Accountants for Doctors

Managing tax on dual income streams requires careful record-keeping. If you work for the NHS, your tax is usually deducted through PAYE. However, for private practice, you will need to report this income on a self-assessment tax return. It is important to keep detailed records of all earnings and expenses for your private work. Consider setting up a separate bank account for your private income. Additionally, you may need to make payments on account of your private earnings. It’s also important to be aware of the impact on your tax code and potential higher-rate tax implications. If your private practice is substantial, it might be beneficial to consider incorporating a limited company for potential tax benefits. Always declare all income to avoid HMRC investigations, and consider consulting with a specialist medical accountant to optimise your tax position across both income streams.

Doctors can reduce their taxable income by claiming various professional expenses. These may include GMC fees, medical indemnity insurance, Royal College membership fees, and professional journal subscriptions. If you work from home, you can claim a portion of household bills. Deductible travel expenses include those between different work sites but not regular commuting. Course fees for relevant CPD (Continuing Professional Development) can also be claimed. Locums can claim allowable equipment costs like stethoscopes or medical bags. It’s important to keep all receipts and maintain detailed records. Some larger purchases may qualify for capital allowances. Be mindful when claiming items with dual personal and professional use, as HMRC may investigate to ensure expenses are legitimate and business-related.

The NHS pension scheme can have a significant impact on your tax position. Contributions are tax-deductible, which reduces your taxable income. However, it’s important to be aware of the Annual Allowance, which limits tax-free pension growth. For high earners, there may be a Tapered Annual Allowance, which further reduces this limit. If you exceed the allowance, you could face a tax charge. The Lifetime Allowance is also important – exceeding this limit can result in additional tax charges when you access your pension. If you face an Annual Allowance charge, consider using Scheme Pays. Some doctors choose to opt out of the scheme to avoid these charges, but this requires careful consideration of long-term financial planning. It’s advisable to regularly review your pension statements and seek advice from a financial advisor specialising in NHS pensions to optimise your position.

The decision of whether to operate as a sole trader or a limited company depends on several factors. Sole traders benefit from simpler accounting and lower administrative costs, making this structure suitable for smaller private practices. On the other hand, limited companies provide limited liability and can be more tax-efficient, especially as profits increase, by using a combination of salary and dividends. Companies pay Corporation Tax on profits, while sole traders pay Income Tax and National Insurance on all profits. Although limited companies have more paperwork, they can appear more professional to clients. When making this decision, it’s important to consider your income level, growth plans, and risk profile, as they can significantly affect your tax position and pension contributions. It’s advisable to consult with an accountant to analyse the numbers for your specific situation, taking into account both immediate tax implications and long-term financial planning.

As a locum, you’re typically considered self-employed, requiring careful tax management. Register for Self Assessment with HMRC. Keep meticulous records of all income and expenses. Set aside money for tax payments – typically 20-40% of your earnings, depending on your tax band. You may need to make payments using your account. Consider using an app or software to track income and expenses on the go. Be aware of IR35 rules if working through an agency or limited company. You can claim various expenses, including travel between assignments, equipment, and professional fees. If you work from home, you can claim a portion of household bills. Consider hiring an accountant familiar with locum doctors to ensure compliance and maximise allowable expenses. Stay organised throughout the year to make tax season less stressful.

Taking on extra sessions or doing private work can put you into a higher tax bracket, which could impact the amount of money you take home. It’s important to understand the tax thresholds and how any additional income might affect your overall tax rate. When it comes to extra shifts in the NHS, tax is typically deducted through PAYE, but it’s important to ensure that your tax code is accurate. Income from private work must be declared on your Self-assessment tax return. You should also consider the effect on your pension Annual Allowance, as high earners may face a reduced allowance. It’s important to keep clear records that separate your regular income from any additional income. Making pension contributions can help reduce the impact of higher tax rates. If you’re doing significant private work, setting up a limited company could be a tax-efficient option. Always make sure to declare all of your income to avoid penalties from HMRC. It may be beneficial to consult with our tax advisor to plan effectively, especially if you’re close to a tax bracket threshold.

If you earn money from speaking engagements, research grants, or medical writing, you must report it on your Self Assessment tax return. This income is usually considered self-employment income, separate from your main job. Keep detailed records of all the money you receive and any expenses related to these activities. You can deduct costs directly related to this income, such as travel expenses for speaking events or resources used for writing. Some grants may be tax-free if they are specifically for research – make sure to review the terms. For consistent extra work, consider setting up a separate business structure. If your employer pays you for this work, make sure you understand how it is taxed. Even if tax is taken from the source, you still need to report this income. It’s a good idea to seek advice from an accountant with experience in handling different types of medical income to make sure everything is reported correctly and to maximise tax efficiency.

If you receive a notice of HMRC investigation, don’t panic, but act promptly. Seek immediate assistance from our tax professionals, who are experienced in HMRC investigations. Gather all relevant financial records: bank statements, invoices, expense receipts, and tax returns for the period in question. Respond to HMRC’s requests fully and honestly within the given timeframe. Be prepared to explain any discrepancies in your accounts. If you’ve made genuine mistakes, consider making a voluntary disclosure – this can lead to more lenient treatment. Only volunteer information is asked for. Know your rights – you can ask for clarification or more time if needed. Consider whether you have tax investigation insurance to cover professional fees. Remember, many investigations are random checks, not accusations of wrongdoing. Stay professional and cooperative throughout the process, but always have expert guidance to protect your interests.

There are several legal ways to reduce your tax bill as a doctor. Maximise your pension contributions, which offer tax relief. Ensure you’re claiming all allowable expenses, including professional subscriptions, indemnity insurance, and relevant training costs. If you have a private practice, consider incorporating it to benefit from lower corporation tax rates. Use ISAs for tax-efficient savings. If you’re a higher-rate taxpayer, salary sacrifice schemes could be beneficial. For property owners, the Rent-a-Room scheme might help. Keep accurate records to ensure you’re paying tax. Timing of income and expenses can be crucial – sometimes delaying income or bringing forward expenses near the tax year-end can be advantageous. Always seek professional advice, as tax laws change and individual circumstances vary. Remember, tax efficiency should be balanced with overall financial planning and ethical considerations.

When working across different NHS trusts or UK regions, it’s important to manage your taxes carefully. Make sure that each employer has your correct tax code, as you may need a separate tax code for each trust. Keep track of all your sources of income for your Self-assessment tax return. If you’re working in different UK countries, be aware of potential differences in tax rates, especially between Scotland and the rest of the UK. Remember that travel expenses between different work locations (excluding regular commuting) are usually tax-deductible. If you temporarily relocate for work, you might be able to claim associated costs. Keep detailed records of where and when you worked. Consider using a digital app to track income and expenses across different roles. Be mindful of how your total income across all roles affects your tax band and pension Annual Allowance. It’s a good idea to consult with an accountant who is familiar with NHS structures to ensure compliance and optimise your tax position across multiple employments.