Financial news that make the headlines is usually focused on the negative side of the story. Therefore, whilst global governments are under an amount of pressure to find solutions to specific economic issues, there is still a fair few number of things that as a dental or medical professional you can be positive about when it comes to your finances.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Practice goodwill valuation is (generally) positive
The goodwill in your practice will most likely have increased in recent years so if you are planning your exit strategy you could find that you make a good profit from your investment.
Figures show that sale prices have been steadily rising, although this does largely depend on the type of practice and the location.
Entrepreneur’s Relief (ER) offers a generous tax benefit to those selling a dental practice and indeed a connected commercial property.
This tax relief can bring down the Capital Gains Tax to just 10%. Whilst this is open to change in the future, right now this is a key benefit for dental and medical practice owners.
Low interest on commercial finance
If your plans are to buy a practice this year, whilst prices for goodwill may have inflated a little, the cost of borrowing is at an all time low. With interest rates at rock bottom means affordable borrowing for those wanting to realise their dreams of owning a dental or medical practice.
Dentistry also remains a low-risk sector by the banks, so organising finance is typically manageable.
To assist with the transaction, it is necessary to obtain a profit & loss account, plus a projection if possible from a qualified accountant.
A finance broker can help with the transaction to ensure you stand the best chance of success with the bank.
Tax rates remain stable
Tax rates remain stable and whilst most doctors and dentists will fall into higher rate tax, there are still a number of things that can be done to minimise this.
Paying into a personal pension plan is one of these measures that helps to reduce the amount of tax paid at the higher rate, whilst planning effectively for your retirement.
Dividend tax did increase last year although corporation tax remains low, and may even reduce further in the near future.
Tax rates in the UK remain competitive, overall.
Pension tax relief + flexible pensions
The tax relief on pensions is generous with £40,000 gross annual contribution being allowed for tax relief. This is sufficient for most pension investors.
If you pay top rate tax, with income over £150,000 per year, then your tax relief will be restricted now. However, the majority of dentists and doctors don’t fall into this category, despite fairly lucrative remuneration packages.
As well as the generous tax relief on private pension contributions, pension holders now are able to access their pensions from age 55, giving much more flexibility.
The political upheaval could have been worse
News of Brexit and then the new Presidency in the US, were expected to cause a cascade of economic issues, most of which haven’t come to fruition as yet.
Whilst there is expected to be some bridges to cross, speculation is that it could have been a lot worse.
House prices in the UK have remained reasonably stable, and there isn’t expected to be a crash like what was predicted during the EU Referendum process.
Investments also may also be fluttering here and there, but on the whole, when considering the longer-term approach, stock market investment is still outperforming cash on deposit and other lower risk assets.
•It is important to not invest simply on past performance but it can be a good indicator.
Specialist advice
Specialist advice is available regarding your finances. Take advantage of the many specialist professional advisers that can guide your decisions and have knowledge of your sector.
Always ensure that they are independent and therefore their advice will not be limited to certain financial products. Also, the length they have served in the sector is a good indicator of their reputation.
Need help with your financial decisions? Speak to Darren
Dental & Medical Financial Services have been helping doctors and dentists with financial planning for over 25 years. We can help you to navigate the current financial market to make the best choices.
Tel: 01403 780 770
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