Having qualified as a dentist, you are a professional person who now has to learn how to operate in a commercial and business world where you will normally become self-employed as an associate, partner or sole practitioner running a business to make a profit.
Hence you will normally need to seek advice from an accountant to help you make certain business decisions, explain the complexities of the taxation system and how to manage your business affairs.
In this section of your manual we will cover a number of important considerations to be taken in ensuring that you obtain a strong financial base for the future.
COMMENT FROM A TRAINEE:
"As a Vocational Trainee, there is no need for an accountant, but as the year draws to an end it is wise to find one."
Keep records of:(A VT may arrange for tax coding to take these into account.)
a. Membership of professional bodies eg GDC, BDA.
b. Uniform
c. Car expenses
d. Telephone accounts
e. Expenses solely connected with work
This will reduce the accountants work and thus his charges. A first year bill should be about £250 but could be much higher.
When you become as associate, it is important to remember that you are not taxed at source, but will be liable to pay tax after the year end. You should save 25% of your earnings for this.
National Insurance has to be paid weekly preferably by a direct debit arrangement.
HOW INCOME TAX AFFECTS YOU:
The difference between being an employee subject to Schedule E. and self-employed subject to Schedule D.
The dates your taxes become payable.
How your taxes are calculated?
What expenses are allowable?
What income is taxable?
The basis of assessing your income?
What records should be maintained for both income and outgoings?
HOW NATIONAL INSURANCE AFFECTS YOU:
This is effectively an additional form of taxation of which there are four types, Class 1, Class 2, Class 3 and Class 4.
It is quite possible for you to be liable to Classes 1, 2 and 4 which could mean that you become entitled to a refund or can defer some payments.
Do you know how to make the appropriate elections?
It is your responsibility to organise your affairs and make your payments.
PRACTICE MANAGEMENT:
Your profits can be enhanced by efficient and effective management in the following key areas:-
Efficient book-keeping system.
Computer application.
Credit control for patient charges and private patient fees.
Control of expenditure.
Maximising income.
Budgeting and cash flow forecasts.
Employment of a good practice manager/financial secretary.
Financing capital outlay comparison of different methods.
Terms for dental associates.
Do you require locum or other assistance?
>PARTNERSHIP AGREEMENTS AND CHANGES:
When dealing with these then you should consider:
1. Contents particularly admission and retirement, methods of valuation and capital to be introduced or withdrawn.
2. Which expenses are to be borne solely from your fees earned.
3. Which expenses are to be pooled.
4. What are the taxation implications of cessation or continuance.
OTHER TAXATION MATTERS:
Have you declared all sources of your income including cash fees, sale of dental accessories, waste materials, etc?
How does Value Added Tax, Capital Gains Tax or Inheritance Tax affect you, your family and your business?
How you obtain tax relief on capital expenditure?
Would leasing of equipment be more beneficial rather than outright purchase?
Are you applying the PAYE/NIC rules correctly to your staff?
PERSONAL FINANCIAL PLANNING:
Your should have good independent advice from individuals authorised under the Financial Services Act to give such advice in the following areas:-
House Purchase
Provision for school fees
Pensions subject to your N.H.S. Superannuation commitments.
Family protection
Inheritance Tax planning
Investments for income or capital.
CONCLUSION:
Accountants are the people with the expertise and experience to provide a personal and professional service of the highest standard to help you with all of your financial requirements.