Becoming an Associate Dentist may be exciting for some, but others may be fearing the thought of having to manage tax affairs and save for the dreaded January tax bill.
To outline everything you need to know about moving from employed to being a self-employed dentist, we’ve asked Ryan Beacall, Client Manager to share his expertise.
Take it away Ryan…
Taking that next step in your dental career and becoming an Associate Dentist is a great opportunity, and helps you become that much closer to owning your own practice. But there are a few things you need be aware of. Below I’ve explained everything you need to take into consideration when making that move to becoming an Associate Dentist.
Self-Assessment and Tax Savings
Firstly, you will need to register with HMRC for Self-Assessment from the date you start your Associate Dentist position. If you have a Government Gateway account, you can fill in the form CWF1 to register for Self-Assessment. Alternatively, we can complete the necessary forms on your behalf, and make sure that you are set up correctly.
Once HMRC have processed the forms, they will assign you a 10 digit number called your Unique Taxpayer Reference (UTR), which will be required to submit your tax return and pay your tax.
The biggest change is going from having your tax deducted from your Foundation Dentist salary, to being paid by your practice with no deductions for your tax, national insurance, and student loan.
Therefore, it is vital that when you receive your first associate pay you put away the correct amount for your tax – we understand that there may be some that have to fight the urge of a shopping spree!
Below you will see a rough guide of the amount that should be saved for your tax each month depending upon your earnings:
If your monthly earnings are higher than this, then please do speak to us so we can advise you on the tax savings to make each month.
For those Foundation Dentists who are starting their associate position in September 2023, the first tax and student loan payment to HMRC will be in January 2025.
Accounts and Tax Return
Moving to becoming an associate dentist does have some tax advantages. You are taxed on your profits (income less allowable business expenses) compared with your salary as a Foundation Dentist, and the national insurance paid on your profits is at a lower rate than you pay on your salary as an employee.
The allowable business expenses to be deducted from your income as a self-employed Associate Dentist is much wider than as an employee. There is a long list of potential expenses which you can claim, the main ones being:
- Professional Subscriptions (GDC, BDA, RCS etc)
- Professional Indemnity Insurance
- Allowable Course/CPD fees and associated costs
- Dental equipment including loupes you have already purchased
- Protective clothing costs
- A percentage of your mobile phone & home internet costs that relate to business use
Depending upon your level of earnings, for every £1 business expense, this could save you tax of 42p (plus 9p of student loan if you have a student loan), so it really is worth keeping all your receipts and invoices! We have a helpful app called DEXT which can help you with this.
Most dentists start their associate position in September, in which case their first set of accounts are typically from their start date in September to the following 31st March, with all subsequent accounts made up from 1st April to the following 31st March. Your accounts show your income and business expenses for that period, and after some adjustments, the profit figure from these accounts is then incorporated on the Tax Return. The first Tax Return will also include your Foundation Dentist salary from April to August. You should receive a P45 after finishing your Foundation Dentist position which details your taxable pay and tax paid on your salary in that tax year.
This Tax Return needs to be submitted to HMRC by the 31st January, after the end of the tax year. So for example, an Associate Dentist commencing self-employment in September 2023 will need to prepare their first Tax Return for the year ended 5th April 2024, and they would have until 31st January 2025 to file this Tax Return. Their first tax payment will then be due by 31st January 2025, with the next tax payment due by 31st July 2025 and all following tax payments due in January and July.
Other financial considerations
As a self-employed individual, you should also consider the following:
- Pension contributions – if you aren’t a member of the NHS pension scheme or doing only a small amount of NHS dentistry, you should look at contributing to a private pension scheme and retirement planning
- Insurances – income protection and critical illness cover are commonly taken out by self-employed individuals so you can make a claim if you cannot work for various reasons. If you are carrying out NHS dentistry, you may be eligible for some cover through the NHS long term sickness pay and should be considered when applying for these insurances.
- Limited company – if you are not a member of the NHS pension scheme or solely providing private dentistry services, a limited company may be the right business structure for you and we can help you with this decision.
Your financial adviser will be able to help you with retirement planning and the various insurance options to protect your income.
We’re here to help
If you are moving into self-employment for the first time, we can help. We will guide you through your journey from employee to being self-employed and offer proactive advice throughout your career. To speak to our team on how we can assist, give us a call on 0151 348 8400
