The Chancellor’s new rules for paying tax on incorporated company dividends will start at the new financial year in 2016. Along with many of the new regulations regarding taxes, these guidelines will muddy the waters of the existing system, which is also bewildering.

Tax on any kind of income will vary depending on the source and whilst PAYE income tax is fairly straightforward, requiring little or no independent calculations, dividend tax payments are an entirely different matter.

The current set up is that any practice owner/manager of a limited or incorporated business drawing dividends from the company’s profit pot as either their entire salary, or as a share of it, pays tax in the following ways:

• Basic rate taxpayers whose overall mix of salary and dividend income is £42,385 or less, typically do not pay any tax on their dividends. This is due to a tax-free threshold on income up to £10,600 and then the basic rate tax category applies to anyone earning up to £31,785. As they fit into the basic rate bracket, their tax due on dividends is 10% but this is then effectively cancelled out by an across the board 10% tax credit for dividends.
• Higher rate taxpayers, when the 10% tax credit is taken into account pay 25% in tax dividends.
• Additional rate taxpayers (total income more than £150,000 per annum), when the 10% credit is applied, pay just under 31% in tax dividends.

However, a blanket £5,000 tax-free dividend allowance will be introduced which will replace the 10% tax credit. Any dividends paid out beyond that first £5,000 will then be taxed for basic rate taxpayers at 7.5%, for higher rate taxpayers at 32.5% and additional-rate taxpayers at 38.1%. Often, these changes will mean that the combination of dividend tax and national insurance contributions paid by practice owners and managers will pay a higher amount of tax on their dividends. For example, for a practice generating £100,000 annual profits and an owner drawing £8,000 as a salary and £73,000 as dividends, the amount of tax and national insurance contributions is going to increase from £28,900 to £32,937.

Financial advice and accountancy services from experts who have been working for the dental sector for many years is exactly what you need to make sure your company profit offers the best return possible, whilst remaining legally compliant.

Contact the friendly team at Lansdell & Rose today, to find out how to maximise the benefits of your hard-earned profit.

Specialist medical and dental accountants Lansdell & Rose have a wealth of knowledge on a range of topics, from pensions to tax and record-keeping, and will help your business to grow. Visit www.lansdellrose.co.uk or call 020 7376 9333.

For an employee to feel truly valued, they need to know that they are being paid adequately for the job they do and that their employer is committed to their welfare and wants them to stay. As a dental practice owner, you will probably employ part-time staff – are you sure that you are paying them enough, even if they are not working as many hours as others are?

This is essential after the prime minister unveiled changes to the rules around the National Living Wage (NLW) in September 2015. The measures significantly toughened the regulations that were already in place, emphasising a message of ‘zero tolerance’ for employers who fail to comply.

Under the new laws, the NLW for workers over the age of 25 will be £7.20 an hour from April 2016 and by 2020, it will be at least £9. To ensure that employers comply with this, the government also announced a new unit at HMRC created specifically to deal with firms that are not paying the NLW.

Until the measures were announced, if an employer was caught out, they had to repay the amount they had underpaid plus a non-payment penalty. In September, the prime minister confirmed that this penalty would be doubled to a whopping 200% of the underpayment. Moreover, any business owner found guilty may also be disqualified from being a company director for 15 years.

These penalties are harsh and a small-to-medium-sized business, which many dental practices are, would simply not survive them. Whilst some employers are making a genuine mistake, it is still the responsibility of the business owner to make sure the new rules are properly enforced and all criteria met.

Don’t get caught out! Part of running a successful dental practice is looking after every member of staff and making it a great place to work. Get expert advice to keep you up-to-date with the law, so that everyone can focus on delivering the very best in patient care.

Specialist medical and dental accountants Lansdell & Rose can help you understand and apply employment law. The team also has a wealth of knowledge on a range of topics from pensions to tax to help your business grow. Visit www.lansdellrose.co.uk or call 020 7376 9333.

On 25 November 2015, the Chancellor of the Exchequer George Osborne revealed the 2015 Spending Review and Autumn Statement. In the Summer Budget, Osborne declared it was time to become a country of higher wages, lower taxes and lower welfare. It would seem that the Review looks to reinforce this. However, how will this affect the dental profession, if at all?

Savings and Pensions

There are some aspects of the Autumn Statement that won’t affect dentists, but taxation on savings and pensions might. It is prudent to note that the band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2016/2017 – a relevant point for those looking to achieve savings on tax through proactive mitigation.

In regards to individual savings accounts (ISAs), the limit will remain at £15,240. The Statement also announced that the list of qualifying investments for the new Finance ISA is to be extended in Autumn 2016 to include debt securities offered via crowdfunding platforms. As for the ISA savings of a deceased person, they will continue to benefit from ISA tax advantages during the administration of their estate.

The Review has also outlined plans to introduce legislation that will enable the pension tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation. As for the pensions tax relief consultation that was launched in the Summer Budget 2015, the proposals will be published in the 2016 Budget.

Inheritance Tax

Another aspect of the Autumn Statement that might affect dentists is changes to inheritance tax (IHT). The Autumn Statement has revealed that inheritance tax rules are to be backdated to 2011 to prevent pension scheme members from being charged for inheritance tax if they don't drawdown their monetary funds before their death.

Buy-To-Let Scheme

For those looking to invest in additional properties, including buy to let properties and second homes, from 1 April 2016 they will have to pay an extra 3% in stamp duty. The money raised will be used to help those struggling to buy their first home. While this may be costly to some, it is certainly good news for the younger generation of dentists who are not yet on the property ladder. With announcements that a new Help to Buy equity loan scheme will lend 40% of the price of a home to those living in London, it is especially good news for those working and living in the capital.

Rent-A-Room Relief

Additionally, there has been an increase in rent-a-room relief, which is the amount of rental income that can be received tax-free by individuals renting a room or rooms in their main residence. From April 2016, the tax-free amount will be increased to £7,500 per annum.

Get Advice

All in all, the Autumn Statement was met with mixed reactions and certainly provides food for thought. For dentists specifically, there is much to be considered, but there is nothing that is especially concerning. If you are unsure what the Review might mean for you and your practice, it is always beneficial to seek out the advice of trusted financial professionals.

For more information please call 0845 345 5060, email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit www.money4dentists.com

A review of the top five lenders on comparison website Moneysupermarket.com revealed they will not lend to newly self-employed dentists regardless of income. Chartered Financial Planners PFM Dental undertook the review and found that self-employed dentists without at least two years of accounts were barred from obtaining a mortgage.

Jon Drysdale of PFM Dental commented: "We based our review on a first-time buyer wishing to borrow £180,000 for a house purchase of £200,000. The majority of dental associates would easily afford the repayments and they have virtually guaranteed job security. The good news is that specialist dental advisers are aware of lenders happy to accept mortgage applications from newly qualified associates."

Around 1,000 dentists have now completed Foundation Training in the current academic year and the majority will start associate positions during August and September. The move to self-employment usually results in an immediate uplift in income, causing many dentists to think seriously about their first property purchase.

Jon Drysdale is an independent financial adviser for Chartered Financial Planners PFM Dental. He specialises in pension and wealth management advice exclusively for dentists.

For more information visit www.pfmdental.co.uk

Loyalty to one’s dentist cannot be taken for granted. Just like for any commercial operation, every person who walks through the door needs to be treated like a highly-valued customer, every single time.

Determine who your core, ‘good’ patients are, then think about how you can offer the very best service for their needs. With a few simple changes, finding a perfect balance between service provider and profitable business is possible. 

Put a strategy in place to encourage patients to not only stay loyal, but to recommend you to their family and friends, too. Run a friendly practice and make it easy for people to book. You might want to investigate online booking, which many patients find convenient. Have a system for reminding people that they have an appointment: a text service, a phonecall or appointment card. If they want to reschedule, do so with minimal fuss. Also, if someone has had major treatment, give them a call to see how they are. A financial incentive for referrals is always a great idea, especially if they recommend another ‘good’ patient. Simple touches like colouring sheets and crayons to keep children occupied, or free water in your reception area work well, too.

Present a knowledgeable team who can answer questions promptly and comprehensively. Regular staff meetings will help you identify if someone needs to be bought up to speed with your pain relief policy or finance plans, for example. If you think your patient base will appreciate it, think about a blog or newsletter to keep the lines of contact open between appointments.

Business articles seem to bombard us with the importance of attracting new patients, however, it is vital to remember that these strategies are not the only way to increase profits and be one step ahead of the rest. When you are a dental practice owner, it would be a huge mistake to neglect the people who are keeping your business ticking over, day in, day out. Invest time and effort in your current patients and you will create a fantastic platform from which your practice can grow. It is easier to keep and nurture a patient than it is to sell your services to someone new, yet the rewards will be just as great.
 

Specialist medical and dental accountants Lansdell & Rose offer business advice alongside regular tax planning and financial accounting. Visit www.lansdellrose.co.uk or call 020 7376 9333.

Whatever you have planned for your retirement, there are many elements you need to put in place before you can enjoy your well deserved time off. Ensuring you have in place the most suitable pension scheme for you is just one of the necessary steps. With many options available, it’s crucial to understand the benefits of each, as well as your eligibility.

A welcome change for many pension holders came in the shape of the Pension Reform in April 2015, which increased flexibility and access to funds from the age of 55.

There is no limit on the amount permitted to be taken from pension pots once the policy-holder has reached this milestone age. However, only a quarter of these funds are tax-free so managing the other 75% needs serious consideration. Any amount removed from the pot beyond the first tax-free-quarter, will be added to other incomes and taxed at the relevant tax band rate – which could mean 45% for some professionals.

If the 25% tax-free lump sum is taken from the pot, there are several ways to make the most of the remaining 75%:

• Purchasing an annuity – providing a guaranteed income for life.
• Implement flexible retirement income/flexi-access drawdown – the 75% is invested in funds constituting a regular taxable income (as with an annuity). However, this option involves risk as income is relative to the performance of these investments and is therefore not guaranteed.
• Take small cash sums – treating the pension pot like a savings account. However, there is little protection for yourself or dependants and three quarters of each sum is subject to a tax deduction and possible additional administration charges and limits.
• Take the whole pot as cash –this option doesn’t offer the pension holder or any dependents a secure income for life, however, and there is also a risk of running out of money too quickly.
• Mix all of the above options – the best combination can be determined by retirement age, income objectives, health, size of the pension pot and dependants.

It’s important to consider all options carefully – depending on your personal circumstances your priorities may vary from someone else’s. Best thing to do before you decide? Get professional advice on keeping investments high and deductions low.

Specialist medical and dental accountants Lansdell & Rose offer business advice alongside regular tax planning and financial accounting. Visit www.lansdellrose.co.uk or call 020 7376 9333.

As small business owners, dentists encounter key business decisions daily, from day-to-day accounting to making difficult legal or financial changes. Just being able to balance all these aspects alongside the day-to-day provision of excellent healthcare can seem like an impossible task, especially for those without a formal business education or background.

Fortunately the 4dentists group is ready and waiting to help. With expects across a range of business specialities, the 4dentists group has all the elements needed to help remove some of the stresses of running a modern dental practice – making an impossible task achievable.

Across all its areas of expertise – legal, financial, accountancy, training, consultancy, insurance and setting up, buying and selling practices – the specialists at the 4dentists group are highly experienced and mindful of dentists' needs.

Don’t let running a dental practice become an impossible task, turn to the experts at the 4dentists group for professional, reliable guidance and advice.

For more information please call 0845 345 5060 or 0754 DENTIST. Email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit www.4dentistsgroup.com

Taxation rules and business ownership regulations seem to be constantly changing and so keeping on top of the financial environment can seem like a never-ending task. 

Just when you think you have understood a new rule, another one is likely to be waiting for you in the Chancellor’s bag. As an owner of a dental practice, it is ultimately your responsibility to ensure your business, employees and own finances are organised correctly and so by spending time, often with an expert, can help to lessen the burden when the end of the financial year hits.

For the last tax year there were 21 new changes implemented by Her Majesty’s Revenue and Customs (HMRC), and now with a new government in place there will no doubt be further changes lined up.  A key part of the Conservative party’s manifesto was to encourage start up businesses and to help in the success of Small and Mid-size Enterprises (SMEs). The majority of dental practices will fall in this band and practice owners are expecting new policies to be introduced to the tax system at the next budget, in July that will benefit their business and employees.

The popular saying of “fail to plan, plan to fail” has never been so true than when applied to tax affairs. Any tax adviser or business accountant with sufficient experience will advise to keep abreast of the tax environment and to plan ahead. Maintaining your records to ensure they are accurate and up-to-date will save a lot of stress at the end of the financial year and minimise those few weeks of scrambling around for information.

Another way to stay in control is by consulting a professional. For example, an Independent Financial Adviser (IFA) can direct on how to maximise your income but minimise your tax payments well in advance of the deadline.  They are dedicated to spending time to understand the financial environment and then to advise on what changes you can make to your affairs to best serve you and your business. At money4dentists there is a team of highly experienced and professional IFAs that are dedicated to the dental industry, meaning that they are not only professionally qualified, but also highly knowledgeable about the intricacies of owning and running a dental practice.

With a firm understanding of today’s financial market and over 50 years of experience, money4dentists have a proven track record within this sector. They spend time to understand your professional and personal goals and to then advise on how best to achieve them.  Keep in control, plan ahead and disperse the stress; contact money4dentists today to see how they can help.

For more information please call 0845 345 5060, 0754 DENTIST, email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit www.money4dentists.com

John Grant Director from Goodman Grant Solicitors discusses the importance of bespoke written associate agreements.

If you were to study the legal test into whether someone is an employee or self-employed, you might quickly conclude that most dental associates are employees. The dental profession has quite frankly always enjoyed what can only be called a special dispensation from the Inland Revenue. In other words, the Revenue have not, as yet, challenged dental associates’ self-employed status. Although there is little sign of this changing at present, that is not to say it never will and it is certainly better to do what one can to protect oneself – not only against the Revenue, but also against claims of unfair dismissal by former associates

If there is no written associate agreement and a practice principle decided to terminate an associate’s contract, that associate could seek legal advice and if it was deemed that they were an employee, they could pursue a claim for unfair dismissal. This could then culminate into a sizeable compensation sum.

In addition, not only are there the risks of compensation claims, there are also tax implications. If the Inland Revenue were to pursue the case, it would be entitled to ask the principle to pay all tax that the associate should have paid as an employee over their entire period of employment. This is regardless of any tax the associate may have already paid.

Consider the criteria of the legal multiple test that is used to determine if someone is an employee or self-employed:

Personal service – does the servant have to perform the service personally or can someone else carry it out

In most associate’s agreements, the right to appoint a locum is provided – however in the vast majority of cases, it is limited and may only apply if the associate were away ill and even then, the appointment of a locum is usually subject to the practice owner’s approval.

Mutuality of Obligation- An obligation to do the work and an obligation to be paid for it.

The overall reality of a dental practice is that the principle or owner does introduce patients. Whilst many associate agreements state there is no obligation, the reality is that such an obligation does exist – otherwise principals would quickly find associates giving notice to leave the practice. When the work is complete, there is the obligation to pay the associate.

Control – how much control does the employer exercise over how the servant carries out their job?

Not only are there controls imposed by CQC, the NHS and the GDC, but in addition many written agreements stipulate that associates must comply with the practice policies and procedures – even to the extent of requiring associates to participate in practice appraisals.

Similarly, most large dental corporates go into great detail within associate contracts to explain exactly how the individual should perform the work, which I would submit is entirely contrary to the notion of associates being self employed. If they are required to attend team meetings and have to attend out of hours emergencies, this too suggests a degree of control that is most commonly found in an employee/employer relationship.

John Grant of Goodman Grant Lawyers for Dentists - a Past Chairman of ASPD

For more information call John Grant on 0113 834 3705 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

www.goodmangrant.co.uk
 

ASPD MEMBER