Author Richard T Lishman, Managing Director of money4dentists, a firm of specialist Independent Financial Advisers who help dentists across the UK manage their money and achieve their financial and lifestyle goals.
It goes without saying that being a principal dentist/owner of a dental practice demands a great deal of responsibility and hard work. Whether it's completing clinical or administrative duties, there are a million and one tasks that need doing at any given time. That can leave very little time for tax planning.
In order to remain compliant, pay tax efficiently and to minimise tax liability through the best use of available allowances, deductions, exemptions and reliefs, however, a principal dentist must allocate the necessary time to dealing with the relevant taxes – and unfortunately, there are a lot of them.
Tax planning is not likely to be your forte, so it can pay to take some time out and get to know which taxations are relevant to you and your dental practice, as well as what they all mean. It really is like learning a new language! Once you've got that cracked, you can begin to focus on the ever changing world of taxation reform and how it affects you. Changes take place at least twice a year, so it is crucial that you stay as up to date as possible. The most recent statement was on the 23rd November 2016, the first of many for Philip Hammond and the first since the referendum result in June.
One of the most notable changes was the Chancellor's decision to equalise National Insurance Contributions (NIC) thresholds at £157 per week for 2017/18. What's more, termination payments of over £30,000 that are subject to income tax will also be liable to employer NICs from April 2018. As such, you will need to consider how these increased costs will affect the cost of running the practice – it may be worthwhile incorporating this additional expenditure into your yearly forecast.
You may also have noticed that the higher rate tax threshold has risen to £45,000 for 2017/18, which is good news for your personal paycheck. Even better, it has been re-confirmed that this number will rise even higher to £50,000 by 2020 – a great incentive for your hard work and commitment. Anything you earn above the £45,000 threshold will be subject to income tax of 40 per cent up to £150,000, with the additional-rate of 45 per cent remaining unchanged for now.
As far as the above reforms are concerned, it is all relatively straightforward. Business taxation is where it starts to get complicated. As a non-domestic property, your dental practice will be required to pay business rates, which are worked out based on your property's rateable value. Some properties are eligible for discounts from local council on their rates. However, you have to apply for some types of relief, so be sure to double check whether you meet the requirements – it could save you a lot of money. One type of relief that may be applicable to you if you are an independent practice is the small business rate relief. Business rates are an expensive fixed overhead cost that you will be required to pay, but with the right tax planning, they don't have to be a burden.
Another element of your taxation compliance as a principal dentist/owner is that you have to submit an end of year report to HM Revenue and Customs for each employee earning more than £8,500 that has been provided with expenses or benefits – this includes directors.
If your practice is a limited company, things will be even more complicated as you will be required to pay corporation tax on any profits that the business makes. As it stands, the rate is 20 per cent, though this is going to be reduced to 17 per cent by 2020 as confirmed by Philip Hammond in the Autumn Statement, with the first reduction coming in 1 April 2017. If this does apply to you, you will need to submit a corporation tax return (CT600) each year and pay any tax owed within nine months and one day after the end of the accounting period. Failure to meet deadlines will result in a penalty.
On top of that, you will need to settle your personal tax liabilities via the self-assessment process, which is where you submit your personal tax return, together with any taxes owed by 31st January of the year following the end of the tax year in question.
With so many aspects of taxation to take into consideration – not to mention that the goalposts are constantly moving – compliance and advanced planning can be incredibly onerous. For that reason, it is always advisable to utilise the services of a specialist accountant, such as those at accountants4dentists, to assist you in dealing with the various taxation that applies to you and your practice. Not only will this save you valuable time, but it will ensure that you are completely compliant. When done properly and efficiently, you could even save yourself some money, not to mention the stress from doing it yourself.
That isn't to say that you don't have a role to play in the process, as it is still necessary that you keep accurate records. As a small business, these should include:
Income and expenditure records
A register of fixed assets
A record of company liabilities
Staff payroll information
A record of uncompleted work at year end (otherwise known as floating assets)
Dealing with taxation is an integral part of your role as a principal dentist/practice owner, but that doesn't mean that you are expected to do it all yourself. To ensure that tax doesn't take its toll, make sure you get the right help.
For more information please call 0845 345 5060, 0754 DENTIST. Email firstname.lastname@example.org or visit www.4dentistsgroup.com