The self employed dentist

Neil Morrison gives advice on making the change from salaried employment to self employment. Neil is a partner with Campbell Dallas LLP, Chartered Accountants - specialists in the Healthcare market.

It is often perceived as a big step in your careers in dentistry when moving from an employed situation to the 'riskier' status of self employment. Often this is viewed as a step into increased administrative workload and a worry over future tax payments. These concerns should be eased by obtaining the appropriate professional guidance before you first become self employed. Ideally advice should be sought from an accountant specialised in dealing with healthcare professionals.

Your adviser should assist you to register with HMRC for self employment purposes. There is a penalty for not doing so within the required timescale. It is important to obtain advice on record-keeping and the expenses that may be claimed as business expenses for tax purposes. Most of my dental associates keep simple Excel spreadsheets of their income and expenses each year which are emailed shortly after the end of the tax year. The key is to keep the record-keeping simple and up to date on an ongoing basis.

A common mistake is to submit income on the tax return on a 'receipts' basis rather than 'earnings' basis. HMRC expect income to be returned on an 'earnings' basis and thus work completed in March should be entered on the tax return to 5th April even if that income isn't received until after the end of the tax year (5th April). It is adviseable to understand how the tax payments work once you are self employed. If you are moving from a salaried position, there will be a significant period of time during which you are earning profits but not paying tax. However, this eventually catches up and results in significant payments of tax twice a year, particularly each January (in the first years of self employment). As a rough rule of thumb, you should be aiming to reserve a third of your income to meet future tax payments.

Be aware that HMRC are currently looking at the employment status of dental associates and you may be asked by a practice owner to put an associate agreement in place. A specialist healthcare adviser can assist at the appropriate time when you are considering buying into a practice. This will involve a review of the accounts of the practice with comment on how profitability compares with other practices, a review of the partnership or shareholders agreement for any unusual clauses, an opinion on the goodwill value of the practice and advice on appropriate healthcare lenders to approach for the finance required. Selecting a suitably experienced and qualified adviser at the outset will bring benefits in terms of ensuring that the best possible advice and guidance is provided from the outset.

Neil is a partner with Campbell Dallas LLP, Chartered Accountants - specialists in the Healthcare market, with offices in Aberdeen, Glasgow, Perth and Stirling. Neil can be contacted on 01738 441888 or by email [email protected].