PFM Townends points out the potential financial hazards if you’re self employed.
New Year is often a time where people set goals for the upcoming year and is a time to re-evaluate your professional life. The first key date of 2019 will be the 31 January, which is the deadline for both submitting your Tax Return and paying your tax bill. For those of you where 2019 will be the year that you complete your studies and enter the world of self-employment – it will be a big year!
Who applies to you?
If you have been employed all year, you might think that filing a Tax Return won’t apply to you, but that isn’t necessarily the case. You are still entitled to claim tax relief on your professional expenses such as subscriptions and indemnity insurance. If you have had to purchase loupes or other dental materials required for your job, then these can be claimed for as well. It is worth speaking to your accountant to see what is the best course of action for you to take to maximise your tax position.
Tax Returns, however, are not the only consideration you have to make as you join the world of self-employment and become responsible for all aspects of your finances. There are a few key areas that you need to be aware of to be able to plan. Once you are out of employment, you are no longer entitled to sick pay. We would advise that you adopt a long-term plan, and safeguard yourself against any future illness. There are many forms of income protection available to you, and it is certainly a worthwhile expense. The nature of the work you will perform as a dentist lends itself to muscular and joint conditions, and so you need to make sure you are protected from the start of your career.
Pensions is another worthwhile consideration. Through performing your NHS work, you will be entitled to be part of the NHS Pension scheme. Although this is a good scheme, it may also be worth considering making additional contributions to a private pension. Not only do pension contributions provide tax relief, but they are another means of saving for the future.
Finally, many of you will be looking to buy a house, or even a practice in the upcoming years. Being self-employed makes securing a mortgage or bank loan more difficult, due to the potentially fluctuating levels of income monthly. As a first-year associate, another problem is that most lenders require two full years’ worth of accounts, and as a newly-qualified associate, you won’t have this information. It is important that you work with your accountant to try and forecast earnings so that you can still obtain any financing required.
Help is at hand
Being self-employed may initially seem like a lot of responsibility and an overload of information. The HMRC tax system itself is complex, and then paying the tax is another routine that you have to get to grips with. Help is at hand, so speak to us to make sure you spend and save your money in the most efficient way possible!
For more information visit pfmdental.co.uk.
