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Dentists Who Invest

Podcast Episode

Dr James: 

Fans of the Dennis who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dennis who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome, welcome to the Dennis who Invest podcast. Welcome everyone. Hope you’re all having a good day. I just saw a jump on the group quite spontaneously to create a live to give some content about the new budget and what it means for you, and Mike has very kindly donated his time. We’re going to speak on Rishi Shunak’s impending budget changes, which are going to apply in the new tax year, if I’m correct, mike.

Mike: 

Most things, some things actually forward planned, but yeah there you go. I’ve learned something already.

Dr James: 

Mike is an absolute fine of knowledge. He’s on the group with anybody’s interest at his names Mike Brown. He’s always dishing out knowledge on tax and I can’t see anything like that. It’s super interesting and I thought who better to speak on the budget than Mike himself? So very privileged to have Mike here today. Hope you’re good, Mike, and if you’re happy, I’m just going to jump straight in with some questions. Mike, yeah, that’s a good jump. Cool, cool, cool, cool Cool. So, first of all, what I was interested and I’m sure lots of other people will be in a similar boat to me what I was interested to know, what is like a brief, concise summary of the most important changes, Because surely there’s going to be a lot of information out there and you’ll know what’s relevant better than any of us will. So I’m just curious to hear that.

Mike: 

Yeah, absolutely so first of all, our budget summary is 16 pages long. We’ve got maybe 10 or so minutes to cover this, so we’re going to fly through some things, and this is just the summary. You can see what’s in there. Wow, I’ve also condensed that down into a short A4 kind of size. So things that are relevant for dentists only. So let’s crack straight on. We’re going to start with sole traders, so not incorporated businesses Well, individuals, let’s call it actually. And the main change there is historically government has increased tax bans at minimum with inflation, because as your income increases with inflation, you would expect tax bans to increase with inflation, because if they don’t, your take home is going to go down. You’re going to have less cash because your taxes are artificially going up. So what’s historically happened is the personal allowance has increased quite significantly over the last five years. It’s now at £12,500. So everyone can earn, not everyone. If you earn under £100,000, you can earn £12,500 tax free this tax year. That is going up. It’s going up by £70 next tax year, so from 5th of April. But then it’s going to be frozen for the next five tax years, I think up to 2026.

Dr James: 

Interesting.

Mike: 

The effect is, assuming that the practice you work at has inflation reincreases to their sales, which normally most practices would, or you have an inflation reincreased to your associate contract, the effect will be that your take home will go down. The HMRC will work that because there’s no inflation reincreased to those tax bans. Same thing applies to the higher rate of tax. £50,000 of earnings you could earn at the basic rate, assuming again you earn over £100,000. That’s going up to £50,270. There’s a small increase in the basic rate band of tax but again that’s then going to be frozen for the next four or five tax years.

Dr James: 

What was that figure? Again, the basic rate’s increasing too.

Mike: 

The personal allowance is going to £12,570. Then the next £37,700 will be taxed at 20%. What that means is you could earn £50,270 and not pay the higher rate band of tax. Now that changes and this has been around for years. That changes if you earn over £100,000. This is where tax gets excruciatingly painful for higher earners. When you earn over £100,000, you start losing that personal allowance, that £12,500 of tax-free income. Actually in that bracket you pay 60% tax at an effective rate. Add on national insurance and student loan. You’ve still got a student loan. Actually you’re paying away £71,000, you’re paying £29,000.

Dr James: 

That can be a good idea to get into a separate roundabout that territory for a lot of people.

Mike: 

Private pension contributions or limited companies absolutely to great plans for mitigating that. So, yeah, that’s the main one for individuals. I think we’ll just skip over into the next bit, which is your self-employment income support scheme. Okay, very, very useful for any individuals earning under 50,000 pounds. Now, that takes the majority of full-time dentists out of the equation, but you know, younger dentists, especially those that just finished their FD year, may have actually crept into that bracket. Now the fourth and the fifth scheme have been announced. The main change is the first, second and third were based on 18, 19 tax returns. Okay, the fourth and the fifth are based on 1920 tax returns. So any FDs or any new associates that qualify finished their FD year. You get the year right in August 19,. Historically would not have got this grant. Now they may get this grant, oh, I see. Okay, it’s worth seven and a half grand for the fourth and it’s worth seven and a half grand for the fifth, so it’s potentially worth 15 grand to the dentist Worth, while checking if you’re eligible If you are eligible, because the numbers work. That’s the first step. The second step is to think about whether coronavirus is still financially affecting you and whether you have reduced demand due to coronavirus. You look at fellow times for dentists. You look at the fact that an aging population probably aren’t turning up to dental practices that often. You probably can tick those boxes, but you do need to think specifically to your personal circumstances as with all of this very, very important specific to you. Don’t rely on my information right now because I don’t know the individual dentist’s circumstances. Just quickly, on the fifth grant, there is an income threshold, so they want you to declare that if your income has dropped by 30% or more, you will get the full grant. If it’s dropped by 30% or less, you will only get 30% of that fifth grant. So it’s caused a bit more confusion. There’s a bit more calculations that need to go on. Again, you need to ideally be speaking to your accountant and making sure they’re your best friend at this moment in time to make sure they’re checking whether you’re allowed it and you can claim it.

Dr James: 

Super interesting stuff. That’s really cool. I didn’t know half of that and I’m sure that will be very relevant to a lot of people.

Mike: 

Thank you very much.

Dr James: 

Go on if you’ve got a question.

Mike: 

I was just going to say there’s still more that I want to cover on the overall update.

Dr James: 

By all means, by all means, mate. Sorry, I thought you were finished. Yeah, the more you do it.

Mike: 

No, no, no. There’s still a few more Quickly for employers, those practice owners and employee people, coronavirus drop retention scheme has been extended to September. There’s a lot of memes out there that say, well, the country goes back to normal in June. The support schemes are extended to September. What’s going on here doesn’t quite add up. Who knows? There’s apprenticeship schemes and traineeship schemes available so you can get grants if you’ve got nurses perhaps going through training programs. There’s maybe one to three grand that you can claim there. And there’s also, yeah, worthwhile looking into a lot of dental practices. Ignore that, so definitely worthwhile. See if you can get your hands on that. There is another loan scheme, so anyone that needs a cash injection from the bank, they should be able to get their hands on a bit more cash from the bank. Yes, fire a loan so it is repayable, but it is backed by the government up to 80% of that loan, which will just allow the banks to hopefully quickly lend rather than going through stringent credit checks. Then we jump into corporation tax those trading is limited companies. This is massive. This is probably the biggest change of the budget. There’s three things, well, two things that I really want to cover. And then a throwaway comment at the end Corporation tax rates going from 19% to 25%. It’s not coming in until 23, 24, so you don’t need to worry about it until April 23, but it’s a massive jump from 19% to 25%. Again, things are a bit more confusing. Historically, 19% doesn’t matter if a company earns £1 or £5 million, it’s 19%. With the CT right now, there’s a small profit exemption, so if your profits are under £50,000, you pay 19% If your profits are over £250,000, you pay 25%. If your profits are between the two, you pay somewhere between the two. The devil’s in the detail. They haven’t announced exactly how it works yet, so we’re still not sure. I imagine it will definitely be somewhere between the two. They’ll probably push it towards a higher end, if they can. One step further with that. If you have associated companies, say you’re an associate trading as a limited company and you have a property company for your property portfolio, they will count those as two connected companies and therefore they will divide the £250,000 limit by two. So you’re going to pay more tax in that example, £125,000 each. It’s getting very confusing. You need to take advice. If that’s your circumstances, good news on the other side of it.

Dr James: 

Yes, please, that’s it Some good news. That’s it Some good news.

Mike: 

This super deduction. I’ve called it a super deduction. It’s from April this year to April this year, march 2023, so it coincides with the increase of taxes which is talked about. It finishes when the increase of taxes come in. It means anyone that’s investing in equipment, in refurbishment of practices, in any capital allowances we believe still behind the details still to be unveiled, but you’ll be able to deduct 130% of the cost of that equipment. Put that into layman’s terms you spend 50 grand on doing a practice at surgery. You actually deduct £65,000 from your taxes. Okay, 130%, and therefore you pay less tax in the next two years. The theory is quite simple. The theory is let’s try and get companies to invest now, to make businesses better now, and then let’s tax them higher in two years time. Tax relief now, higher taxes two year time. Okay, it costs the government now, but then we get more taxes in. I’ll say we, the government, gets more taxes from 23-24. Real quick, guys.

Dr James: 

I’ve put together a special report for Dentist entitled the Seven Costs and Potentially Disasters Mistakes the Dentist Make Whenever it Comes to their Finances. Most of the time, dentist are going through these issues and they don’t even necessarily realise that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdenisounvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details the seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forwards to hearing your thoughts. Wow, I don’t remember there ever being so many wholesale changes in a budget, but I guess it’s unprecedented times. Or is this common in your experience? No, I mean, I’d say this one’s because of the coronavirus pandemic. I think there’s a lot more going on now than in the historical.

Mike: 

Definitely, definitely, when we talk about.

Dr James: 

Was there more you wanted to add to that? I don’t think we’re there yet. I think next year there will be more more probably negative impacts on taxes.

Mike: 

The Tories announced a few years ago they wouldn’t increase income tax for individuals. They haven’t. They wouldn’t increase VAT. They haven’t, they wouldn’t increase tax for individuals. They said CGT. Anyway, they haven’t. They have stuck to their manifesto a few years ago. That ends soon so it may well be that they look at maybe some increases next year. There’s stamp duty exemption still going on. There’s a new mortgage scheme for 5% deposit holders. Cgt James your viewers will be pleased to hear that They’ll be pleased to hear hasn’t changed that £12,300 exemption remains and will remain. So those with crypto and investments outside ISIS. You can still play the game to make sure you’re not paying CGT on any games that you make. There’s loads more, but I think we’ve covered the main ones.

Dr James: 

That’s awesome. Thank you so much. That was a great summary. I have another question here. It was on start dates, but we kind of just answered that somewhat, I suppose. So the official start date of the new budget is, of course, early April, so that would be the new tax year. Rather is early April. Is it April the 6th, mike?

Mike: 

The 6th Mike is the day the new tax year begins.

Dr James: 

Yes, correct, but I believe a lot of those changes that you spoke about. There’s about 10 different changes and they’ve got about 20 different start dates there. You summarise them very nicely. You summarise it very nicely. There’s a lot of them. It sounds like they aren’t even set in stone. Really a lot of them at this point.

Mike: 

Yeah. I mean the CT, the corporation taxes, will happen, but they are in the detail of the marginal relief isn’t announced yet. The personal allowance freezes are frozen and they are guaranteed to the same until, I think, 25, 26. I’m pretty sure that’s the place. I’ve got it all written down here somewhere. Yeah, fair enough, 25, 26,. The personal tax ban will be frozen too. Yeah, it’s not simple. As I mentioned, there’s a 16-page document here of our budget summary. We can’t condense it into 10, 20 minutes, but we’ve hit the main month of dentist, that’s for sure. If anyone wants to copy, feel free to ask me. I’ll ping over to them, cool.

Dr James: 

Is the worship to come then in terms of taxation increases? Do you see? This as the tip of the iceberg, and the government are going to come with their hand out even further down the line.

Mike: 

I would expect. So I would imagine that, yes, there’s more to come. The increase in corporation taxes is quite large. We’ll still be one of the lowest corporation tax rates in the big G7 countries. Why it was quite surprising is because corporation tax inspires large employers and therefore you don’t want to annoy them, because we don’t want unemployment, but us being one of the still one of the lowest in G7 is still reason for them to remain and invest in our country. But, yes, no increases in personal tax rates probably could be looked at at some point next year, the next budget perhaps, but we don’t know until we get there.

Dr James: 

Cool, fair enough, can you? I know that you’ve done a really good job of summarising the general changes. If you were to pick out some of the most relevant ones to dentists, what would those be? What were those ones that would directly affect us the most?

Mike: 

Definitely the ones we’ve talked about In that summary. I really did focus on dentists anyway and removed a lot of the stuff that doesn’t matter. There’s VAT exemptions for hospitality. We haven’t looked at that. There’s a lot going on the personal allowance freeze, it’s the corporation tax and the super deduction and, yes, the self-employment government support scheme.

Dr James: 

Cool, mike is way ahead of me on that one. Awesome Mike. And how can we? This is the best bit, this is the kicker. Okay, we’ve got all these changes. Apart from the, I know that you mentioned grants and things like that Any other ways that we can take advantage of them that are unique to dentists?

Mike: 

Well, there’s an interesting question that was poised on the group yesterday or the day before that seemed to get quite a lot of responses. So, for every look and associate dentist or a principal okay, you have the right on how you structure your business. There’s an issue with NHS pensions and limited companies and that’s why a lot of dentists will remain sole traders. Okay, the ability to split your business into an NHS sole trader and a limited company for your private and I want to really reiterate anyone that’s read that thread you need to take advice specific to your circumstances. But there is the ability to save a significant amount of tax by looking at something like that. Okay, okay, it’s more complex. You have two businesses. You need to jump through some hoops to set it up correctly. Don’t budget. I’ve seen it firsthand where dentists have come to me and they’ve said, oh, I’ve been doing this for years, but actually they haven’t. They’ve been, you know, really not doing it correctly. You’ve got a lower earning spouse. If you’ve got plans to invest in dental practices, grow other businesses and really quite motivated and ambitious that way, then potentially looking at that will save you a significant amount of tax.

Dr James: 

Cool. So yeah, that was in the detail. I think really, I just say, and maybe worth just getting your account involved past a certain point, Okay, Mike, is there anything else? You’d like to say, just to wrap up and conclude, I thought that was wonderful, really helpful today.

Mike: 

No, I mean maybe to just conclude, I are 35. For dentists it’s a big, big topic. I would be really interested to hear from any of your members if any of the corporates are suggesting they can no longer trade as a limited company. It looks at employment status of a dentist Okay, is a dental associate employed or self-employed? And it’s really going to probably come into fruition in the next few months as to drilling down to make sure that associate is remain self-employed. In my opinion, that’s the best answer for all of you, because taxes are better and your autonomy whilst you’re working is better. So that’s probably a final point just to leave with your members and if anyone has any further questions on that, come back to me.

Dr James: 

Cool, no problem. Actually, mike, we’ve got some questions here, some cute that people have just typed in the chat box. So if you have a few moments we could even answer some of those. Yeah, absolutely Super quick. There’s only two or three here. Silliman Saka says good morning James. And Mike. Good morning Silliman, hope you’re well. Thanks for joining us. Vivek has said is this for self-employed or limited companies? It’s hard to know. The trouble is, vivek, there’s a bit of a lag between us talking and the questions, so it’s hard to know exactly what you’re referring to there because of the time lag. Vivek, if you’re happy to make that more clear in the questions box, we’ll be happy to answer that. Sherry has said again another one that’s kind of referring to something that we were talking about good news for solar traders or limited companies or both. Hard to know exactly what you’re referring to, sherry, but I think overall, well, there’s some caveats. Really I don’t know if it’s necessarily good news for either. Really, this budget Is it like no, not really the freezing in personal taxes is not negative.

Mike: 

really it is negative. It’s not a huge negative. They could have increased 20% up, 40% up. They haven’t. So I’d say that’s probably a lower negative, a better negative than corporation tax, where corporation tax was pretty negative for those trading as limited companies, unless they’re low around.

Dr James: 

Cool, no problem. Vivek has typed another question. It’s really just kind of added something to the conversation. You can apply for bounce back loans if you have a business account, including those who have a current account, and trading as a sole trader through that current account. Does that make sense, mike? Is that something that you’ve heard of?

Mike: 

Yes, any businesses can apply for bounce back loans. A lot of the banks were defining businesses as having a business bank account. That’s not a true definition of being a business, but that’s the one the bank used and that’s their choice. So if you’re a sole trade dentist a dentist trading is a limited company you could potentially get a bounce back loan from your bank. It’s 0% interest for 12 months, then it’s 2.5% interest thereafter. So, yes, potential to get cash injection there.

Dr James: 

Cool, cool, cool, fair enough. Peter has asked will this be available afterwards on the group? Yes, peter, as soon as I stop this live, facebook processes it for about 30 minutes and then it’s live. Sherry has said oh, hang on. Vivek has said I forgot what I wanted to ask. There is Vivek. Hopefully we’ve given you enough information in that live to make it worth a while. Sherry has said the good news was about buying equipment. Yes, that is true. There is some good news. I suppose. Sherry, you’re quite right, and the 130% claiming back is also quite good. And Vivek has just snuck one question in there just before the final whistle Can hygienists be classes self-employed? Good question, I don’t know, can they?

Mike: 

Yeah, absolutely. I would say the majority of hygienists are self-employed. Again, it looks at the legal contract or the working arrangements between the hygienist and the practice. It all goes down to who controls the hygienist. Who tells them when to work. Are they working using their own equipment or not? Can they work at other practices? So there’s a lot of considerations into it. I would argue from both the maybe not from the hygienist side, but from the practice side they want hygienists to be self-employed because it’s cheaper from taxes, but from the hygienist side it’s a bit too in front of. So the hygienists may want self-employment because they have ability to work at other practices. They have a bit more freedom, they have a bit more clever tax at their expenses. They can claim to reduce their taxes. On the other side, the hygienists may want to be employed because they get holiday pay, sick pay, protection against redundancy and it’s a guaranteed income every single month. So pros and cons of both.

Dr James: 

So there’s some questions, other questions sneaking in here. I wanted to keep this live really bite-sized Guys. So if you want to ask Mike any questions, he is available on the group. His name is Mike Bryan. We’re going to wrap up now. Mike. Thank you so much for giving up your Saturday morning to come and talk to us, and I think there was a lot of really valuable information in there to get this.

Mike: 

Just one far away comment, james sorry.

Dr James: 

Totally, totally. Yeah, let’s hear it.

Mike: 

Anyone thinking with a limited company thinking of investing in a hybrid car should do it before the end of the month, because the rules change and it will be electric only after the end of the month. Okay, so there’s quite a big change in intact allowances for hybrid cars. I forgot to mention that. It’s quite cliff edge, it’s quite time, important and a bit of a cool stuff.

Dr James: 

Okay, thank you so much, Mike. Thank you so much for your time. I hope you have a great Saturday. I’m Mike Bryan, a man who is a big and hit. Join to become part of a community of thousands of other dentists interested in improving their finances, wellbeing and investing knowledge. Thank you,