's going up to about £13.20 an hour. That is clearly a good thing for those that are working at national minimum wage rates, and that's why it's The good category. But for dentists, and specific to the audience of this podcast, the problem is um the the the gap between those unskilled workers and skilled workers in a dental practice. So you're kind of talking about the um trainee nurses and the the trainee receptionists compared to the fully qualified nurses and the fully qualified receptionists. Because what happens when national women's wage goes up by four percent is does everyone else's wage go up by four percent as well? And what happens if you all of a sudden put everyone's wages up by four percent in your practice? Well, that's going to increase uh that's gonna decrease your profits. And can you do that? And you may do that, but you may increase your your your private fees on your on your dentistry. That's inflation, that's how inflation works, okay? That's uh that's exactly what will happen is if everyone's wage goes up by four percent. So what actually you have is you have a squeeze, yeah, those national minimum wages get paid more, and the the skilled workers the the the bands squeeze a little bit. And I think Audi, the supermarket, were advertising the other day, something like 13, don't quote me on this, but 13 pounds fifty an hour to stack the shells in in an Audi supermarket and 14 pounds to be the store manager in the supermarket. It's like, well, I'm gonna I think I want more than 50p an hour extra to have the responsibility of looking after a whole supermarket. Um, and that's and that's the whole point, and it's managing those expectations from staff members who all of a sudden go, oh, all the all those on minimum wage have gone up by 4%. I want a 4% increase. You know, this isn't fair. And it's it's a it's those conversations that need to be had. The unfortunate thing for those on natural minimum wage is that their salary will go up by 4%, but it's likely that their rent goes up by 4% as well, because all of those landlords have just had a 4% increase to their tax, and they're probably going to pass that on to their tenants. So actually, again, and it's it's a bit propagandery, isn't it? It's a bit, I'm gonna pay the lower wage more. Well, actually, they haven't increased tax bans, they're increasing the landlord's tax, and therefore, actually, the result of that for a national women's wage worker is probably they'll be worse off because their income goes up by 4%, but that's 3% net of tax, and their rent goes up by 4% because the landlord needs to charge more to keep the same amount of their profits because the landlord's tax has gone up.

Dr James, 24m 31s:

Yeah, no, I hear you. And a lot of things are like that, they're they're spin. And if you know like two things about the economy, you'll know that it's not always a good thing. Case in point, uh, do you remember when the government paid everybody's wages in 2020, right? Like that cash has to come from somewhere. That cash has to be created, it has to be printed. Uh, and when that happens, yes, we get this short-term cash boost where we're all we're all at home having a great time. Um, but eventually we all pay for that, it comes full circle because all that extra money in the economy then pushes up prices, which we then pay for later, which is kind of why we're slightly in this pickle. Um so a lot of people were jubilant about that at the time, but we do all we do pay for these things eventually. And I feel like enough people don't understand why that's not necessarily good news in the moment, even though it seems to be because of the issues that it creates later. So, whilst I'm not saying this is exactly akin to the situation, it's another example or another facet of it.

Mike, 25m 35s:

Yeah, yeah, exactly that. Exactly that. Shall we move to the good? End on a high.

Dr James, 25m 40s:

Let's do that. Let's do that. I'm I'm looking forward to some positive news in this podcast. UK Dennis, Dennis Who Invest now has an official platform where you can learn about finance and obtain UK compliant, verifiable TV D at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK dentists. This includes complete courses on how tax works for UK dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course and how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best to the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit to celebrate the launch of the Smart Money Members Club. And given that the CPD deadline is coming up soon, I've decided to offer the first month of this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

Mike, 27m 35s:

Awesome. Okay, so uh MTD, making tax digital. I mentioned it earlier. We will have a new band of people coming in in April 2027. Uh the previous threshold was 50 grand. So if you earned more than 50 grand in 24-25, you're in MTD from April 26. It's now dropped to 30 grand. So if your income from rental or self-employment was over 30 grand in 25-26, you will start in April 27. That goes to 20 grand from next year. So the year we're in now, if your income's over 20 grand, you will go into MTD in April 2028. So most sole traders, landlords, will end up in MTD, and that's what they want. The good news is that the soft landing that the first tranche of people went into and then currently in this year has been extended. So anyone that starts MTD from April 27 will not get penalties, will not be penalised if they're late for the first year.

Dr James, 28m 35s:

Okay, there we go.

Mike, 28m 36s:

Very important to understand. Very important to understand that if you are in MTD now, you will get penalties next year if you're still late.

Dr James, 28m 50s:

Right, got you. So I I I I understand that, right? Yeah, it depends on what threshold your income falls into, right? Is basically what you're saying.

Mike, 28m 59s:

Yeah, exactly. If you if you're starting MTD in April 27, you've got another year grace. If you're already in MTD, your year grace ends in April 27, and therefore you will start getting a 200 pound penalty every submission you're late, uh, which is quarterly now. So you've got to report quarterly.

Dr James, 29m 18s:

All right, good to know.

Mike, 29m 20s:

Moving on, uh, CGT rates didn't increase. That's definitely a good thing. Uh, we talked about the issues with business asset disposal relief, business rates, a tax that I probably get asked of by my clients twice a year, and a tax that I hold my hands up to. I do not have the foggiest on how business rates work. Um, it is a local council thing, um, and it's like council tax, but certainly the threshold's gone up. So if you had a rateable value of £12,000 or over, you would have paid business rates. Uh, from next year, that goes up to £18,000. So I imagine there's going to be some dentists there that have rateable premises of between eight, uh, £12,000, and 18 grand that will actually be uh better off next year because they're not going to have to pay any business rates.

Dr James, 30m 6s:

Good news. Business business rates, from what I know of it as well, it's kind of one of those areas, it's a little bit like capital allowances, right? It's a little bit not a dark art. I don't know what I don't know what quite the term is, but it's basically so complicated that most accountants know, even accountants, you know, who typically know these sorts of sort of things very well, they kind of stay away from it. Um, from what I can see.

Mike, 30m 28s:

Yeah, it's well, it's just it doesn't go on your tax return. Broadly, the taxes that we deal with are taxes that go on your tax return. Okay, yeah, okay. You've got stamp duty in there when you buy property as well, that doesn't go on your tax return. But generally, we're looking accounters look at taxes that are on tax returns. Business rates doesn't go on your tax return, and therefore I just don't need to know about it. I don't have to advise on it. It's more of a surveyor's game. How much is a property rateable value? You know, I don't know. Get surveyor in to tell you what that is, um, and that's how they collect their their their business rates. So, yeah, I'd say it's it's definitely a bit of a dark art.

Dr James, 31m 2s:

Yeah, yeah, that's what I've always observed about it. I mean, I I probably know even less than you. Uh, it was just interesting to say that out loud and get your take on it. Any more good news? Or or have we summarized?

Mike, 31m 13s:

Yeah, couple. Um, trading allowance. Trading allowance for all of your side hustlers. So this is very important that if you are a sole trader, you can't then claim the trading allowance for a side hustle. Right. Okay, because you've already got business income. But for those that are limited companies, let's say, if they have a side hustle on the side that is on them personally as a sole trader, the threshold before you need to report and start paying tax is tripling. It's going from £1,000 a year to £3,000 a year. Which basically means that if I'm a director, if I'm a let's say I'm a fully private dental associate trading by my limited company, um, but I also decide to um go back and make some arts and crafts. Yeah, yeah, and let's do an arts and crafts thing and sell something on there, I can earn three grand without paying any tax and without having to report anything on my tax return as well. So that's that's a nicety. Absolutely. People should be using that where appropriate. Um you're a higher rate taxpayer, that could save you twelve hundred quid a year in tax.

Dr James, 32m 20s:

Nice, because if it wasn't taxed as that, it would be taxes income, correct? If I got that right, would it be? Yeah, yeah.

Mike, 32m 28s:

Yeah, exactly that. And if you're a 40% taxpayer, you'll pay a 40% on free grand, which which is your 1200 quid. So um yeah, that's a good thing. Look, it it's it's really there to help simplify really, really small businesses, hobbies more than anything, right? Those that have hobbies that actually generate an income as well. Um the property allowance is at £1,000, which is similar to the trading allowance, but the property allowance isn't going up. So the property allowance is staying at a thousand pounds.

Dr James, 33m 4s:

Could we just recap that? The property allowance? What is that?

Mike, 33m 8s:

So if I had property income of under a thousand pounds a year, uh-huh, I wouldn't need to declare it.

Dr James, 33m 14s:

I see. Okay. Does that then mean that you have there's a thousand pounds threshold before you pay property tax, property income tax, or no?

Mike, 33m 27s:

No, no, so it's one or the other. So it is you you either claim the property allowance of a thousand pounds, which means you can't claim any expenses on that property. So that's your play. You either claim the property allowance, but no expenses, or you claim expenses.

Dr James, 33m 42s:

Gotcha. I can't imagine there's too many people out there with a thousand less than a thousand pounds of property allowance. I mean, what would you rent?

Mike, 33m 48s:

Have to be you're talking maybe someone that that um I'd need to check that this works, but maybe someone that rents out their garage or their driveway, right? Potentially, something like that. Um, maybe someone that has um, you know, family wealth and they get, I don't know, a fifth of a property's income potentially, maybe they'll they'll do it. Or anyone that has actually, you know, I've got this one of my clients, she has uh a commercial property in her personal name, rents it out, and um the the expenses for this property are are non-existent. There's just no expenses because the tenant is liable for all the expenses. So actually, when we come to the year end, she's got no expenses. We might as well then claim that that £1,000 trade uh property allowance for her because that's just gonna knock £1,000 off her uh off her rental income.

Dr James, 34m 38s:

Right, okay.

Mike, 34m 39s:

Yeah, so that saves her £400 quid a year in in tax.

Dr James, 34m 43s:

Makes sense. Oh, okay, cool. Interesting. Um and then two more three more and mileage allowance.

Mike, 34m 59s:

So dentists that try travel for work uh can now claim 55p a business mile compared to 45p. And uh if they do more than 10,000 miles, they do 35p instead of 25p. So small, small win there again for dentists. It's super important that you don't claim commuting, but you do record all your other travel because one of the things that dentists are bad at is working out how much actually they drive for their business. So when they go to uh the lab, any domiciliary visits, any courses, any conferences, anything like that, um they need to record it and they need to claim it on their tax return. And the extra 10p a mile will just save them a pittance, but it's worth claiming.

Dr James, 35m 44s:

Tell me this. How best is it to record that? Like just make a note of it somewhere, or is there some sort of official way that we do that?

Mike, 35m 51s:

But I mean, look, we we give clients mileage log books. Uh, we used to give them little paper ones that you could put in your glove box. I don't think we have them anymore, and you could literally write down every time you did a business trip and then add it up at the year end. How I do it is I I use my work diary. Okay, every time I go somewhere, I put in that work diary that I'm going to drive to this place. And at the end of the year, yeah, it's it's a it's a bit of an administrative task because sure there's easier ways of doing it, but every year I spend an hour or two going through my diary and writing down the miles for each business journey, and that's what goes on my tax return.

Dr James, 36m 24s:

Nice. Yeah, because when you said a lot of dentists are very bad at recording that, I just thought to myself, I wonder if they even know how to do that. Are you with me? Well, yeah, exactly.

Mike, 36m 32s:

Yeah, they might not. I mean, look, there's loads of apps now that you can get. Um, but the problem with apps is that you need to turn it on because it will it'll it'll literally uh follow on follow you on your GPS on your phone. Yeah, but you've got to remember to turn it on. You've got to say this is a business journey, so record this journey and then turn it off at the end, and that's just another thing to remember. Realistically, I I use a manual diary to work out my knowledge.

Dr James, 36m 54s:

Interesting. Yeah, fair enough. You said there was two more in the good category.

Mike, 36m 58s:

Two more in the good category. Uh let's go to uh electric cars. So electric cars continue to be tax efficient for those with limited companies. Um we didn't know what happened to the benefit in kind rate from uh after April 2030 until the budget. We now know what's happened for the year uh end April 2031, and that benefit in kind rate will only go up by one percent. So it's going from 9% in 2930 to 10% in 2030 slash 31. The equivalent hybrid best hybrid will be a 20% benefit in kind percentage. So you're halving your benefit in kind tax by going fully electric. Um, so those that have at least deals, I lease my electric car. Um, I wouldn't buy them because I don't trust the secondhand market in electric cars, not because of tax, because of because of the market for electric cars. Um, you may, if you're looking at a four-year lease now, you may feel have have some reassurances, you know what's going to happen after 2031. We still don't know what happens after 2031. So if I were looking at an electric car leased now, I wouldn't be leasing it for more than four years. I think four years is probably the maximum you'd look to lease anyway. But um, and those that have hybrids that are coming to an end, i.e., the lease is coming up, you may bite the bullet and go fully electric because um half the benefit in kind tax is is an attractive thing.

Dr James, 38m 27s:

You know, I don't I don't want to go off on a tangent, but I want to say this out loud for listeners of the podcast, you'll know this better than me, but if you purchase a car through your limited company, right? And quick quick question on that is it still fully tax deductible if it's a fully electric car?

Mike, 38m 44s:

It is if it's a brand new fully electric car bought by 31st of March 2027, yes.

Dr James, 38m 49s:

Right, glad I asked. And to add to that, I believe, no, correct me if I'm wrong, let's say the car is worth 100 grand, it's a really nice car, right? And you split it over four years and it's higher purchase or whatever. Am I right in saying that you get the full tax relief up front?

Mike, 39m 7s:

Yeah, yes, but and there's a but so when you look at this, you've got to be aware of you look at let's use a hundred grand car for ease of conversation, let's say in four years' time that car is gonna be worth 40 grand, okay, just for an ease of conversation here. Your company will save around about 25 grand in the year it buys that car, okay? It needs to buy it or it needs to HP it, and if it HPs it or you can PCP it, so many options now, but if you PCP it, your intention has to be that you're gonna pay the balloon payment at the end, because with a PCP you then tend to have a big balloon payment at the end. So the company saves 25 grand in tax in a year you get the car. Excellent, really good. The problem when you sell that car in four years for 40 grand, you pay tax on selling the car. So you will pay 10 grand in this example on selling the car. What you then do is look at the net effect here. Yeah, you've bought a hundred grand car, you've sold it for 40 grand, so you've spent 60 grand, you save tax on that 60 grand, 15 grand, and that's exactly what you've saved. Okay. If you got uh a second hand car, which you won't pay 100 grand for for the same car put secondhand, you're gonna pay a lot less, but you you won't get full tax relief in year one, you'll spread the tax relief over the life of the car. If you bought a second hand car for 100 grand and sold it for 40 grand, you'll get exactly the same tax relief if you bought a new electric car and uh and and sold it for 40 grand. It's just a question of when you get the tax relief. Okay, with buying outright, you get good tax now, but pay tax at the end. With leasing or a second hand electric car, you spread the tax relief over the lease or the life of the car.

Dr James, 41m 1s:

This is this is why I love bringing this sort of stuff up, Arany, because I've heard of these things, and not obviously not to this level of detail. And am I right in saying what's the benefit in kind tax on secondhand electric car?

Mike, 41m 12s:

Uh well, it will be nine percent. At the moment, I think it's four percent, it might be five percent. I think it's four percent this year, five percent next year, seven percent the year after, nine percent the year after, and then ten percent um in twenty thirty one.

Dr James, 41m 22s:

Gotcha. Well, that's another and that's another really interesting angle or way of looking at it. Really glad I brought that up. We have one more final piece of good information, I believe, going off what you said earlier. Yeah, founders' relief. Hmm.

Mike, 41m 35s:

Now, I don't think this is going to be very applicable for for dentists. Okay, I bring it up because um I think it was probably a bit of a buzzword for the government in the budget, in that they are bringing back what used to be known as entrepreneurs' relief, uh, in that people can have 10% CGT on 10 million pounds worth of assets per lifetime. I know this is great news.

Dr James, 41m 59s:

We're freshing on a high. Is there a twist?

Mike, 42m 1s:

Is there a twist? Oh, there's a massive twist. Uh the problem with it, you need to have 10 million pounds worth of turnover in the previous year when you sell. And therefore, if you are a dentist with one or two practices, you're not getting close to that 10 million quid. And therefore, it's not appropriate for dentists. Yeah, don't get me wrong, if you look at uh let's think you have to be a founder, so I don't think buying practices would would qualify. Again, the the the the keys in the detail here, aren't in the detail. I think founder, you probably need to think more squat practices. So I think this would be appropriate for uh a um, is it tooth club? I think they they're all squat practices. I think they've probably got 20, 20, 20, 30 practices now. Wouldn't surprise me if their turnovers over 10 million quid. They probably will get founder's relief when it's there because they've they've started it the squat practices. Uh there are some other conditions you need to have 25% of the of the shares on uh when you start, at least 25%. I don't know what the percentage is when you exit. Um, but yeah, it's gonna be a small, small, small niche, especially for dentists, where they can get their hands on that 10% CGT rate again. Um, but unfortunately not for the for the majority.

Dr James, 43m 23s:

I mean, 10 million is quite the quite the threshold, isn't it? As you say, there's gonna be a significant amount of practice. And just to remind me, and you may have said this and I may have missed this. So the catch is that it can't be if it's a business that you've purchased from someone else, you have to be the founder, correct?

Mike, 43m 40s:

I think so. Again, you need to look at the detail. The detail's not out yet, but I think clues in the name founder's relief. I think if you went and bought loads of dental practices that are already in existence, you probably aren't the founder. But again, someone looking at that is sensible. So if you were growing a group of practices, Someone would need to look at that for you.

Dr James, 44m 1s:

And tell me this, because I know I know B A D R can sometimes have quite a lot of little small prints and T's and C's to it. Tell me this. If you buy the practice, okay, you buy the practice, I don't know, 800 grand, and two years later you flip it for a million. Okay. Do you get how does entrepreneurs relief work in that instance? Does it work the same as if you'd founded the business or no? Uh entrepreneur, well, business asset disposal relief. Oh yeah, sorry, B, yeah, sorry, I use the old term. Yeah, B A D R. Yeah.

Mike, 44m 29s:

Yeah, exactly. Again, you've got you've got the corresponding criteria, so you've got to own it for two years. So I think in your example, you may be out there for a year, but you've got to own it for two years to get BADR. You've got to have at least five percent. Generally, for dentists, you will have at least five percent, and you've got to work in the business. Generally for dentists, you will work in the business. So you will get that uh for BADR, you that will be a tick in the box. But for founder relief, it's probably not a tick in the box because you haven't got 10 million pounds worth of income in the year up to sale, and that's gonna be the main cracks for dentists. They just don't have business businesses big enough that are going to be eligible.

Dr James, 45m 5s:

Makes sense. No, it makes complete sense, actually. Yeah, I was just curious how that inter I I was just curious how B B A D R worked in that instance as well, because it can sometimes have little T's and T's in it.

Mike, 45m 16s:

Oh, always and you've got to check the T's and T's. You know, the last thing you want to do is sell, think that you're gonna get B A D R and then actually not get B A D R because something wasn't put in place in the lead up to say, Oh, you need you need to do it two years before selling to make sure it's structured. Perfect.

Dr James, 45m 32s:

Two, and one other thing to consider is I believe you won't get BADR if it's held in a holding company. However, there is there is some sort of there is a mitigating factor, and you'll know more about this than me. There's something that you can do to roll over the profits and invest them in something else. So what is that again? I'm a little listening to details. I know of it.

Mike, 45m 53s:

Your substantial shareholding exemption. That's the one, yeah. Yeah, so that's if a company sells. So B A D R founders' relief is only for individuals, it's not for companies. If you've got a holding company that owns your trading uh company and you sell and your holding company sells the trading company, again, so long as you check the T's and C's, your holding company should pay zero tax because substantial shareholding exemption is a zero percent tax rate. The problem when you look at the play on whether you want this or not, is that you then have a cash-rich holding company. Okay. For a person that's going to go in and sell one practice and then go and invest in another practice, fine. They don't need that money personally, they're leaving it within a company structure. But generally speaking, when you exit, when you sell your pro your baby, your dental practice, you're generally thinking about retirement, and therefore, generally, you're thinking about getting that cash in your back pocket. Yeah? So you've got two choices. You can sell, you'd sell the trading subsidiary, and your holding company would become cash rich. You can then do one of two things. Liquidate your holding company, has to be within certain time parameters. But assuming you do that within the rules, you will then get all of that cash out at business asset disposal relief rate. So 18%. Again, up to those thresholds at 500 grand million quid now, 500 grand for next year. Um, and you have to do it within a certain time frame. Now, if your holding company is owning other businesses, because maybe you own three practices, you can't liquidate the holding company, right? Because it's it owns other businesses. If it owns residential properties as an investment, you can't liquidate it. So you've got to be a bit careful when you're adding things to this holding company as to what your plan is when you exit. So that's the that's the typical, that's probably what most would do when they're looking to retire because they want all that money out, and getting all that money out at 18 or 24% tax is attractive. The option, the other option is to leave it in the holding company, and then you've got your usual conversations. Do you need to take a dividend out into your personal pocket, pay the dividend tax, um, or do you leave it in the holding company and go and invest in in some other kind of business? And that will look at your retirement, right? Because if you're gonna retire, let's say you look at a dentist that wants to retire when they're 50 and they've got what, a five-year gap until they can access their pension to whatever it is, eight-year gap or whatever it is. Actually, if a dentist sells their practice and has 500 grand left after they sell their practice, and they've got no income for the years between selling and getting their pension, they can just draw down 50 grand a year out of their holding company and pay more efficient tax than they would by liquidating it on the on the day they sell their practice. But it tends to be people want the money in their back pocket now, they want to pay off their mortgage, they want to buy their kids their first home, they want to travel the world, they want to do all of those fun things when they sell their practice, and therefore normally it's probable that they will liquidate their holding company at the same time as selling a trading entity.

Dr James, 49m 0s:

Really glad I asked the question. And I I I this is why it's so great to talk about the budget because it leads on to these further deeper questions, which are really valuable for dentists, and there's there's loads of ins and outs to it. And I bet we could I actually had like five other questions spring to mind when you were talking there. So perhaps we should do a follow-up podcast at some stage, Mike. But I think that's a really good note to end everything on. So, Mike, what I'd like to ask from you is if if is if there's anybody listening who wants to reach out to you off the back of this podcast today, how are they best off finding you?

Mike, 49m 32s:

Yeah, uh Google probably Google Mike Bryan uh at Humphrey Co accountants. You'll find my webpage, you'll find my email address and my mobile number. Your email address is mbryan@humph.co.uk