Kwasi Kwarteng, the new Chancellor of Exchequer, delivered his first budget announcement that cut Income Tax, National Insurance, Corporation Tax, and Stamp Duty.

Prime Minister Liz Truss and three other conservative MP's published a booklet back in 2010 titled ‘Britain Unchained’ that set out their vision for the UK to be a leading player in the world economy.

The cuts outlined below may be the beginning of their vision as set out over 10 years ago when they became newly elected MP’s.

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All members of the NHS pension scheme pay a percentage of their pensionable pay towards the scheme.  From 1^st October 2022, the amount you pay for your pension will change and further changes are planned in 2023.  For many of you, this may result in a lower percentage paid in pension contributions.

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As your private practice grows, you will need to build a team to support you. This may be a secretary or administrative support or another healthcare professional.

Unlike your work in the NHS, where these resources are likely to be already available, you will need to build your own team. The team you pick can impact the success of your private practice and can have different financial implications.

Medical Secretary

A medical secretary will likely be your first – and possibly the most important – role you recruit for. Your secretary will often be your patients’ first point of contact as they look to arrange an appointment with you.

Medical secretaries are usually either:

• Employed by the private hospital where you work;
• Work on a self-employed basis or via a limited company;
• Employed by your business.

In most cases, secretaries are employed by the private hospital or the secretary is self-employed. You will be billed monthly for the hours/days the secretary has supplied or, occasionally, a per-centage of your fees. You should be provided with an invoice detailing the hours they have worked for you and then the amount.

For accounting purposes, you should keep either a physical or electronic copy for seven financial years. No employment rights Secretaries paid in this way have no employment rights from your business. This means that if they are sick or on annual leave, they should not be paid or alternatively a replacement should be provided to you.

Secretaries working in this way will often be working for a number of consultants. As your private practice grows, it may be that you find you require a secretary that works exclusively for your business. Where someone is working exclusively for you, it is likely that HM Revenue and Customs (HMRC) would class them as an employee rather than someone who is self-employed.

This status is not a choice, but a question of fact. To help you determine the status, there is a toolkit available on the HMRC website.

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Many of you will have read reports in The Telegraph over the weekend headed ‘The electric car trap that could land you a £30,000 bill’.

The article highlighted the pitfalls associated with such a scheme and gave the example of NHS consultants.

The article is good in that it brings to the public attention something that, we as specialist medical accountants, have been aware of from the inception of the concept of the Annual Allowance (AA) many years ago and are well versed in giving advice.

The article goes on to explain that having the car for two years can avoid the AA tax charge. This is true in the majority of circumstances.

This is because the majority of any tax is associated with the deemed growth in the 1995 NHS Pension Scheme which is linked to your final salary and the best of the last three years of your service.

What the article failed to address is if there are any other ways to avoid the Annual Allowance Tax if you were in a three year or longer contract or coming up to retirement.

The good news is that there is a way to mitigate/extinguish the AA tax if you are in one of these scenarios.

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Most Independent Practitioner Today readers have some form of employment income in addition to their private practice. For many, this will be the NHS – and the health service’s payslip can be complex.

Although this complexity makes understanding your payslip more difficult, this does mean we can gather a significant amount of information from a single payslip. Richard Norbury (right) has some practical tips to aid understanding of the payslip and highlights some common pitfalls 

Tax code

Your tax code reflects the tax-free amount being applied to your salary.

It is made up of a number of elements, but for medics will primarily relate to personal allowance, tax relief on employment expenses and adjustments for unpaid tax in previous years.

The tax code is usually a number with a prefix or suffix letter. The number dictates the tax-free amount divided by ten.

For a lot of people, the tax code will just be the personal allowance, currently £12,570 for 2022-23.

The tax-free personal allowance can be reduced when an individual earns over £100,000 of taxable income. Then it reduces by £1 for every £2 over the threshold.

This means when you reach £125,140 you have none of the original £12,570 left. The effect of losing your personal allowance in full is additional tax payable of £5,028.

Your tax code may also include any professional subscriptions paid so that the tax relief is spread during the year. The code may also incorporate regular charitable donations under Gift Aid.

It may be that you have under-paid tax in previous years. If you are not ordinarily submitting a tax return or if you opted to pay any shortfall of tax via your tax code, your tax code may include the col-lection of underpayments.

The loss of personal allowance can lead to an underpayment of PAYE. Understandably, HM Revenue and Customs (HMRC) struggles to accurately calculate tax codes in these circumstances, especially if the salary goes up during the year.

If your taxable income was under £100,000 in the preceding tax year, then HMRC will have no reason to reduce your tax code in the next financial year.

HMRC should send you a copy of your tax code calculation. It is possible to have the tax code amended if required.

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Do you know how many patients you currently have in your care homes?

In the first quarter of the financial year, it is a good time to check the number shown against your Practice Residential Nursing Home Index on your GP statement.

If you find there is a significant difference in your care home patients’ numbers between these please see below.

Just a few different could just be timing as the GP statement weightings are only updated at the start of each quarter.  However, an increase in the RI weighting should also increase the monthly global sum for your practice.

If you have a significant difference, you can check this using your clinical system searches.to check the coding for these patients that you know are in your care homes – set up a search if you haven’t got one already that checks the number of patients in each home and then a sub search based upon this population for the VO code to identify either those that are coded or those not coded and then add the code accordingly.

Please click here for further guidance.

If you require further assistance then please do not hesitate to contact us using the details below. 

Since the introduction of pension-related tax charges, trading as a limited company has become the preferred trading option for most consultants in private practice.

Sandison Easson Partner, Alec James, looks at the cycle of considering a company through to formation and cessation and highlights some key events where important decisions need to be made.

A limited company is primarily used as your trading structure for three main reasons:

• To limit your personal financial exposure. A company has limited liability which is contained within the entity thereby protecting the shareholders and directors.
• For financial flexibility. As the earnings from your private practice are moved from your personal tax return to a corporate tax return, you have flexibility to control your overall level of earnings, which can be beneficial to avoid or mitigate certain tax charges such as pension annual allowance charges.
• For potential tax efficiencies. Depending on the share structure, you may be able to use the company to reduce your overall tax liabilities. The savings and opportunities will, however, depend on your individual circumstances and you will therefore need to take professional advice.

For most consultants, the driving force behind the decision to use a limited company is usually a combination of all three.

Trading via a limited company requires a different thought process, particularly for those that have historically been self-employed and have enjoyed a great deal of flexibility over access to the funds generated.

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When dealing with patients, doctors are all used to keeping copious notes, but when it comes to the financial paperwork, they can often be lacking. In many cases, financial arrangements can work themselves out, but if things go wrong, you can quickly be into a costly situation.

Partner, Ian Tongue looks at the areas where keeping adequate paperwork is essential in the commercial world.

Accounting records can take many forms and in recent years there has been a push to use digital packages and store records electronically.

There is nothing wrong with manual records, but changes to the tax system known as ‘Making Tax Digital’ will largely force businesses into keeping electronic records, as more frequent reporting of information will be required.

HM Revenue and Customs (HMRC) requires you to keep ‘adequate’ accounting records, but does not specify exactly what that means. From a practical perspective, this means that your records allow you to disclose a complete and accurate position of the business.

As a minimum, your system must record:

• Income earned;
• Income received;
• Expenses;
• Bad debts.

A private practice should always be run through a separate bank account. For those that are VAT-registered, a higher standard of record-keeping is required.

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Partner Ian Tongue presents a recap on Value-Added Tax (VAT) and how this may affect your private practice. 

VAT is a tax we are all familiar with, as it is paid on the majority of the goods and services we buy.

Sometimes an invoice will separate out VAT, but in much of our day-to-day expenditure the price we pay is inclusive of VAT, particularly in the retail world.

When running a business, it is normal to have to be VAT-registered, but within the medical profession it is less common for private practices.

The reason for this is that medical services are usually exempt from VAT, meaning that VAT does not need to be considered. But there are some exceptions which this article considers further.

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It’s not uncommon for doctors in private practice, especially those who are new to running a business, to run into financial problems. Sandison Easson's Partner, Ian Tongue, picks out some key areas to be aware of and shows how to stay out of trouble.

With the busy demands of a consultant carrying out private work, it is easy to encounter financial pitfalls that can result in significant financial pressure or loss.

Let's look at some of the more common areas to focus on to avoid a potentially costly mistake.

Running a business

One of the most common problem areas is not treating your private practice as a business.

It may sound simple, but the career path towards carrying out private work rarely sees you paid outside of the PAYE system.

Therefore, patients and insurers paying you without tax deducted – and robust chasing systems when they don’t pay or part pay – are essential to ensure that you are not working for free.

All private practices are required to maintain adequate accounting records and, as a minimum, this should enable you to understand the financial position of the practice at any time.

Records of work undertaken together with details of when payment was received are the absolute minimum required.

Likewise, expenses need to be meticulously recorded to ensure all your spending is included thereby minimising your tax liability.

Where payment is not received, systems to investigate and chase this money are required to avoid financial loss.

It is surprising how many consultants write off debts because they left things too long and didn’t deal with things at the time.

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