Preparing for life as a dental associate

If you are in the process of securing your first Dental Associate post, or you have already started your self-employed career then the following guidance is for you.

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Register as self-employed

You should register as self-employed with HMRC within 3 months of becoming self-employed to ensure you pay the correct Income Tax and National Insurance.

How do I pay tax and how much should I set aside each month?

You should pay HMRC direct. Tax payments are due at the end of January and July each year. If you became self-employed in July/August 2020 you may not have to pay your first tax bill until January 2022.

It is good practice to set aside 30% of your annual income for tax. Don’t forget that you will also have to pay Class 2 and Class 4 National Insurance through self-assessment and some of you may well have student loans to repay.

Do I need an accountant?

An accountant will act as your business and tax adviser. This will involve keeping you compliant with the law and tax regulations – submitting your annual tax return and preparing your annual accounts and providing you with advice on offsetting your taxable income with business expenditure. So do keep your receipts and good records of your expenditure including any business or professional courses you attend.

There are good and inexpensive cloud accounting packages available for self-employed Associates that will help you to manage your finances. You can link your cloud accounting software to mobile apps that will enable you to e.g. take photographs of your receipts on your phone and post them digitally to your accounts, as well as linking your accounting software directly to your internet bank account.

Getting to grips with the finance virtual workshops for Associates

We run finance and tax virtual workshop sessions for all new Associates on how to use cloud accounting software to manage the day to day finances. We also cover linking your accounting software with your online bank account and setting up the appropriate apps to make the financial admin that little bit easier to manage, as well as explaining all you need to know about personal and business taxes.

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We would advise that you open up a business bank account to keep all of your business expenditure separate from your personal expenditure.

Following securing a full-time post many Associates look next at getting on the housing ladder. To get a mortgage, most lenders will require you to have 2 years of self-employed accounts as evidence of your income and your ability to repay the debt. The Help-to-Buy Individual Savings Account (ISA) is worth checking out as you save towards your deposit.

Cash ISAs are always a good option for those early in their dental careers – see our Tax Rate Card on maco.co.uk for the current annual maximum savings limits. You won’t pay any tax on the interest you receive from your ISA, nor will you have to declare it on your annual tax return.

For longer term savings, Stocks & Shares ISAs are also worth considering as part of your investment strategy as both capital gains and income will be tax free. They are not suitable for everyone though, and the value of investments can go down as well as up and you may not get back the full amount you invested, so do speak to us before investing.

If you arranged an income protection policy whilst still at university or at the start of your VT year you should review this policy to ensure the cover is still adequate.

Are you thinking about buying a practice?

Buying a dental practice is exciting and potentially stressful. However, with careful planning your advisers can help you to appraise the economics and keep you on the right track. There a range of issues you will need to consider including: 

• what is the practice you are considering buying worth;19942 MACO Tax Planning 38
• get clarity on exactly what you are buying i.e. are you buying the practice-owning company and its share capital or are you just purchasing the assets;
• what should be in a Sale & Purchase Agreement (SPA); and,
• if you are planning to raise finance to fund the purchase you should ask your accountant to prepare financial projections for three years for both the lender’s requirements and to see how the new practice will fit into your financial modelling.

If you would like to sign-up for our Getting to grips with the finances virtual workshop, or if you would like to arrange an appointment with Jayne to discuss any of the above send her an email or give her a call >Contact Jayne Clifford

Winter Economy Plan 2020-21Covid 19 maco3

Highlights from the UK Chancellor's winter economy plan, announced on 24th September 2020, to help combat the impacts of Covid-19 on businesses and self-employed individuals include:

• A new Job Support Scheme, primarily targeted at small and medium employers, will be introduced covering employees who work at least one third of their normal hours. 
• The Chancellor confirmed that the furlough scheme will end on 31 October.
• The Self-Employment Income Support Scheme (SEISS) will be extended to April 2021, with a revised basis.
• The closure date for the four existing business loan schemes will be extended to the end of November.
• Repayment terms for the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans (BBLS) will be relaxed, with the maximum term extended to 10 years.
• The reduction in VAT to 5% for the hospitality and tourism industries will be extended to 31 March 2021.
• The deferred VAT and self-assessment payments due early next year can be repayable in instalments rather than as a lump sum.

There is more detail on the Winter Economy Plan >read more and the update announced on 9 October for those businesses that are forced to closed due to the coronavirus restrictions >Job Support Scheme update and Covid-19 resrtictions fund in Scotland >read more.

In terms of the SEISS, when the scheme was originally announced in the Spring we advised our Dental Associates clients who deliver a mix of NHS and private treatments to consider: the proportion of NHS income that they are currently still receiving; and, the losses they have experienced from being unable to deliver private treatments.

If you are a self-employed Associate delivering a mix of NHS and private treatments, and you decide to make a claim for relief via SEISS and receive support, at a future date the NHS may claw back the NHS income you have received during the period when you have been unable to work. The SEISS claim process does not differentiate between your NHS income and private income. If you make a SEISS claim it will be based on the full trading profits you submitted to HMRC in your last tax return.

Each individual's situation will be different in terms of their NHS and private income split and their contractual agreement with their Principal(s). Our advice is to consider the guidance available from the BDA and to make a SEISS claim only if your private income losses are greater than the NHS income that could be clawed back at a future date. If you provide 100% NHS treatment, we believe you should not apply for SEISS.

The BDA has a helpful Q&A page for Associates on dealing with the financial impacts of Covid-19 and provides useful guidance for those who are in receipt of NHS income from their practice >BDA guidance for Associates read more