The last few tax year’s saw many new changes in tax legislation and planning ahead is more important than ever to ensure you work within the rules to not miss out on a tax saving opportunity. Tax for dentists is a complex area that requires specialist tax knowledge about dentistry. Our team possess this specialist tax knowledge.
Selective Capital Allowances Planning
Even though you may have spent money on capital items in a tax year, there is no requirement to claim capital allowances at all.
This matters when your circumstances in a tax year mean that if you claimed all of the capital allowances you are eligible for you would lose your personal allowance.
E.g. Dentist ABC has profits of £100k and losses of £50k brought forward which can be used to reduce the taxable profits.
It also spent £50k on capital items in the year upon which capital allowances can be claimed. However, an election can be made to reduce the claim to £38.5k instead leaving £11.5k as the taxable profits. (I.e. £100k -£50k -£38.5k = £11.5k).
By restricting the amount of capital allowances claimed you can still make use of your personal allowances (Which is £11,500 in 2017/18) and carry forward the unclaimed capital allowances into the next year instead of losing them
With the new rates of dividends that came in on the 6th April 2021, dividend income is now taxed at 7.5%, 32.5% and 38.1%, depending on whether your total income (including the dividend itself) puts you into the basic rate, higher rate or top rate bracket.
Along with the new rates the Chancellor has now given every UK taxpayer a new £2,000 tax-free “dividend allowance” which means the first £2,000 of dividend income is tax-free. To minimize your tax position, it is possible to allocate some shares to a spouse who doesn’t have dividend income to make sure this dividend allowance isn’t lost. This must be done carefully and within the accepted boundaries to be acceptable to HMRC.
Remember to record all the charity donations you’ve made. These reduce your taxable income.
If you’re a higher rate taxpayer, you can personally claim back tax.
Example -You donate £100 to charity -they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).
Care needs to be taken here though. It can sometimes cost you tax. If you’re close to the personal allowance, this could be the case. Speak to an accountant to check what tax you are due back!
When paying into your pension, you receive tax relief on any contributions that you make. This is at the highest rate of income tax that you pay, provided that the total gross pension contributions paid into your pension scheme, by you and anyone else don’t exceed the lower of your annual earnings and the annual allowance.
This could mean that, if you’re a higher rate taxpayer, £10,000 worth of contributions could get you £4,000 tax relief. Meaning you’re receiving at least a £10,000 benefit for only £6,000.
Limited Company Research & Development
Are you doing something that has never been done before –in advance of current technologies and sciences? This could be something as simple as a website or an app.
Millions worth of tax relief is missed by SME’s due to people not knowing about this extremely generous tax relief for qualifying expenditure.
For each £10,000 spent on R&D, you could receive £22,500 worth of corporation tax relief. That’s means the expense only really cost you just over half of what you spent at £5,500.
The tax rules surrounding this are very complex and therefore require a professional to ensure the expenses qualify.
Cash In On Self-Employment Profits Taxed Twice
Again, another relief people know little about.
If your self-employment year-end differs from 5th April, it’s very likely you’ve paid tax twice on your overlap profits and therefore with a little planning, you can get this back!
Many sole traders and businesses have a tax relief just waiting to be used and can ‘cash it in’ at any time they choose.
Utilise Your Tax-Free Personal Savings Allowance
Do you have a credit balance Director’s loan account (amount owing to you from your Ltd company)?
If so, you could be missing out on utilizing your tax-free personal savings allowance.
There are huge tax breaks for investments in EIS / SEIS and VCT’s. To say they are generous is a huge understatement.
For example, you could invest £10,000 into an SEIS and get £5,000 immediate tax relief. What’s more, due to loss relief, even if your investment folds, your actual loss will only be £2,750. You can even carry back to the previous year.
In addition, every individual has a £20,000 ISA allowance available each year, which is income and capital gains tax free, so if you are not utilising this tax saving wrapper, you should really consider this.
Again, the tax legislation surrounding these different investment schemes are complex and the level of relief depends on the individual person so you should ensure you obtain independent tax advice before proceeding.
Claim All The Allowances You Are Eligible For
Whether it is claiming for use of home as an office, or laundry allowance every little helps and working with a Dental Accountant means they will be able to maximize the items you can claim for.
Tax for dentists is a complicated subject which requires knowledge and expertise.
The above is just a taste of some of the top tips, however, we strongly recommend you seek professional advice on any of the subjects detailed above.
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Further Information on Dental Accounts and Tax
To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.
As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for 20 years to help manage their accounts and tax. To find out how we can help your practice’s finances, book a free consultation or contact us today to find out more.
If you’re a dental associate looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts. Book a free consultation or contact us today to find out more.