| Tax
Options
You may have a choice so let’s look at your tax
options in detail.
Option 1 – Taxed
at source (PAYE)
The NHS and Locum agencies tax you under normal PAYE rules
(Schedule E). Locum agencies also, unless otherwise instructed, tax you
at basic rate (emergency tax).
Advantages: None
Disadvantages: Allows no flexibility for tax purposes
under the tax act ICTA Section 19, 1988. You are very limited on what
expenses you can claim. The Inland Revenue normally only allow your professional
subscriptions.
Option 2 - Self-Employed
This will apply to Consultants with private practice income
and Locum Agency doctors (where applicable). You will be paid gross e.g.
before tax and national insurance contributions have been deducted.
Advantages: Your income is now treated as ‘Schedule
D’ Tax Act ICTA Section18, 1988. This now allows us to claim additional
expenses e.g. books, computers, travel, mobile phone, secretarial, office
from home and many more (where applicable).
Disadvantages: Because tax is not being deducted at source
you therefore must discipline yourself to retain enough funds to pay your
tax bill at the end of the tax year (5th April).
Option 3 - Incorporating
your own UK Limited Company
Beneficial to Consultants with private practice, short
and long term Agency Locum doctors and Locum General Practitioners.
Advantages: Many - you will be an employee and director
of your own company. All business and running expenses can be claimed
(as with option 2). For tax reasons you should consider including your
partner, spouse or dependants (over the age of 18) as co-directors or
shareholders thus utilising their basic rate tax band. You will receive
both PAYE salary and dividend as remuneration from your company therefore
paying less tax and national insurance. There are no complex administration
duties in addition to the records you should already be keeping. We will
purchase the company and register the company on your behalf, whilst providing
advice and assistance at no additional cost to you or the company. Contact
us for a personal illustration.
Disadvantages: This option does not benefit every doctor.
It is very much dependant on your personal circumstances.
Option 4 - The UK Contractor
Company or Umbrella Company
From 6th April 2007
The goverment removed the tax advantages of managed services companies. It is now illegal to work through a managed service company.
If you are being paid through a third party intermediary under the guise of an 'umbrella company' you may be caught by IR35 legislation.
For those considering using off-shore companies, be warned as in most cases that we have experienced, you may end up paying more tax and become subject to a tax investigation by HMRC.
Be careful of those companies who claim they have special arrangements with HMRC and can claim expenses on your behalf through dispensation. All this means is that the company does not have to see your receipts. However, in the event of an enquiry, HMRC would always ask for sight of receipts. There is no ‘automatic’ or ‘standard’ amount of expenses that you are entitled to claim. Many of these companies who offer this type of payroll method are not accountants. Doctors are often referred to some payroll companies because they pay high commissions for referrals but unfortunately do little by way of tax mitigation. You should always speak to a competent tax advisor or accountant who understands your job and circumstances and has experience in servicing your particular profession.
The right advice can often cost you money but in most cases can sometimes save you more in tax.
Conclusion
So if you are keen to maximise the financial returns available
to you as a doctor with the minimum of administration or administrative
duties, call today to discuss in confidence (under no obligation) which
option will ensure you pay less tax each month and obtain a no obligation
illustration on any of the above options.
Getting Started
After we advise on the option to suit your individual
tax circumstances, an application form shall be forwarded to you within
48 hours of our telephone discussion. We will also liaise directly with
your locum agency when necessary.
Download Tax Tables - Click
here.
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