With tax changes potentially increasing penalties for uncorrected mistakes, Simon Cosgrove, dental regional manager at Wesleyan Financial Services, explains what private dentists and practice owners should consider to stay on top of their finances.
Running a successful private dental practice involves much more than delivering excellent patient care. From managing cashflow and paying associates to keeping on top of business expenses and tax obligations, practice owners have a range of financial responsibilities to balance.
With this in mind, proposed changes to HM Revenue and Custom’s (HMRC) rules on correcting tax errors are worth paying attention to, particularly for dentists managing both their personal finances and the demands of running a business.
The proposals, published in July as part of draft legislation for the 2026-27 Finance Bill, would introduce a clearer legal requirement for taxpayers to correct inaccuracies once they become aware of them.
While the changes are not yet law, they serve as a timely reminder of the value of good financial planning and seeking professional support when needed.
Tax treatment depends on individual circumstances and may change in future.
Understanding the proposed changes
Currently, HMRC can issue penalties for inaccuracies in tax returns, with the amount depending on the nature of the mistake and the taxpayer’s behaviour.
For example, a careless error can attract a penalty of up to 30% of the potential tax lost. This increases to 70% for deliberate inaccuracies that are not concealed, and up to 100% for those that are both deliberate and concealed.
Under the proposed rules, failing to take reasonable steps to correct a mistake after becoming aware of it could result in the error being treated as deliberate for penalty purposes, even if it was originally unintentional.
For private dentists, this could have implications across several areas of their finances, from personal tax returns to business accounts.
Consider a practice owner who discovers that certain income has been recorded incorrectly, or that an expense has been claimed in error. While the original mistake may have been an oversight, failing to address it once identified could lead to more significant consequences under the proposed legislation.
The important distinction is that making an honest mistake and knowingly leaving one unresolved are not necessarily treated in the same way.
Working with your accountant
Many dentists work closely with accountants to manage their tax affairs, particularly when operatingthrough a limited company or managing several income streams.
Having the right professional support in place can make a real difference. However, it’s important to remember that responsibility for taking reasonable care over tax affairs ultimately remains with the taxpayer.
Under the proposed changes, this would extend to taking corrective action once an inaccuracy becomes known, regardless of whether it originated with the dentist, their accountant or a bookkeeping process.
For private practice owners, regular communication with their accountant is therefore particularly important.
This might involve reviewing how associate payments are recorded, checking that practice expenses have been correctly categorised or ensuring that income from different services is accurately reflected in financial records.
If something doesn’t look right, raising it promptly with an accountant can help establish whether a correction is required and how it should be made.
What happens if HMRC identifies a potential error?
Another element of the proposed legislation is the introduction of Customer Correction Notices. Thiswould allow HMRC to contact taxpayers where it has reason to suspect an inaccuracy and ask them to review their position.
The recipient would need to take reasonable steps to resolve the issue or explain why they believe no correction is necessary within the specified timeframe.
Failing to respond appropriately could result in an inaccuracy being presumed careless, unless the taxpayer can demonstrate that reasonable care was taken.
Although this represents an additional compliance consideration, the intention is to encourage taxpayers to address potential problems earlier.
For busy practice owners, having accessible financial records and clear processes for dealing with queries could help make responding to HMRC more straightforward.
Taking a proactive approach
While the legislation is still being considered, there are practical steps private dentists can take now to strengthen their financial arrangements.
Keep financial records up to date
Accurate bookkeeping provides a clearer picture of how a practice is performing and can make it easier to identify discrepancies before they become more complicated.
Review your finances regularly
Rather than treating tax as something to think about once a year, consider scheduling regular reviews with your accountant. This can be particularly useful for practices experiencing growth, taking on additional associates or introducing new services.
Address potential mistakes promptly
If you identify something that may be incorrect, seek clarification rather than waiting until the next tax return is due. Your accountant can advise on the appropriate steps and any relevant deadlines.
Consider the wider financial picture
Unexpected tax liabilities or penalties can affect practice cash flow, particularly where funds have already been allocated to staffing, equipment or business development. Maintaining suitable financial reserves and reviewing your business plans can help you prepare for unforeseen costs.
For self-employed associates, similar principles apply. Keeping accurate records of income and expenses, understanding your tax obligations and seeking support when circumstances change can help you manage your finances with greater confidence.
Planning ahead with confidence
The government’s technical consultation on these proposals closed on 7 September, with further decisions expected as the Finance Bill progresses. The Autumn Budget is scheduled for 28 October, and no commencement date for the proposed rules has yet been confirmed.
Therefore, there’s no need to make assumptions about how the final legislation will look. Nevertheless, the proposals highlight the importance of having effective financial processes in place.
For private dentists, managing tax obligations is one part of a broader financial strategy. Whether you’re growing your practice, considering investment in new equipment or planning for retirement, understanding your financial position can help you make informed decisions.
Working with an accountant on tax compliance, alongside a financial adviser who understands the dental profession and your longer-term goals, can help ensure that your immediate responsibilities and future plans are considered together.
Ultimately, taking a proactive approach to your finances isn’t simply about avoiding potential penalties. It’s about creating a stronger financial foundation for your practice and giving yourself greater confidence in the decisions you make.
To book a conversation with a dental specialist financial adviser at Wesleyan Financial Services, visit our website at wesleyan.co.uk/dental or call 0808 149 9416.
This article is sponsored by Wesleyan Financial Services.
