With recent updates from the Autumn Budget 2024, dental practitioners considering selling their practice may want to accelerate their plans to avoid new financial pressures due to changes in NHS pension contributions and capital gains tax adjustments. Both buyers and sellers need to understand how these changes affect valuations, financial expectations, and the timelines for sales.
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This post explores the importance of wealth management platforms in the UK, key features to look for, and how they can affect both IFAs selling their business and buyers seeking growth opportunities.
What Are Wealth Management Platforms?
Wealth management platforms are technology-driven services that allow financial advisers to manage and monitor client portfolios, execute trades, report on p
What Changes Are Coming and Why?
The Autumn Budget highlights NHS pension adjustments that will significantly increase employer National Insurance Contributions (NICs) by 1.2% and will lower the threshold for contributions from £9,100 to £5,000 annually, starting in April 2025. This adjustment is aimed at fortifying NHS funding but will impact practice expenses. For practices linked to NHS contracts, these adjustments could affect valuations and profitability – key considerations for buyers and sellers alike.
Additionally, the Capital Gains Tax (CGT) rates are set to rise, particularly affecting business assets. Currently, CGT on business disposals stands at 10%, but this rate will gradually rise to 18% by April 2026. This staged increase puts immediate pressure on those looking to sell soon.
Why Selling Before April 2025 Might Be Beneficial
Avoid Higher Costs: By selling before April 2025, current owners can avoid the heightened NIC expenses, preserving profitability and potentially maintaining a higher practice valuation. The higher NIC rate will directly impact post-April profitability, which buyers are likely to factor into their valuation models.
Take Advantage of Lower CGT Rates: Selling before April 2025 also allows sellers to benefit from lower CGT rates on business disposals. With CGT expected to rise to 18% by 2026, the difference can be substantial, particularly for high-value practices.
Manage Cash Flow with More Certainty: Prospective buyers may want to finalize acquisitions early to avoid any cash flow uncertainty that the new pension contributions might create. Current stability offers a clearer financial picture for acquisitions before these cost increases take effect.
Considerations for Buyers: Strategic Acquisition Opportunities
For buyers, April 2025 represents an opportunity to potentially negotiate a better price. With sellers motivated to avoid additional taxes, it may be possible to secure favorable terms if a practice sale is executed before the new rates apply.
Preparing for the Transition: Key Steps
Seek Professional Advice: Consult with financial advisors and accountants who specialize in healthcare sales. They can provide insights on optimizing CGT and advise on financing structures that mitigate the NIC impact.
Understand Due Diligence Costs: Be prepared for thorough due diligence as practices seek to quickly transition. Buyers should verify that all compliance, regulatory, and financial requirements align with expectations.
Secure Financing with a Low-Interest Option: Rising interest rates add another layer of complexity. Buyers should consider locking in financing options as soon as possible to take advantage of current rates.
Our Final Thoughts
The Autumn Budget's changes have significant implications for the healthcare sector. With pension contributions, CGT increases, and a tighter timeline, buying or selling a dental practice will require careful planning. By acting promptly, both sellers and buyers can optimize their financial position ahead of the changes in April 2025. Book an appointment today to speak to us
