NHS to private: five financial considerations

Wesleyan Financial Services’ team of specialist financial advisers shares their top financial planning areas to address in order to secure your move from NHS to private.

Moving from NHS to private, whether it’s a full practice conversion or starting with your own patient list, is a big and exciting change for your financial future.

It may mean a better work-life balance, removing stress caused by ongoing uncertainty within the NHS and a sense of empowerment that comes from taking back control over your career and earnings.

As with any change, there is an element of risk. But to help mitigate some financial elements associated with the change, we have pulled together what we feel are the key financial elements to look at in order to protect yourself as well as the business.

1. Protection

When talking about protection, it’s worth thinking about the wider context. Not only protecting yourself, but also your family and your practice.

Under the NHS, if you’re unable to practise due to long-term sick leave (after a deferred period depending on where you’re based in the UK) you are able to claim sick pay.

Reviewing your income protection policies and ensuring they are still appropriate for your needs to cover this gap after moving to private dentistry is crucial to support you financially during a period of illness.

The service also provides a death in membership scheme and dependents pension. This supports your family should you pass away.

A solid estate plan is crucial to pull together all the elements of your pension provisions. As well as how you would like your practice legacy to pass on to your family.

Another area to consider for the business that forms part of the estate plan is business continuity planning. This comes into effect should you, your partner or key members of staff be unable to continue working due to serious illness or death.

Partnership and key person insurance for yourselves and your partners is crucial to help mitigate the financial risk associated with these scenarios.

2. Correct business structuring

For some practices, moving from NHS to private could lead to you (or you and your partners) setting up a limited company to trade. This is an alternative option to acting as sole traders/partnerships (based on advice from your accountant).

When income is at or above £80,000, you have a spouse/partner who has a lower tax status, and/or children whom you may wish to pay dividends to, accountants will typically suggest this to clients as a more appropriate company structure.

If this was to happen, your business would become a separate legal entity. Therefore, it is able to transact in its own right.

For example, the business can make employer pension contributions, set up life policies in its name etc as a limited company. This can often provide tax efficiencies. You can pay for certain costs directly from the business rather than personally.

There are also director loan options available. Many practice owners ‘sell’ the practice to the limited company by granting it as a loan. This is often because the company is unlikely to have the funds to purchase the practice itself.

The loan is then repaid by the company to the director and is not treated as income. It therefore isn’t taxable as such.

3. Personal pension and retirement provisions

Moving from NHS to private will almost certainly impact your retirement plans.

NHS pension contributions are likely to decrease or stop. It all depends on whether you reduce your NHS commitments or convert to private provision completely.

Make sure that alternative retirement vehicles (such as personal pensions or building an investment portfolio) are explored to ensure that a proportion of your hard-earned cash is still able to go towards building a separate retirement nest egg.

A few years without any pension funding can create a bigger impact than you might expect. It could push back your retirement date. Or result in you having to save more in a shorter space of time to get back on track.

It’s worth remembering that you are still a member of the NHS pension scheme, even when you transition to private dentistry. The pot that you have accrued up until the point you leave the NHS is available to you when you’re ready to retire.

You can find out more about this in the guide to replacing the NHS pension scheme.

4. Improve cash flow

Sitting outside of the direct financial impacts to yourself, the move will also impact the finances of patients. Many are used to paying a set amount for their dental treatment under the NHS.

Supporting your patients by providing an alternative payment vehicle that spreads the cost of their routine dental care into regular, consistent payments may make the change more palatable and help retain their loyalty.

Introducing a membership plan for routine dental care is a good way to support your patients through this change. There are providers, such as Practice Plan, that ensure your brand is at the forefront rather than theirs.

This ensures you maintain a relationship with patients. One that isn’t diminished by introducing third parties into your communications.

Then, moving to private might provide you with opportunities for more complex or cosmetic treatments. Similarly, it’s best to consider patients and their ability to fund these high-end costs, which is where patient finance might be a way to help patients spread the cost and ultimately, say yes to treatment.

Brokers, such as Medenta, can help you with this process.

5. Specialist advice

Moving from NHS to private may seem like a daunting change to some who isn’t sure where to start. Or an exciting change for others who can’t wait to start the process.

Either way, it pays to get specialist financial advice to smooth the transition. And to get your financial foundation as secure as you can ahead of the change.

You may find that your income increases as you move to private dentistry. So, a review with a financial adviser allows you to ensure the surplus income you earn is utilised in a way to optimise its growth – particularly in the high-inflation environment that we are currently facing.

Having the right team of people around you who understand the world of dentistry not only eases the burden of identifying all the financial pitfalls and opportunities associated with the move, but most importantly, takes away one element of stress.

This leaves you free to focus on other areas of the business. As well as preparing your team and patients for the change.

To explore your options outside of the NHS, speak to a specialist dental financial adviser from Wesleyan Financial Services as part of a no-obligation financial review by visiting wesleyan.co.uk/lifes-journey or calling 0800 316 3784.

Please note: tax treatment of particular solutions depends on the individual circumstances of each client. It may be subject to change in future.

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