Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
Incorporating your business means you can run your dental or medical practice as a limited company as opposed to operating as a sole trader or partnership.
Doing so means your company is a legal entity, completely separate from whoever owns or runs it.
Despite the recent reduction of the tax advantages, there are still numerous benefits to incorporating your businesses.
Tax Benefits
First and foremost, there are still tax breaks associated with being a limited company, albeit far less than there used to be.
Corporation tax paid by companies is also lower than the income tax paid by sole traders and partners in a partnership.
Additionally, companies can pay out salaries as well as dividends so one can choose the blend of payments that nets the most earnings. Directors or shareholders may take a small salary and then the remainder of their income can come from dividends – this reduces the amount of National Insurance contributions they must pay.
The rules are also more flexible around allowable expenses and tax relief options.
Professional Advantages
Being an officially incorporated company presents a more professional face to the world and can assure vendors and clients alike that your business will be around long-term.
Separating yourself from the company, thus providing ‘limited liability’ means the owners cannot be held personally responsible for any of the company’s financial issues or losses, adding a layer of protection in the event of major financial disaster.
Finally, having your company as a distinctly separate entity from your personal affairs lets you separate bank accounts, assets, contracts, etc. allowing your company to live on in case anything were to happen to the current owners.
As you can see, incorporation provides a division between your company and yourself as the owner which has a variety of benefits, as mentioned above.
In addition to the these advantages, there are quite a few others such as pension contribution benefits, ease of funding and capital sourcing, protection for your company name, and ease of future sale, just to name a few.
Deciding whether or not to incorporate your business is a major decision and a huge undertaking. Seeking professional advice from your accountant and financial adviser should be the first step in your decision making process.