With Christmas now a distant memory, it’s that time of year again. The deadline for filing your self-assessment tax return online for the tax year ending 5 April 2018 is rapidly approaching.
According to statistics published by Hargreaves Lansdown, last year more than 15,000 people filed their tax return between Christmas Eve and Boxing Day. If this wasn’t you, don’t despair, the chances are you’ll be among the millions who typically leave it late to pay their tax bill which must be completed before midnight on 31 January 2019.
To coin a common phrase, the only things certain in life are death and taxes. However, it’s common for high-earning professionals, including time-poor dentists, to be caught out by confusing and unexpectedly large tax liabilities.
Perhaps your self-employed income has varied markedly over the last year and your ‘accounting profit’ in your bank account isn’t sufficient to cover your bill, or maybe you are paying more tax than you legally should be? Whatever the reasons, it’s important to seek specialist help and advice to avoid risking fines and penalties from HMRC for late payment.
If you’re worried about your January tax bill, the following five tips highlight how dentists can ease the pressure on their finances and gain better predictability over their monthly expenditure.
Contact HMRC today
If you’re struggling to pay your January tax bill, contact HMRC before the payment deadline of 31 January to discuss what options are available to you. By doing so, they may be more inclined to consider arranging a payment plan for the remaining amount if you can make a contribution towards your bill before it’s due.
Last year, HMRC announced plans to introduce a points-based penalty system for late payments by businesses and individuals for corporation tax, income tax and self-assessment. Those who fail to pay their tax bill on time may be exempt from penalties, or have them calculated at a reduced rate, provided the bill is settled within 30 days after its due date if they contact HMRC and agree to a Time to Pay (TTP) arrangement.
Don’t get caught out by incorrect information
Last month millions of taxpayers received letters from HMRC incorrectly informing them that they can pay their tax bill at the Post Office or by personal credit card. Both arrangements came to an end in December 2017, so if you were thinking of leaving it until the last minute to settle your tax bill, these options are no longer available.
Get an accountant
Specialist dental accountants help dentists to better plan and understand their tax liabilities when embarking on self-employment. This extends to advising when you need to pay tax to ensure you don’t miss any deadlines, what financial records you need to keep and ensuring you don’t miss out on claiming all of the tax-deductible expenses you are entitled to claim for.
Invest in accounting software
Purchasing leading accounting software will make it much easier to file future self-assessment returns as you won’t have to be reliant on paper-based financial records and spreadsheets to keep track of your tax-deductible expenses. Cloud-based accountancy solutions enable users to instantly scan and upload expenses and electronically store important documents that you’ll need to complete your self-assessment, such as receipts, P60s and P11Ds all in one place.
The impending introduction of the Government’s Making Tax Digital (MTD) initiative has made it even more imperative for dentists to invest in compliant IT systems. The MTD legislation will commence on 1 April 2019 and will require most businesses, including self-employed dentists and corporate dental businesses, to prepare monthly management accounts and pay VAT on a quarterly basis using computer software. This is likely to pose significant complications for dentists given that the majority are not registered for VAT and required to regularly produce financial reports.
Seek alternative finance solutions
Specialist finance providers offer funding for tax bills to enable dentists to preserve cash flow without compromising their existing banking lines. Unsecured loan facilities allow you to spread the cost of tax liabilities in a flexible way, over a term of six or 12 months. Busy professionals also have the convenience of being able to apply for tax funding online in minutes through digital services. Some providers, such as Wesleyan Bank, can arrange payment of your tax bill directly to HMRC, or if you have already filed your self-assessment return they can still look to finance your tax payment retrospectively.
There are times when every dentist will feel the pinch of an upcoming tax bill. If you’re worrying about finding the cash to meet your January liability then you certainly won’t be on your own but there are proactive steps you can take to ease the burden. In addition, specialist financial providers who understand the pressures dentists face today can offer tailored short, medium and tailored funding solutions to ensure that 2019 doesn’t have to be quite so taxing after all.