As a dental associate, planning for your long-term financial stability is essential so you can keep practising the career you spent years training for and continue to help the clients who rely on you for their dental health.

One crucial aspect of successful business planning is a good grasp of tax planning so you only pay the tax you owe and not one penny more. In this article, we’ll explore the key solutions for tax for dental associates which they can use to reduce their business’s and their own tax liability.

Allowable expenses and capital expenditure

One of the bigger challenges of running a dental practice is the high input costs of your work. However, you can claim the costs of your business expenses and investments against your profit, ultimately leaving you with a lower tax bill.

Allowable expenses
Allowable expenses are everyday costs directly related to your work. They include, but are not limited to:

• professional fees and memberships for organisations such as the British Dental Association
• dental instruments and materials
• travel expenses (as long as the travel is specifically for business purposes)
• costs associated with professional development courses.

Make sure to keep detailed and accurate records of these expenses to ensure that you can back up your claims.

Capital expenditure
Capital expenditure refers to the purchase of larger, long-term assets for your practice, such as dental chairs, X-ray machines or computers. These investments can be claimed through capital allowances, which allow you to offset a portion of the asset’s cost against your taxable profits each year.

The annual investment allowance, for example, lets you claim up to 100% of qualifying assets in the year of purchase – up to £1m a year.

Consider incorporating your business

Incorporating your practice can offer significant tax advantages, particularly if your business has a high income. This is because sole traders have to pay income tax and national insurance contributions on their earnings, while companies pay corporation tax – which is charged at a lower rate than income tax alone.

However, while incorporating offers substantial tax savings, it does come with increased administrative responsibilities, such as filing annual accounts and corporation tax returns. It’s important to weigh these factors and consult an accountant before deciding.

Don’t forget your personal taxes

In addition to your business’s tax liability, you can improve your personal tax efficiency to benefit your overall position. Here are some ideas.

• Pension contributions: You may qualify for pension tax relief, which sees the government top up your pension contributions when you put money aside – up to a certain amount.
• ISA investments: You can invest £20,000 per year in an ISA, and any interest, dividends or capital gains earned on the investments are tax-free.
• Gift Aid and charitable donations: If you’re a higher-rate taxpayer, you can claim tax relief on charitable donations made through Gift Aid. For every £1 donated, the charity can claim an extra 25p.

Work with a specialist accountant

Given the complexities of the tax system and all the specific regulations that apply to dental professionals, working with an accountant specialising in dental tax solutions can be invaluable. They’ll ensure all eligible expenses are claimed, help optimise your tax returns and keep up with changing tax laws that may impact your financial situation.

If you need help with your tax planning, get in touch with us. We’ll do our best to help.