An Awful Budget for Dentists

What an awful Budget that was.

Chancellor Alistair Darling’s pie-in-the-sky forecasts for a resurgent economy in 2011 are believed by virtually no one. Scores of wealthy people are checking out their emigration options, held back only by the hope that the 50% tax rate will be reversed by a new government come next year’s general election. The economy is in trouble when the Government has to break one of their manifesto pledges, of not raising taxes.

They have taken several crafty steps that will impact many dentists. My esteemed colleague, Dumindu has summarised the key budget points relevant to most dentists on Samera Connect* - you can read the summary here.

More importantly, the budget highlights some further significant issues that may make dentists want to consider their tax options seriously.

Abolition of the The Personal Allowance if you are earn more than £100k

The abolition of the personal allowance for anyone earning above £100,000 per year is a significant issue. Many dentists earn in the bracket between £100k - £150k, under the new changes of abolishing the personal allowance, dentists will be worse off. For example a dentist with a net profit of £125k per annum would be worse off by over £2500 per annum, a significant amount. Take a look at Dumindu's calculation here this highlights the change in payable tax...it's not very nice news.

50% Tax Rate

The introduction of a new tax rate of 50% for those who earn over £150k per annum is just a further nail in the coffin. For those that earn £200k per annum, that additional £50k you earn, half of it wil go to Inland Revenue. There comes a point where one will have to ask one self, why do I work further when half of everything i am earning goes to the Treasury, due to economic mis-management by the Government!

Time to re-consider Incorporation and taking control of your own wealth

This pretty awful budget now presents a time to consider one's options. Firstly, do you need to consider your tax arrangements, and secondly, do you need to develop another stream to grow your wealth? I present 2 convincing options that i know can help dentists, you just need to take action to benefit.

• Incorporate now not later - Over the last couple of years, we have undertaken many types of incorporations for dental practices. Both large and small practices, so we have a wealth of expertise to help dentists consider incorporation. Incorporating your practice, is something that perhaps needs to be re-considered again. The new tax rules come into play in April 2010, Dumindu highlights on Samera Connect*, for someone that earns £200k net profit will be worse off by waiting to incorporate after April 2010. So if you are considering doing this, then now is better than later. Get in touch and we can evaluate whether it is right for you. There are significant tax benefits for incorporation, but each and every case must be evaluated on their own merit. Take a look at our page on incorporation here.

• Taking Control of your own Money - In this economic climate, as things get tougher, and increased taxes start to bite, now more than ever, i would advocate taking control of your own financial destiny. ...not leaving it to the "experts" or our wonderful Government. I would strongly suggest learning how to build your wealth through other means. If this is what you want to do, then check out our "Master your Wealth" events. We have one next week, and i can assure you that after implementing just a few of the strategies i outline in that day, the budget will be a blip on the horizon. To find out more and book click here.

All the best!

Arun