90% of UK adults will waste an unnecessary £7.6bn in tax overpayment this year.
With the increasing cost of medical indemnity and professional subscriptions many doctors are feeling the strain on their finances. We performed a recent survey on freelance doctors, showing that 4 out of 5 doctors were grossly overpaying on their tax bill.
I used to manage my personal accounts using complicated spreadsheets and time consuming software programs. But I never seemed to know what records I should keep or be able to find the time to enter all the data.
At the end of the tax year I would spend days trawling through paperwork for my accountant. I decided there had to be a better way so I teamed up with specialist medical accountants and created a solution – MyLocumManager.com; a bespoke accounting toolkit for doctors, that makes it simple to record your accounts in realtime, in seconds from your smartphone or PC.
The first year I used it I knocked over £2000 off my tax bill.
I learnt how to be extremely tax efficient and was able to manage all my accounts in very little time. Therefore, here are my 5 top tips on reducing your tax bill and becoming more tax efficient;
1. Claim all tax-deductible expenses
As a self employed doctor you are allowed to deduct legitimate business expenses before paying tax. Many doctors are unaware of the types of expenses they can claim for. Although we often expense for the larger things such as medical indemnity, we often forget to expense for everyday business costs that we pay as part of our work. These include train fares, parking tickets, parking permits, stationary and medical equipment. It is important that you know what to claim for. A full list of tax deductible expenses can be found here.
2. Track Missed Payments
If you are freelance, you are in charge of all your business earnings and chasing outstanding payments. With so many other things to juggle it can be difficult to know which invoices you sent, which have been paid and which ones need chasing. In order to be tax efficient it is key that you run your business admin meticulously, there are a number of ways you can do this through Microsoft Money, bespoke online software and spreadsheets such as excel.
3. Self Employed Car Costs
You can claim the running costs of a car, but not the total cost of buying one. If you use the same car privately you can claim a proportion of the total costs. It is important that you record your car mileage for your commute to your clinic or practice and home visits.
4. Make your pension work for you
If you are undertaking some NHS work then you are able to make contributions to your NHS pension if you are a sole trader. Contributions to your pension fund are fully allowable for income tax and the assets in the fund can grow free from tax. This can be an extremely attractive financial option for many.
5. Financial Planning
It is important to keep a meticulous financial record of all your earnings, pension contributions and expenses. The HMRC require you keep these records for at least 5 years. Getting an independent financial advisor and considering income protection may also be worthwhile. Consider investing in an ISA – you can invest up to £15,240 tax free. If your partner pays a lower tax rate it is possible to reduce the total amount of tax you pay as a couple.
As a busy locum GP, I have learnt the importance of having an effective system to organise your finances and tax reports. Creating MyLocumManager, has not only enabled me to easily prepare for my tax return which involves sending all the data from the site direct to my accountant with one click, but has also has helped thousands of my colleagues manage their business admin, saving them time and money.
It has been an amazing journey creating MyLocumManager and it is so rewarding hearing about the difference it makes to busy doctors. The site has been awarded a place on the NHS England Clinical Entrepreneur Scheme and we are now finalists at the ACW Awards Health Tech Start-Up of the Year .
This recognition and support drives me to keep innovating for our users.
Dr Surina Chibber, Co-Founder www.MyLocumManager.com