Practice Plan’s Tina Wixon looks for answers to the questions you’re asking…
How can I reduce the stress of my January tax bill?
Dealing with tax is an inescapable part of running your dental practice, but it’s fair to say that it’s probably not most people’s favourite task. That may be the reason why many leave it relatively close to the deadline before even thinking about calculating and settling their bill.
Many people also find taxes stressful, which could possibly be both the cause and effect of putting it off until close to the deadline. A fifth of small business owners said that filing taxes was the area that caused them the most stress, according to a survey by Xero. Given that this is something that you cannot avoid, it would be worthwhile knowing what steps you can take to minimise this stress and make the whole process smoother.
To find out what these steps could be, I asked John Clarke, Head of Business Development at Wesleyan Bank: How can I reduce the stress of my January tax bill?
John: ‘According to statistics published by Hargreaves Lansdown, last year more than 15,000 people filed their tax return between Christmas Eve and Boxing Day. And there are millions who typically leave it late to pay their tax bill which must be completed before midnight on 31 January 2020.
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 you can ease the pressure on your finances and gain better predictability over your 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 December, 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 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, which was introduced in April 2019, means most businesses, including self-employed dentists and corporate dental businesses, are now required to prepare monthly management accounts and pay VAT on a quarterly basis using computer software.
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 funding solutions to ensure that 2020 doesn’t have to be quite so taxing after all.’
Thanks to John for his five tips about how to meet your tax bill in a way that causes you the least stress possible.
The Government’s tagline of ‘tax doesn’t need to be taxing’ clearly doesn’t ring true for many and paying taxes may never be a completely seamless or enjoyable part of running your business. But there are measures you can put in place, and experts who can guide you through, to help ease that burden.
Tina Wixon has been a Regional Support Manager at Practice Plan, the UK’s leading provider of practice-branded patient membership plans, and has more than 20 years’ experience in the dental industry, including with a corporate orthodontic group and its practices. Through this regular column, she offers YOU the chance to ask any questions you may have about the ongoing uncertainty surrounding NHS dentistry and the framework of the proposed dental contract going forwards. Simply email firstname.lastname@example.org with your question alongside your job title and location, and let us do the rest!
John Clarke is Head of Healthcare at Wesleyan Bank. John has amassed 19 years’ experience in the finance industry and has deep domain expertise in the professions, specifically within the dental and legal sectors. He has recently played a key role in several multi-million-pound dental acquisition transactions.