We are still receiving a number of approaches from newly qualified dentists coming out of Foundation this year, who are not yet registered with HM Revenue & Customs as Self Employed. There are fairly strict time limits to do this, otherwise the fines are mandatory.
Just as alarmingly, we are finding new dentists’ understanding of the tax system to be sometimes limited, resulting in more of their earnings being put away for tax than is necessary. This can certainly pour a little cold water on the first few months of “proper earnings”.
However, better that than not putting anything away at all, which is also something that we find!
There is no right answer to how much needs to be put aside, as this is determined by the rate of earnings and how quickly this grows as the first months pass. How then do you make sure that you are neither leaving yourself short, nor leaving yourself unnecessarily as poor as a church mouse?
The answer is to get someone who knows what they are doing to look at your first few months’ performance, and then project forward based on the underlying dynamic. A specialist will have a feel for the rate at which you work in your particular practice, and how that is likely to change for you with time and experience. For each dentist, this will be different, as their circumstances are not the same and the rate of work or working hours is not the same.
The projection should fit YOU. Knowing how much and when your tax is likely to fall over the first two years will allow you to budget sensibly and reasonably, without fear of being wildly wrong, and without fear of nasty surprises.
The tax bill is probably the largest single payment you will make within your business. It should not be unknown!
So don’t leave it too late. Get your tax liability personalised in good time, and then you can take complete charge of your financial affairs.