How can I boost my medical income without doing overtime? The answer is to get smarter with your tax – this could save you a small fortune!
AF Tax Solutions are Medical Tax Experts. We provide back-office support to doctors and clinicians to maximise their earnings through expert tax advice, so they can focus on the important job of caring for their patients.
To make sure you are taking home the income you have earned and not needlessly giving it away to HMRC, we take a straightforward look at 5 tax-saving benefits Medical Professionals can take advantage of.
1. Claim your tax rebate
This is all about deductible expenses specific to the Medical Professions and these can significantly reduce your tax bill. With the increasing cost of medical indemnity and professional subscriptions, many of you are feeling the financial pinch. However, this needn’t be the case – for example, the following items are up to 40% tax-deductible:
- Medical exams
- GMC fees
- Royal College fees
To illustrate this, the Professional Fees for a trainee doctor over a typical 5yr training period would be just over £5,500. Apply to this the 40% tax relief and that is a whopping £2,200 saving!
Following the HMRC vs Banerjee decision, it may now be possible for doctors to claim tax relief on training expenses. (To qualify, the expenses must be incurred wholly, exclusively and necessarily in the performance of the employment duties. Attendance at training courses is compulsory and included within the Employment Contract.)
With many Medical Professionals pursuing specialisms, it’s worth mentioning the longer you study and the higher the exam costs, the bigger your tax relief.
2. Claim tax-deductible expenses
Self-employed doctors are allowed to deduct legitimate expenses before they pay tax. Many doctors forget which areas they can claim for, so here is a quick reminder:
- Medical indemnity
- Travel costs – to include train fares, parking permits & tickets
- Medical equipment
- Consulting room fees
- Accountancy fees
3. Claim travel and relocation expenses
This represents a huge financial benefit and is often overlooked. There is a massive £8,000 tax-free relocation allowance to draw upon over the length of your training. These can include:
- Stamp duty fees
- Removal fees
- Legal fees
- Travelling expenses between hospitals
- Trainee doctors on placements may also be able to claim mileage to and from work
4. Make your pension earn for you
Here are some things to consider to make sure you are claiming all your pensionable income:
- If you are working even part-time for the NHS, you can contribute to your NHS pension as a sole trader.
- Your pension fund’s contributions are allowable for income tax – meaning the assets in these funds can grow tax-free.
- If you run your private practice through a Limited Company, your company can pay pension contributions on your behalf, which are fully tax deductible to reduce profits.
If in any doubt about your pension, contact a specialist accountant who will guide you through your options.
5. Financial Planning
There are many additional ways that you can reduce your tax liability. You will need to keep meticulous financial records of your earnings, pension contributions and expenses. With HMRC requiring that you keep these copies on file for at least 5 years. Here are a few other options to consider:
- Getting an ISA allows you to invest up to £20,000 tax-free annually.
- If your partner is in a lower tax band, it may be worthwhile looking at how you can reduce your taxable income as a couple.
- Getting an Independent Financial Adviser or specialist Medical Accountant will allow you to take full advantage of all your tax allowances. Allowing you to get on with what you do best, being in the clinic treating patients.
I hope this article has helped. The truth is, this is just the tip of the iceberg in terms of tax advice – there are tax code errors to look out for and tax-free childcare opportunities could also improve your yearly income. We are here to answer any questions.
With most doctors paying more tax than needed, it is well worth investigating what your tax requirements are so you don’t miss out.
We are Specialist Tax Advisers to Medical Practitioners across the UK. If you have any questions, get in touch, we’d be delighted to advise you.
By Andrew Fenton: Medical Tax Specialist at AF Tax Solutions Ltd