The only easy win of 2020: tax planning

by Compliance, Finance, Tax, Wealth management

If you don’t hear much from your accountant, keep reading, you could save tens of thousands of pounds. The reason is that with all of the chaos and uncertainty around, one of the few things you can nail down in your profit and loss forecast is your next tax bill. Tax bills are usually the biggest expense for dental practices and because payment deadlines are so far ahead you can get clarity over what’s due in time to be able to organise the finances of your business advantageously. But you (or rather your accountant) needs to be proactive.

I understand that right now you will be thinking about PPE costs and worrying about what your income is going to be over the next 12 months, but your tax affairs are equally as important in terms of revenue and they have the advantage of being tangible and concrete. There is serious money at stake and you can sort this out now. One thing to bear in mind, for instance, is government support on tax. You don’t have to make your usual payment on account by July 31 but you will still have to pay it in January. If you choose to do so your cash outflow will double at the start of 2021, so you need clarity on that number.

In the conversations I’ve been having with new clients it’s become apparent that a lot of people have received poor advice on tax. Many dentists are practicing as sole traders when they shouldn’t be because their income levels are too high. They are giving money to HMRC needlessly. This will get worse as the tax rates go up, as they must do. Rishi Sunak has alluded to it, and the government is operating at a massive deficit so it will have to change tax laws sooner or later to recoup what it’s spending on emergency corona measures.

We don’t know what these new tax laws will be but we know there are definitely savings to be made now during the current tax regime. Of course, tax isn’t the most exciting subject. Practice owners will be focusing on getting revenue into their businesses and reopening, but tax is equally as important and it’s an easy win. All you need to do is engage with us and we can identify whether you can save money and, if so, manage that process for you.

There’s another benefit: you’ll relieve the mental burden of a massive looming tax bill of unknown size. It may be painful to see the figures and confront the reality but that’s got to be better than living in fear of the unknown. If you’re a sole trader and you can reduce your tax bill by incorporating, we have time to process that and reduce your January tax bill via the payment on account system.

When we evaluate your tax position we look at your personal expenditure to see whether you need to put money away for tax. It might be that there is no problem even though you think there is. So at the very least you’ll get peace of mind. But you could save a sum that makes a real difference to your business. What have you got to lose?

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“There is serious money at stake and you can sort this out now.”

Hayley Robins, Senior Accountant at Hive Business

Author: Guest