You may have been practising for a while or are newly qualified and have decided that self-employment is the best option for you. If so, you are probably trying to navigate your way through the complex UK tax system. When you become self -employed there are certain things you need to familiarise yourself with. This feature covers some of these in detail.
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.
Understand your responsibilities
As a self-employed Dentist or Doctor, it is now your responsibility to calculate and pay your own taxes and National Insurance Contributions (NIC). This may seem daunting at first, particularly if you were used to getting paid via PAYE, but overtime you will become a pro at working this out.
Get your paperwork organised
Your proof of income may come in the form of a monthly schedule from your practice principal. This will give details of your income and any expenses you have incurred, such as lab costs. It’s important to keep a copy of these.
You also need to keep copies of receipts for expenses you have incurred and any paperwork that gives details of bank interest, gift aid contributions and rental income.
Understand that not everything is an expense
HMRC have strict specifications on what can be claimed as a business expense. A detailed list is available on the HMRC website.
Examples of allowable business expenses includes things like; costs paid put for training / courses (plus money spent on travel and subsistence), subscription costs, mobile phone expenses and money you have spent on protective / work clothing.
It is important to note that travel costs to and from your work place are not allowable as this is classed as a personal cost.
Put important dates in your diary
The tax year runs from 6th April to 5th April the following year. Payments for that year are due by 31st January and 31st July the following year.
The payment due by 31st January is made up of the balance due for the previous year and a payment known as ‘payment on account’. This is an advance payment towards the current tax year.
The payment due by 31st July is a second payment on account.
It is recommended that you put aside around 35% of your income to cover your tax liability.
Take care of your pension
As someone who is self-employed it is your responsibility to declare your Net Pensionable Earnings (NPE). The annual declaration is due by 30th June each year.
Before submitting this figure, you must make sure that it is correct as it will be used to calculate your pension contribution.
Be tax savvy with savings
The UK’s low interest rate is not good news for savers. If you are putting money aside to buy your first home, for instance, you need to make sure that you will get the best possible deal.
Investing your money in an ISA may be a good option. ISA’s offer a tax-free way to invest your money. Whilst with other saving accounts, you may have to pay income tax on the interest you ear. The ISA allowance for 2017/18 is £20,000.
Interested to find out if Equity Release is right for you?
Dental & Medical Financial Services have been helping doctors and dentists with financial and retirement planning for over 25 years. Call to discuss your options with Darren:
Tel: 01403 780 770
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