Welcome to our Autumn 2018 Dental News
In this issue we take a look at
Pension contributions for higher earners
Digital Accounting and Tax Records
For new associates who have recently completed their foundation training year, you will hopefully be starting or have already started as a self-employed Associate Dentist.
Therefore you are now obliged to inform HM Revenue & Customs and to register for Self-Assessment.
The registering process can be done remotely and we can assist you with this free of charge as a gesture of goodwill. We would also be happy to set-up a phone call with you outside surgery hours, at a lunchtime or in the evening to discuss the wider implications of being self-employed, what you need to be doing to save yourself tax, plus how to obtain a tax refund for your foundation training year (if you have not already done so).
If you would like help registering for Self-Assessment with HM Revenue & Customs, please email email@example.com and we will explain the next steps.
Pension contributions for high earners
Many of our higher earning dentists are increasingly being caught by the restriction in tax relief on which they are entitled to on pension contributions.
Generally an individual may invest £40,000 in their pension(s) each year and will be entitled to tax relief unless their “adjusted income” (for ease think taxable income) exceeds £150,000.
For every £2 their income goes over the £150,000 their allowance drops by £1. This continues until it reaches the minimum taper annual allowance of £10,000 (this is when adjusted income is equal or exceeds £210,000).
Any unused Annual Allowance from the last three tax years can also be carried forward and added to the current year’s Annual Allowance. However, it is now likely that many higher earners will have now fully utilised available unused annual allowances against previous tax years.
If your pensions breach your Annual Allowance limit (and your carry forward unused Allowance from the three prior years has been used up) this position must be declared on your Tax Returns and you will have to pay tax at your highest rate on the excess contributions.
For those dentists who have been members of the NHS Pension Scheme care needs to be taken that the growth in the NHS pension is taken into account when calculating the annual investment into your pensions each year.
How do you know if the growth in your pension savings has exceeded the available Annual Allowance?
NHS Pensions will issue Pension Saving Statements individually for the 1995/2008 and 2015 schemes.
The NHS Pension Scheme will automatically provide dental practitioners with Pension Saving Statements by the 6 October following the end of the tax year e.g. 6 October 2018 for 2017/18.
If you do not receive these by this date, you should request Pension Savings Statements by:-
- Calling NHS Pensions on 0300 330 1346 (it needs to be the person requesting the statement)
- Email to firstname.lastname@example.org and request a statement.
What do I need to do next?
It is important that the Pension savings statements are forwarded immediately to Humphrey & Co upon receipt to ensure that we are able to review your tax position accordingly and advise whether any tax charge is due.
If you are in any doubt whether this may affect you we would urge you either speak to your IFA (Independent Financial Adviser).
Digital Accounting and Tax Records
As a firm we are trying to ensure we are collecting records from our clients in the most economic and efficient method, for ease of our clients and ourselves.
To this end, we are promoting the use of digital records. The digital folders should mimic that of the paper folders which are sent to all of our Dental Associates.
We are aware that this will not suit all of our clients, especially the clients that still receive the majority of their accounting records in paper format. It is therefore suggested that when submitting your records to us, all paper records are converted to a digital format as follows:-
- Collate your records into the sections as defined in the Associate folder. Broadly there are four main sections; income, expenses, bank statements and other information.
- We require your documents to be in PDF format. Unfortunately photos of documents (e.g. JPEG) are not acceptable as these cannot be read easily and occasionally are sent with the incorrect resolution.
To convert from paper to PDF, please download a ‘mobile scanner’ on your mobile phone, there are plenty available.
- Use this scanner to convert the paper documents into the aforementioned categories (income, expenses, bank and other). The aim is to end up with one multiple page PDF document for each category (and therefore have four documents to submit to us).
Once your records are in order and in digital (PDF) format they can be submitted to us. We will request your records as usual in April/May following the end of the tax year.
For Dental Associates, in order to qualify for the lowest fee, we will require your digital records by 31 May, following the end of the tax year.
We will provide further information regarding how to submit your records to us in due course.
Greg Penfold has been invited by Wisbora Conferences to present a Dental Tax Update on Saturday 13th October 2018.
The event is being held at the Novotel in Birmingham and by the end of the lecture delegates should be up to speed on all tax and accounting matters that relate specifically to their profession.
Please visit the Wisbora Conferences website for further information and to book your place at the event.