The recent budget has given the dental market a lot to talk about. While investment in health and social care will be welcomed by many, the budget will hold consequences for dental practices due to changes in taxation thresholds and percentages, despite some measures designed to ease the financial burden for smaller businesses.
Of particular interest for many dental practices are the changes to employer’s national insurance contributions (ER NIC).
Although an increased allowance for small businesses will result in many predominantly private dental practices being better off, primary care providers within the NHS have expressed concern about increases to ER NIC, combined with increased salary costs. Some practice principals may have little option but to decrease their NHS offer in favour of private treatments.
Rachel Reeves confirmed a rise in ER NIC from 13.8 per cent to 15 per cent from April 6, 2025. In addition, the employer’s secondary threshold will be lowered from £9,100 to £5,000. Benchmarking data produced earlier this year gives us an annual staff cost of around £161k for the average UK dental practice with around £906k revenue and six full time equivalent (FTE) PAYE staff. This gives us an average additional cost of just under £5,000 in ER NIC.
To offset this, the employment allowance is increasing from £5,500 to £10.5k meaning – according to government estimates – around 865,000 employers won’t pay any employer's national insurance at all next year. Indeed, for predominantly private practices with annual staff costs under about £180k, the cost of employing people will be slightly lower or about the same post-budget.
The National Minimum Wage (NMW) will increase from £8.60 to £10/hour. That’s almost a £4 per hour increase since 2019. The National Living Wage (NLW) also increased between 2018- 19 and 2024 from £7.83 to £11.44 per hour, while the statutory age dropped from 25 to 21 years. The NLW will again increase to £12.21 an hour from April 2025.
Increases to NMW and NLW require a consideration of commensurate pay rises for staff earning above those on the lowest pay and, of course, this also adds to the ER NIC bill for employers. The government has committed an annual average increase of 3.8 per cent in funding for Health and Social Care between 2023-24 and 2026 totalling over £25bn. However, at the time of writing, there is not yet any detail to confirm what investment NHS dentistry might expect.
Currently, the increase in ER NIC does mean that many NHS practices will be looking at higher employment costs next year, unless something changes. There is deep concern among those delivering NHS primary care about whether the ER NIC uplift has to come out of core budgets. In an open letter to the government, the BDA has called for the chancellor to extend Employment Allowance relief to struggling practices who are already providing NHS services at a financial loss.
Despite all this, there is reason for optimism. A recent set of statistics released by NHS Business Services Authority (NHSBSA) surprised many by demonstrating that income, courses of treatment and dental activity for NHS practices has risen in the last year, and benchmarking information demonstrates that an NHS contract can still be a key driver for practice growth.
Going back to basics can help to ensure you are maximising the value of your business. As always, maintaining a forensic understanding of your finances, and keeping abreast of market influences and trends, alongside strategic investment in growth areas for your particular practice is vitally important.
The Dental Elite Benchmarking Report 2024 revealed a pre-budget advantage in the dental market for mixed practices. This remains the case, with the new proviso that practices will benefit from a greater than 50 per cent emphasis on private work.
You don’t have to navigate your way through the twists and turns of the dental market alone. If you are considering selling or purchasing a dental practice, there are exciting opportunities available.