With recent changes to government legislation affecting many healthcare professionals, as well as increasing costs of medical indemnities, doctors are gradually becoming aware of the importance of managing their financial strategies to minimisetax deductions.
It is therefore important to understand how to improve the efficiency of your financials.
Due to the complexity of compliance issues surrounding this, medical doctors are increasingly sourcing advice from professional accountants to manage their business accounts effectively, especially if they are operating as a limited company. Whilst seeking assistance from a specialist medical accountant service is suggested, here are some basic ways you could minimise taxation of your income:
1. Track missed payments
If you are self-employed, it is of the utmost importance that you track all of your earnings and invoices effectively. Plus, implementing a strategy to pursuit outstanding payments is crucial. With so many other priorities, it can often be difficult to dedicate substantial time to this, but its relevance should not be overlooked. In order to be tax efficient, it is critical that business admin is updated meticulously. Online software can assist with this, but it is generally advised that a registered accountant can best advise which software would be best tailored to your specific business needs. In addition, consulting with a specialist accountant may be valuable to manage the business accounts effectively and implement suitable systems to track invoices.
2. Claim all tax-deductible expenses
As a self-employed doctor, you are eligible to deduct certain business claims which are not subject to tax deduction. However, these expenses need to be regulated and classified as legitimate business expenses. The law surrounding this is often complex meaning doctors are unaware of the expenses they can claim for. Large expenses such as medical subscriptions or training are often included, however, smaller everyday business expenditures are often overlooked. These include travelling costs, office supplies, and even medical equipment. It is important that doctors are aware of what expenses they can claim for and this can greatly minimise taxation. For instance, you may claim for costs of upkeeping travel by car, however, this does not include the cost of purchasing one. This means that keeping accurate records of your mileage for commuting between different places of work (such as the clinic, practice or home visits) can contribute to tax-deductible expenses. It is generally advised to seek professional guidance if you have any queries regarding claiming tax-deductible expenses.
3. Financial planning
In addition to maintaining meticulous records of invoices and expenses, it is equally important to uphold a financial record of all earnings and pension contributions. Regulations by the HMRC require records (of up to 5 years) to be saved. Consulting with an independent financial advisor is advisable to assist with the assessment of tax returns, checking national insurance and tax codes. Furthermore, professionals can support with contract checking to ensure compliance.
4. Pension management
If you are still involved in some work for NHS practices, then you are able to make contributions to your NHS pension. It is worth noting that contributions to pension funds are fully allowable for income tax, meaning that certain assets may be able to grow free from tax. This can be an extremely attractive financial option for many, but it is worth consulting with a professional to discuss the best pension strategy to maximise tax-free growth.
4. Regularly complete self-assessment tax returns
Only higher rate taxpayers are eligible for automatic tax return assessments, whereas, for lower incomes, the ability to complete self-assessment tax returns are optional. A tax return can be requested at any time and it is often in your interests to do so if you have expenses to claim. A tax return must be submitted for additional income such as gross investment, property rental or capital gains. The self-assessment tax return has multiple forms for completion which vary depending on the type of income which often makes the process intricate. Failure to comply with deadlines, providing incomplete information or not including appropriate supporting documentation can result in surcharges or fines. For this reason, it is suggested that depending on a professional accountant to assist with self-assessment tax returns is wise.
In general, as a busy healthcare professional, it is often difficult for doctors (self-employed or otherwise) to dedicate time to manage finances and tax reporting. The taxation system is somewhat complex and contains certain strategies which you could use to legitimately minimise the amount of tax payable. Consulting with a registered accountant to handle business admin and tax returns may prove undeniably beneficial to handle business admin and tax returns; overall saving you time and money.
