So — what is different about being an Associate?
In a word, responsibility. You now have your own number and are launched as a fully fledged dentist with clinical freedom and a list of patients who have the capability to be pleased with you………. or not.
You have freedom to develop your practice as a business how you wish, and set your own goals. This opens many positive avenues – but which are best?
You also have financial freedom. You move from being a PAYE employee to self employed status. You alone are now responsible for dealing with your tax affairs, ensuring Returns to HM Revenue and Customs are made on time, correctly, and that you are paying the right amount of tax, Student Loan, superannuation, and the rest.
The tax system is now strongly penalty-based, and most errors or misjudgements are now addressed with pain rather than the negotiation or understanding of old. This means that first and foremost you have to get your compliance right, and this means taking good advice from a reputable and experienced accountant who understands what they are doing. You can’t expect to know all the rules and regulations, but your advisor should. You will have enough to do chairside, building on the theoretical and early practical experience of your career without worrying what is around the corner from the Taxman.
So park this up, hand it over to someone who knows what they are doing, and let them do the job you are paying them for, whilst you get on with the job that the patient is paying you for.
Tax payment dates
You will come out of your Foundation at the beginning of August. Your tax from then on will be dealt with the self-employed rules, which means that the profits that you make from 1 August through to 5 April will give rise to a tax bill the following 31 January. So it will seem like a tax holiday that first 17 months – but it is not!
At the time of that first January payment you will also start to pay 6 monthly on account for the next year. However, remember the first “year” is only 8 months long, so the amount you are paying on account will only be 8/12’s of what it should be. Your monthly generation of profits will also be rising as you become more dexterous, so when it comes round to the next January payment, all the back catch-up tax will produce a monster bill.
This often catches new associates out, before their liabilities settle down from Year 3 onwards. This highlights the value of using a dental specialist advisor, as they will have an understanding of how you work, and the recurring patterns relevant in the dental industry.
There are a number of forms and actions which need to be completed which will start off your self employed National Insurance contributions, alert HMRC to your existence, and so on. These are quite boring, unless they are not done on time, when penalties arise and suddenly they become less boring.
Your “year-end” need not be 5 April. If one is dealing with a mixture of NHS and private work, then patterns of profit will fluctuate. There are also reasons why profit might fluctuate month on month, such as holidays, maternity and so on. It is often interesting to play a “what if” game with different year ends when one is starting in practice, as different patterns of profit generate different tax levels and the timing of these tax payments vary.
We do this as a matter of course, and will undoubtedly recommend the pattern and year-end which results in the least amount of tax payable by you. In some instances, the variations can be quite substantial.
Of course dealing with your finances and taxation does not end with simply complying with the tax law. There are always wrinkles and nuances in the system which can be approached in different ways, and which can be worked for your advantage. This is where specialist advice comes into its own, because dentists are different.
They work differently to other professions, they get paid in a unique way, and they work in a world which is changing and insecure. You need someone on your side who has a detailed awareness of your world, and so can manipulate changes in financial and taxation legislation to suit your specific circumstances, and hand the benefits to you.
In summary, moving from Foundation Dentistry to Associate involves a change in responsibility level in all sorts of areas. It pays dividends to use specialists on whom you can rely to take some weight from you, leaving you free to do what you do best, concentrate on being a dentist. It is such an exciting time.