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.
Are you prepared for your July tax payment?
The deadline for paying your tax payment on account is looming so you’ll need to ensure you’ve set up payment before 31st July.
While it’s inevitable that you need to pay your taxes every year, it is possible to take steps to reduce your payments and keep more of your hard earned money.
Normally, your January tax bill is comprised of your tax liability (your tax based on profits up to 5 April 2017, due at the end of January) and your first tax payment on account (your tax based on estimated profits to 5 April 2018, due at the end of July.)
There isn’t much you can do to reduce your tax liability because the year you are paying tax on is over.
However, because your payment on account is based on estimates for profits until 5 April 2018, there are some things you can do to help reduce your payment.
Did your profits fall in the year to April 2018?
The calculation used to determine your estimate assumes that your profits will remain flat or greater than the previous year’s profit.
If, for whatever reason this isn’t the case – such as a profit decline, ceasing trading, or loss of income – then you may be able to reduce your payments.
Take care not to reduce your payment by too much though because you will owe interest from the due date if there is a deficit.
Looking to reduce your mid-year tax payment?
There are a few things to consider when attempting to reduce your payment on account.
- Firstly, it is imperative that you examine up-to-date management accounts so you can correctly gauge your profits.
- Secondly, you’ll need to compare the activity from the same time period this year to the previous year to determine if you’ll earn less.
- Lastly, see if you could plan any large expenses or employ any other tax saving methods that might help reduce your taxable profit. This could mean private pension payments, ISA savings, claiming business expenses, maximising tax allowances and sharing those with your spouse, careful timing of capital purchases, or dividend planning.
After reviewing these items, if you feel like you can benefit from reducing your payments on account, it’s crucial you speak with your accountant so they can help set the wheels in motion.
You should also talk to your financial advisor so you can understand the impact to your greater financial picture.