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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.

Dr Bilal: 

Welcome to the Dennis who Invest podcast.

Dr James: 

What’s good everyone. Welcome back to another episode of Dennis who Invest official podcast, hosted by myself, james Martin. I’ve been having a little bit of a think since I’ve been on the airwaves last time and what happened through one reason or another, there was a period of about a month and a half where I didn’t shoot a podcast and that was just only because I just had so many other commitments going on around about that time and, for one reason or another, or the guests would move things or I would move things and, like I say, just for one reason or another, it didn’t happen. So because of that hiatus, it meant that we’ve only just began shooting them again last month. And what I thought would be nice is if we now made this the official season two of Dentists who Invest podcast, because getting Andrew on it felt like a very seminal moment. It felt like maybe it was a crossroads or we’d reached the zenith, or we’d reached a point where it was time to reflect and maybe just take stock of where we’ve got to. And it just so happened that inadvertently, around about that time we had a little bit of a pause. So, for anybody who’s interested, it was just nice for me to kind of draw a line under it and call it season two and begin to think about where we can go and where we can progress the Dentists who Invest podcast and just see where it might wind up. I’m having a ton of fun. I hope everybody who listens to the podcast is having a ton of fun. And yeah, welcome to season two retrospectively, of course, because this is now the second episode of season two. I beg your pardon, but yes, this is the official welcome. Here we go, season two, and we’ve got a brilliant, brilliant, brilliant guest to kick off episode two of season two. You’ve probably seen him on the grip. This is a episode about tax. Now I know what you’re thinking tax not always necessarily the most sexy subject, but it’s actually an amazing way that we can be more profitable and be more efficient when it comes to saving Because, remember, we have to be able to save to be able to invest in the first place. It makes total sense and tax being efficient with tax, never, ever tax dodging being efficient with tax is one of the ways that we can do that, and we’ve got someone who’s eminently qualified to speak on that today. This episode complements the very first episode we did on tax way back when, many moons ago, my very eminent guest. He sat here in front of me right now. I won’t be appearing on camera today for anybody who’s watching this on video, but you can see this chat space. He’s looking back at me right now, bilal Ahmed. I’m what an amazing backlight and professional studio Bilal has presumably in his man cave. How are you today, bilal?

Dr Bilal: 

I’m good. I’m good, james. Thank you for having me. Thank you for having me on the podcast. I absolutely love it. I think you’ve created a fantastic forum, and I was introduced to it by one of my clients who recommended the Facebook group, and now I absolutely love what you’ve created.

Dr James: 

That’s awesome, man. Thank you so much. Do you know that when people say that they find it useful and that they really enjoy it, it hits different for me because it’s my baby. Do you know what I mean? It’s right here, right here in the chest. But anybody who can’t see I’m touching my chest right now, I’m touching my heart. It means a lot to me. No, it does really, honestly, because there was a lot of things that I just think there’s so many valuable things about money that just weren’t out there or they just weren’t getting said or there was no platform for. That’s why Dentist who Invest has become what it is, and that’s why people listen to the podcast, and I’m just so glad that everybody finds it as cool and as useful as I do. So thanks for that, my man. Thank you very much.

Dr Bilal: 

You’re more than welcome Bilal.

Dr James: 

you are an accountant, of course, and you have a special interest in us Dentist. For anybody who doesn’t know Bilal, bilal does 30-second tax tips online and this consists of Bilal just dishing out as much knowledge as he can about tax in 30 seconds and they’re quite entertaining and I think it’s a bit like watching somebody spit bars like a rapper, because it’s like bang, bang, bang, bang, bang and I’m like how does he do that? That’s so good and it’s all in one take as well. It’s quite impressive.

Dr Bilal: 

No, I really appreciate that. Thank you, James. It’s 30 seconds of content might take hours to film, especially when you’ve absolutely nailed it and it’s 31 seconds long oh no, no, surely no one’s going to call you up on that.

Dr James: 

No one’s going to notice. 31 seconds is fine.

Dr Bilal: 

So I’ll know. And yeah, it hurts when it’s 31 seconds long and you’re trying to absolutely nail it at 30 seconds, but the purpose of all of that really is and I think the ethos really behind it is to give you the financial information that you probably should have had at some sort of formal setting, be that at school, college or university. That says you know, this is really important stuff that you sort of left here on devices, and the goal with those 30-second tidbits is to get you thinking. That says, if I can layer on this information, it starts either you go back to your accountant, start asking better questions or you start expanding your mind on the other opportunities that you haven’t really considered. I could do that and then these are the things that you need to know and that’s really the goal, for what about that? Says there’s only so much information I put in 30 seconds, but it’s to really get you thinking and that’s what I’m striving to create with that. So this is a good format for me because there’s only so much I can get in 30 seconds. But now you give me many 30 seconds where I can start going to detail into some of the concepts, and I think that the goal today is to really take you on a journey of the tax side of things. So we’re trying to take something that’s quite depressing and quite expensive and make it less expensive. And take you on that journey is that you might be at different parts of where you are in that journey, but I think it’s either some most of it will be relevant to everyone listening, but it might be relevant to you now but it might be relevant in five years time and if I can impart that knowledge then I’ll be really happy with that.

Dr James: 

And Bilal and I were talking about how we were going to structure this interview just off camera, and Bilal’s organised this, or arranged this, really nicely and methodically, because he’s taking you through that journey from being an FD to being someone who’s just come out of FD, got your first tax bill, through to being an associate and beyond, and I think that’s really nice because he’s just going to hold her hand through that process for everybody who’s on that journey yet to start that journey, regardless of where you are. It’s a nice way to make it into a story and make it a bit more fun. I think that’s super cool. Bilal, as well as that, you were telling me the other day your 30 second tax tips. You achieved a level of virality the other day with one off and it’s quite significant for virality. Can I let you tell the story?

Dr Bilal: 

Yes, so I launched them on TikTok and on Instagram on Reels. So I think one on Instagram is currently 105,000 views, which is phenomenal really. So I’m quite happy with that one and I think there’s it’s kicking off onto the other ones as well. So I’m noticing quite a rapid increase in the views on almost all the other videos. So people are watching and they’re clearly going through the feed, which is quite encouraging, which is quite nice. That’s a picture-self moment.

Dr James: 

Come on right there. That’s awesome man.

Dr Bilal: 

Yeah, it’s very nice. When I first started seeing the numbers rise, I was like, well, it can’t go any higher than that. Then it was like 10,000. I was like, right, can’t go any higher than that. Then it was like 15,000. I was made up with 15,000. Then it went to 20, 25. Then it was 50, 50,000. I think it created something like 12, 1300 new followers as well, which is just fantastic. So I’m still dipping my toe into the social media thing, but I’m enjoying myself.

Dr James: 

That’s awesome man, that’s really cool. Well done, thank you. Well done. Thank you. What was that on Audio curiosity? I know it was on tracks, but specifically, real quick guys. I 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 wwwdentisttoinvestcom 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 forward to hearing your thoughts.

Dr Bilal: 

I think it might have been the 100th phase of Super Induction. Off the top of my head, I think it might have been the 100th phase of Super Induction, and then the other one that’s doing quite well at the moment is Soul Trader versus Dimmter Company.

Dr James: 

Awesome, the power of the internet. How cool is that? You know I actually I had a similar story, not quite to that level, but I made a video ages ago on the best books to read for someone who was starting out their crypto journey and I made this video and normally the YouTube video. It’s not really. It’s not really where the bulk of the traffic is for dentists who invest not by a long way, if anything. It’s just I just put them up as a token. Really, I supposed to maybe build a YouTube channel for someday and Normally, for context, they maybe get a hundred views if they’re lucky and this thing got like 5,000 views and I want it just kind of took off and it I Searched best books to read on crypto and it was the first one that came up and I just feel like it Just it came along at the right time and there was no one else who’d really thought to make a video like that, but it was just interesting. Really. It’s not quite to the same level as you, but it’s the sort of thing I’ve noticed. Sometimes you make content and you think, okay, here we go, where am I gonna? You know when do the talk show host start ringing me? You know when I appear on TV? You know that sort of stuff, because you just think yourself this is gonna be incredible and quite often it’s the things that you don’t really Really think are gonna do that well, but then they just so happen to do well. And I think the key thing with that is there’s two ways you can manipulate. There’s two ways that you can. You can use that information. You can either be someone who’s incredibly, incredibly succinct and clever about Understanding exactly what it is what people want, and you will need that to a degree, but I find that it’s almost just a case of you just make as many videos as you can about something that you’re passionate about and sooner or later one often takes off and that’s sure, it’s almost like you’re big, breaking away. It’s almost like you big, but it’s the graph that comes before that and everybody sees the 105k whatever it is video, but it’s all the hours that come in before that. And let’s not forget as well Speaking on camera. Oh, my god, the first few times you do it, you have a whole new respect for the news presenter, a Whole new respect for that radio host, because it is so hard, there are so many ums and as and whilst. Neither Balala are gonna sit here and say we’re the best at it, we’re perfect. It does take some practice it really really does just to get your words out and I suppose in that way you reap what you sow, and that is that can be the reward for hard work. But yeah, what an interesting story, what a great story. Bilal, that’s really cool. Remember you appeared on dentistry invest podcast? Remember I played a part in making you famous when you hit the big time?

Dr Bilal: 

okay, Definitely, but it’ll be that when you’re absolutely right without that project, you think that you made something like 30 seconds. This is gonna do numbers. This is gonna be phenomenal. I better put DM for inquiries in the bio, because it’s all about that’s where you are. It’ll be the most random one that takes off. Yeah, no, you’re absolutely right. No, it’s an interesting journey, so let’s see where it takes us.

Dr James: 

Yeah, I’ve heard others say that as well, that it just it’s the most random thing that you never really think about, and I actually Forgot that I made that video Until, I think they sent YouTube sent me an email said congrats on your first X number of views in a video, and that’s why I just caught me off guard entirely. But yeah, 5k compared to 105 K is nothing, so hats off to you, my friend.

Dr Bilal: 

Yeah, thank you.

Dr James: 

That’s off. Awesome, bilal, we’ve given us a little bit of an intro about yourself. We know you as the 30 seconds tax tip guy, but can you give us any more background, just for anybody who hasn’t got run to meeting you just yet or doesn’t know you from the group as yet?

Dr Bilal: 

Cool. So my name is Bilal, I’m chief accountant of Heathville Green. That’s my baby. A bit about myself and who I am on my journey today. So I quantified as an accountant almost 10 years ago and it’s been an interesting journey. So my background is commercial finance. So I trained under a corporate team that did the they, the annual report for the head office companies, which is all really sexy accounting really. But what it meant was the team of six. We were responsible for 2.2 billion pounds of revenue and You’re audited by external orders. So you know you might have 10,000 lines in transaction and the orders can pick any one of them in any different categories. So you’ve got to make sure your informations are beyond reproach. So that that’s in my background. So technical accounting, trying to work out how we can apply the correct accounting standards to generate that there the most desired outcome and then beyond that is, I did quite a bit of commercial finance. So I spent a bit of time at Middle East, which I absolutely loved. More recently worked logistics in the UK where it was looking at a business and almost taking it apart like a jigsaw that says, well, we’ve got to put it back together again because the business has to operate, but what’s the most efficient way to do that? So you know, if I was looking at your business, for instance, you’re the expert of your business. I can’t come here and tell you how to do your business. What I can do is give an opinion from an unbiased perspective that said, james, if you did this this way, this might be the outcome. And then it’s a collaborative approach that says, right, I can’t do it that way for that reason, but you’ve given me idea to try something else. And then that might mean you know you, you get more bombs on seats, or you get to, you get to turn the seats quicker, or you know it might. Then, talking about dentistry, might mean you’ve increased your visa line cases to the point where get an ITERO scanner which will will give you a significant return on investment. So that kind of thing is that’s a large part of what we do. Is is taking you on that journey. That says you know you had Mike on and in a home freeze are from what? From what I hear, fantastic accounting company. And then this is sort of a continuation of that conversation, but really adding in the detail at this point says if you did this, this is the outcome, which which I’m really looking forward to going on that journey and really I’m a child accountant and I really want to echo something Mike said on the podcast is Anyone can call himself an accountant and not everyone could call himself a child accountant or a certified accountant. This is, this is a different, so Going to a dentist versus someone who knows about teeth, and it really is a sort of serious as that that says there’s nothing stopping you tomorrow opening the account office and getting registered HMC and there’s nothing stopping you versus smile direct, smile direct.

Dr James: 

Have you heard of those guys? Yeah, yeah, yeah.

Dr Bilal: 

I like seeing. I like seeing my wife argue with them on some of my wife’s a dentist and I like seeing my wife argue with smile direct on Facebook and any any social media folks. You get, I feel, areas, but it’s the exact same concept that smile direct are given the perception that they’re, they’re in the same market, places you as a qualified dentist, providing you with a line, and they’re really not. But then the general public aren’t to know that. So a lot of what I like to educate people on that and think I come back to a horror story which I’ll probably fit in at this point is one of my clients. His brother was with a different accountant and they were talking and he’s gone. Well, bill Al said you can’t do these things and he said, well, my account’s not for me any of that. So he gave me a call and it was horrific in that his accountant was telling me to put his mortgage payments through his accounts, his sofa payments through his accounts, his car payments through his accounts, to go to the cash point and pull 500 quid out of the cash book each month on top of the salary. It was like you can do all that A it’s illegal and B, you’re responsible for those numbers. So whether the accountant’s told you that I’m not in a guarantee he’s not putting it in writing because you will then submit those accounts to HMRC and company’s house. The year was the director, you was the owner of that business or responsible for those accounts. So unless you can prove he told you do that, the office is always on you to do that. So luckily he hadn’t submitted anything yet because it was within the right timeframe and we were able to correct everything and you can do that. I think that takes me neatly on to my next bit that says tax avoidance is illegal. You can serve jail time for that. It’s fraud, whereas tax planning is an entire industry and that’s the industry that I operate in.

Dr James: 

Awesome. Yeah, and that’s I’m very glad that we made that extra clear this up, you know, because the very nature of the beast with tax, there’s maybe a bit of a bit of a black, I suppose miasma surrounding it, whereas soon as people hear the word tax avoidance, you know sorry, tax efficiency then there becomes this it’s almost like a euphemism for something a little more sinister, but it’s not like that at all. It’s just as you said there a second ago. So, yeah, it was very good that you made that extra clear.

Dr Bilal: 

I appreciate that.

Dr James: 

Cool, excellent. So you’ve given us a little bit of an intro about yourself and the next thing we had on the agenda we we sort of touched upon this earlier I was mentioning about your well, the listener’s journey as a dentist and how their relationship with tax evolves over time. Now we all know that, as you’re a foundation dentist, that you start out, that you’re salaried and that means that naturally you don’t have to worry about squaring up your tax returns at the end of the year because generally that is provided, that services provided for you via your the accountant off your dental practice in which you work at least it was in mine. I don’t know about other arrangements, but I know that you wanted to talk a little bit about that the lal and how that journey changes over time. So I’m going to pass the mic over to you and let you take the baton and speak a little bit more on that.

Dr Bilal: 

Thank you. You might have to jump in at some point because I will talk for England.

Dr James: 

It was an Olympic sport I’d smash it. That makes two of us.

Dr Bilal: 

This might work quite well, but we might need a talking stick. So it’s what we talk about the journey, because I think now’s a now’s a great time to do it, because you’ve got a entire crop of foundation, your dentist about to graduate in the next couple of months, and it might sound quite biased and quite selfish to say it, but get an accountant as early as possible, or at least speak to someone, because Mike said it before, he doesn’t charge for an initial conversation I don’t charge for initial conversations Just says we’re happy to have that conversation. So get, have that conversation as soon as possible. But if we talk about that journey and what it looks like really from from seed to branch and then the fruit on the end of that is as a foundation, your dentist, your first, your first year, is employed. So you get a pay slip you paid monthly of the tax and their national truants. Then your productions are taken care for For you. But what you’ll find is your when you qualify your foundation, you’re actually straddling two tax periods. So the tax year runs from the 6th of April one year to the fifth of April the following year and you grab what. You complete your foundation year at the end of August. So come the first September, you are now self employed. So you’ve got a contact HMRC. Tell them you’re self employed. Contact student loans company. Tell them you’re self employed. And because what they’ll be expecting to see is why, why is your why of your submission is finished. So probably student loans company are going to get quite nervous at this point. I think why, why, why, why we get impaired and notified. So you’ll probably get written to if you haven’t done that already. Now, a lot of this is don’t don’t get alarmed by HMRC, because I think a lot of people have this aversion. Like you say. You know you start talking about tax and people think well, I don’t want to get myself in trouble. There’s a massive window of opportunity and we talk about this in a bit more detail, what your time frames are. So when you do get a letter, take a second and breathe, help yourself. You know, have a Google search of it. A lot of these are quite innocent letters, so they won’t text you. They won’t text you, they won’t email you. They will write to you, they will always write to you, and that’s all talking about scan messages you might get, but that’s probably one for another podcast is they’ll write to you. So. But if you’re proactive and you go online and if you just Google how to register self-employed, you’ll get it. You’ll get something called a unique tax reference number, utr, and that’s what you then need to submit your self assessment. That then also notifies the student loans company that you’re now a self-employed person. So they’re now not worried because they know they’re going to get their tax paid. So in that foundation year you’re salaried up to one point and now you’re self-employed. So you’re self-employed, which means you’re getting your money gross. So by gross I mean they’ve taken out whatever they want to take and you’re left with your pre-tax number which you can knock off your expenses off. Let’s ignore the numbers for now. Let’s get to the end of April or the end of March, and then the tax year ends on the 5th of April. So we’re now at the end of your first tax year. So what generally happens at this point and this is a good note, because a lot of the first year dentists that I get on don’t keep these records so what you want is either your last pay slip and definitely nudge your employee to say please make sure you send me my P60. Your P60 is a summary of all the income that you’ve earned, and that’s really important. Reason being is, when you come to, when you go to your accounts you can either do it on yourself, go to an account, or you choose to do it is you almost ignore the taxes you’ve paid already. You look at the full year to date and say, in this tax year, this is what I’ve earned entirely. You then take off your 12 and a half grade K tax tax for the allowance. Netting off all your expenses and whatnot leaves you with what we call a taxable profit or a taxable amount. From that we then work out your national insurance, your income tax and any student loan payments, and then that gets us to an amount. We then knock off the amount you’ve already paid. You’re worried then because you thought you’re going to pay tax twice. So we look at the whole picture, then deduct everything you’ve already paid tax on, and that leaves you with a balance in payment that then is paid up to HMRC by no later than 31st of January the following year. What people think is, if I submit it today, it might be end of April. I have to pay it now. You don’t. Everyone still gets the same payment deadline. So I always encourage people to submit as early as possible. A you know exactly what you’ve got to pay, you when you’ve got to pay it, and then you’re good to go. One of the things that I hate seeing and not hate because it causes any issues is because you’ve put yourself in a terrible position. Without fail, it’ll happen every single year is you’ll get some money. You’ll come to you in December saying I need to sort of a tax return out for the end of January, and then dead nervous at this point because, a they have no idea how much they’ve got to pay. B even if they’ve got the money in the bank account. Or, c what they can and can’t claim. So it starts getting quite nerve wracking at that point for someone that says well, you’re the master of your destiny. At this point it says, if you’re in control of that conversation, like the start, find a staffer, go to accountant or do it yourself, get yourself a good bit of software. However you choose to do, it really is you’ll always know what that number is at the end of January. It’s at the end of January and then you then go forward at that point. So, like I say, your default position is sole trader. You opt into the pension schemes and see a valuation at this point, which is a fantastic scheme. None of this is financial advice. So I’ll put a caveat at this point here that says none of this is financial advice and not qualified to be a financial advice, and I stay away from it. Insert terrible joke here as to what you stay away from, but I stay away from financial advice. That’s not my room. I’m an accountant. Go see a financial advisor for that, and if you opt into the pension scheme, you then get your pension deduction source, which is also tax free. You get to opt out within about two years if you choose to do that. But there’s another podcast that goes into the NHS pension in Great Beta, which is a fantastic podcast. It’s one of the dentists who invest and not trying to plug someone else’s point here. And then Every example that we’ll go through going forward at this point is for the current tax year. So the current tax year that runs from the 6th of April 21 to the 5th of April 2022. Awesome, awesome.

Dr James: 

That’s. That’s that. Yeah, awesome, was that it? Sorry, did I jump in too early? Was that it? No, no, no, no, no, no, you’re good, brilliant, yeah, so for me personally, I recall that the practice that I worked at, they deducted my tax at source, as you said, and then they left me with the gross. So they kind of handled that for me, but I don’t know if that’s the arrangement in every dental practice. Is that? Is that what you’ve come across in your experience In the foundation?

Dr Bilal: 

year.

Dr James: 

In find it yes, specifically in foundation year yes, so every foundation year is employed.

Dr Bilal: 

So that’s your, your, your fresh out of university. The practice gets an amount of money to employ you. You’re an employee of that business in that period of time.

Dr James: 

All right. So yeah, that would mean specifically that they will always handle that for you. Yeah, excellent, yeah, Just curious if there was ever some sort of instance where you had to seek your own advice or help on that one. I don’t know, but yeah anyway. So yeah, that’s awesome, drew, a line under that one very nicely for anybody out there who’s a foundation dentist. And now the next part of your tax journey you’re thrust into the big bad world. You find yourself on the precipice of being an associate. You no longer have your ES looking over you, and just when you think that your troubles couldn’t get them compounded anymore, you need to find your own accountant. Isn’t that right, bilal?

Dr Bilal: 

Yeah, so I mean I always advocate the use of an accountant for a couple of reasons. Is when you touched on this in your last podcast is when you met with the accountant from Nasdal? Is you were telling him what you could claim for or given him my account?

Dr James: 

Can I claim my GBC? Oh my goodness, yeah, yeah, yeah.

Dr Bilal: 

What were you paying the guy?

Dr James: 

for that’s what I knew. I just I won’t go into the full story, but for anybody who hasn’t heard that basically what happened was I had a great accountant. He was a dental accountant. He was in something like the Guild, the UK Guild of Dental Accountants. I don’t think it was exactly that. There was some sort of organization where they all liaise with each other and communicated and what have you. And he was under this. He was represented by these people and he really, really, really knew his stuff and he sold his business on to someone else and I don’t think this guy had ever had a con. The new guy that he sold it on to. I don’t think he’d ever have a conversation with a dentist before. And when I went to meet him, I gave him my pay slips and I said to him I said, okay, here you go, here’s the pay slips. And then he said, okay, fair enough, that’s great, I’ll see you in 12 months. And I said, okay, whoa, whoa, whoa. What about when we do the exemptions, the GDC, all these things? And he said to me this new accountant said to me okay, all right, you’ve got some exemptions for me. Okay, let’s hear them far away. Got a pen and paper Right, and I was talking about my GDC and my insurance. And then there was a few other things on there, like I have my phone is half business and my phone is half what I use privately. And when I said that to him he said, oh, that’s a good one. I never thought of that one. And he wrote it down and I thought, whoa, whoa, whoa, what am I paying you for? And then when I got the bill through, the bill was about the same for what the first guy charged me, so it’s not like the price came down any as well. And that’s when I knew I can do better. There’s something that’s just. I’m not getting my money’s worth here. And that was my. That was actually one of the seminal moments that made me think I need to take more of an interest in my finance, because I feel like there is, there is a. It’s not quite adding up. This is not how it should be. This is. There’s something that I can do to improve this. I need to take this into my own hands. So I’m glad you brought that story up. That was. That was a seminal moment for me, bilal. But yes, not to take the, not to steal the, the, the baton from me too much in terms of speed.

Dr Bilal: 

No, you’re absolutely right.

Dr James: 

I think we’ve got more in my chair and I’m going to throw it back to you, my friend, and we’re going to just delve into that next part we talked about.

Dr Bilal: 

It’s a great story. So so, on that journey of of you know whether you should get an accountant or not, that’s a great example of probably why you should get an accountant, I mean. Another example is I had a, I had a client and I used a Sonic Boli is. They gave me the same scenario, which is these are, these are my expenses. This is what I’ve been producing myself. Well, let’s pump the brakes a second. We’ve got time. And the way I like to do it, I run it through a bit of software. What that software does it takes a live bank account, a bank feed, so I get to see all your bank transactions. I don’t get access to bank account, it’s just a digital bank statement. But then I know what I’m looking for. So the reason why I specialize with dentists, a, the specific nuances with, with working with dentists, working within proximity to the NHS, things like, things like your superannuation, your AIR, you know whether you get the maternity benefit or not, so on and so forth. There’s quite a lot of complexity that comes with this, which is why I choose to do it. But then I know what I’m looking for because you know, when you’ve done it hundreds of times, you know exactly what you’re looking for. So I’m looking for your indemnity and things like that. And then, by looking through the bank transactions, I might see something where you bought something for two and a half grand through Curries. I’m like James, what is this transaction through Curries? And you go oh, I bought a camera and some lenses too, and I use it for work, to take pictures. What do you use it for anything else? Do you use it solely for business? No, I only use it to take pictures of teeth. Well, that’s a great hobby to have, james, and more for you. But then ultimately that can you know if it’s part and part you know your foot, your photographer, your hobbyist, and use it for work is all that we can. We can claim a portion of it and I’m an example of it. So I was able to reduce the most tax bill by £1,800 based on what they’d given me versus what I do, and then we take that same approach. So you know, going back a step and saying my background is working with large corporates is I take that same approach to your business, because the mechanics of how a business works and operates doesn’t change. It’s just a number of transactions that go through it. Complexity might change, but the basic mechanics stay the same, which means if I’m doing your accounts digitally throughout the year, there’s a couple of things as A, you get visibility of how much you’re earning, so it’s never a guess. You know what your tax estimate is going to be as the years unfolding. So you know how much you have set aside. And then what I like doing is giving people sort of worst case scenario that says, look, put away your third of your money, and then going through the example and saying, well, how much have you got in your tax account? And they’ll say no, no, well, you don’t need all of it. And then that’s a great story for them to have, and it’s sort of spinning that as a positive story as opposed to not knowing what that number is and not knowing if you’ve got enough to do it. So, yeah, first this term comes, you’re now a full blown associate Congratulations. And now you’re in the big wide world and you’re dealing with yourself at this point. And the first, I think the general educational point on this is and I said it before is the account is not responsible for your numbers. You’re responsible for your numbers. So if you’re not sure, why the accounts and put together what they have. Ask them you’ve paid for a service. Ask them for every single line. What makes up this number? How have you risen to this number? Because it’s ultimate, you have to sign that off. And again, the way we do it is I don’t want you to send me bits of paper, because I hate bits of paper is where fully digital is. We set one to one calls where we’ll go through the numbers and we’ll go through a sign off call that says are you completely confident and comfortable with what we’ve done, why we’ve done what we’ve done? And I think that thing gets us to attack computation side of things that says well, what are my tax bandings? Because one of the biggest, one of the most interesting ones I get is well, once I hit 50K, I’m going to get tax 40%. Well, yes, you’re right, but you only get taxed on 40% on anything over 50K and that’s how the bandings work. So just sort of going through this in a bit more detail is the first time you’re going to get a tax code. You’re going to get a tax code that’s $12,000 that you earn. It’s tax free. It’s called your personal allowance. Everyone gets that and that’s when you pay slip. So when you get your tax code and it’s currently 1, 2, 5, 7, it’s 1, 5, 7, I think it’s 1, 2, 5, 7. So you just multiply it by 10 and that’s your number of of your. So multiply 100, that’s your tax code. So sometimes, if you look at your pay slip and you’ve got something like 3089L, you can contact HMRC and they’ll tell you why your finding that out. One thing I massively advocate is set up set up your government gateway. So your government gateway is how you can access HMRC online yourself. So even if your accountant submits it, you can have access to it. It’s really important to have enough, because when you want to then go apply for a mortgage or something like that, you need copies of something called your SA302s, which are confirmation receipts of your self-assessment. So your mortgage lender will ask to see that. So that’s really important to really set that up at the start, because what you don’t want to be doing is waiting for codes and access codes and seeing if the information has been loaded. When you really need it is to stay on top of it.

Dr James: 

Go.

Dr Bilal: 

So that’s the first 12,500 plans as tax-free. Then up to 50K you pay 20% tax. Then from 50K to 150K you pay 4% tax. Then anything over 150K you pay tax up 45%. Those are the bandings. Then you get national insurance. So when you do your self-assessment and I’m going to assume for this that you’ve got a student loan, but you can factor that in however you want afterwards is that’s your income tax. So that’s your 20%, 40%, 45% bandings. Then you’ve got national insurance. So national insurance is really important because that’s what contributes to your state pension. So you’ve got to make 35 years worth of qualifying payments. Then get your state pension at the end. So up to 9,000, 9.5-ish grand, there’s no deductions. Then over 9.5 grand, up to 50K, it’s 9%, and then after that it’s 2%. Then you also pay an additional banding of national insurance, which is 150 pounds. Every sole trader pays that. It is what it is. Then you’ve got your student loan. Now this is always a strange one. This is because when you do the computations for sole trader versus limited company, you’ve got to make it clear that your student loan shouldn’t really be considered a tax, because that’s money you’ve borrowed from the debt repayment. But if you’re a plan one, you get 9% deducted after everything over about 19.9K. And then plan two which would be most people that are graduating now, which will be well, probably everyone that’s graduating now is it kicks in after 27.3K, so 27,295 pounds. Anything you earn over that amount is you get a 9% deduction. You pay that same time to HMRC. You pass that on to student loans company using your actual short-stunt massage early track and then we’ll work out the calculations as to whether sole trader will live to companies. The right option is your pay slightly less student loan, but it also just means you’re paying less back towards the debt that you’ve got to pay back overall. So when we go through the examples later down the line, I remove that so you’ve got a life for cash example, and then, when it’s taxed, you so, like I said before, your tax year runs from the 6th of April one year, 5th of April the following year this is solely for sole trader and then your taxes due, your payment of your taxes due by no later than 31st of January the following year. So, using the current example, tax year started on the 6th of April 2021, it ends on the 5th of April 2022, your taxes then due by no later than 31st of January 2023. So that’s that. Those are some, and this is what I was saying before is that there’s always time. Just don’t wait for December 2022, because it’ll be air and then the accuracy then suffers, but jump into it as soon as you can. And going back a step is I keep going back and you’ve got forward at some point is take the engagement and account as soon as possible, because you can’t change what’s happened. So if you get to December 2022 and you realize, oh, I could have saved a shed load of cash if I was a limited company or if I operated via a limited company, nothing can be done really from that point backwards because you can’t change what’s happened. The company didn’t exist and you got paid into your personal bank account. You can start from that point forward, which is where effective tax planning comes into it and that’s really what we do is you know, we look at your accounts in real time and if in your foundation I’ve got one example at the moment where the guy’s absolutely smashing it and you know we’re talking sort of 15, 20 K a month and he’s just come out of his foundation your first year associate, and it’s all private income and you think, well, right now, now’s a great time, so we managed to get it in before the start of the taxes. We get some maximum benefit going forward, which is why being proactive, engaging with someone, can save you quite a lot of money going forward. So what we’ve got here, james, is we’ve got some detailed examples. So slow me down or, you know, jump in again where, if you think it’s worth going over this at certain points. What I’ve got here is what your total deductions would be at different income levels.

Dr James: 

Yeah, so you know, let’s make it tangible. That sounds good.

Dr Bilal: 

Yeah, so it’s not unheard of for me. Your first year, straight out of foundation year, you know you’ve had your part payment, so you really have only been self-employed for seven months. Out of that year is total income for the year 50 K. So as a sole trader, 50 K, you’ve got 7.5 K income tax, 3.8 K national insurance and again student loan. If you’ve got it is another two grand, which means you’ve got a total to pay a 13.3 K. Now it’s a slight misnomer because when you pay your tax at the end of the year so in this example, what we said, your tax would be due 31st of January 2023, you’ve also got to pay towards next year’s tax as well. So it’s brilliant. Why wouldn’t I want to pay my tax early? Fantastic, take more of my money. It’s like the phrase the future, I’m taking all my money. You know the meme there. So you then pay half towards the following year tax. So if your tax bill was 10,000 pounds, you pay 10,000 pounds total deductions and then you then pay five grand towards next year’s tax and that’s along with that payments. That’s 15 K. And then you come to the 30% July in the same year, you then pay another paying towards next year’s tax. So your first time you pay tax it’s going to be a bit painful because you’re paying half of next year’s tax along with the tax that you’ve got due, and then the following about six months time. You’re then going to pay towards next year’s tax again, but you’re always means, when you come to the end of that year you’ve already paid it. You just paying the parking to the following year’s tax and you’re sort of prepaying it. It’s a good position to be in, but it’s one to be massively mindful of is, again, if you’ve waited and not spoken to an accountant, that’s going to come as a massive surprise to you because that’s a lot more money than you probably didn’t have set aside. So at 50 K, you’ve got a total of 13.3 K pay, and that includes two K student loan. And so if you don’t get student loan, just knock two grand up. That way, most cases, I think people do have a student loan. And at 60 K you’re now paying 11,000 grand in contracts, 4 K national insurance and then 2.9 K student loan, and then that’s a total of 18.4 K. Now the reason why I put 60 K in is not because of an arbitrary number, is because you’re now at the, the, the 48, 40% tax spending. That says that 10,000 plan you went over. So at 50 K you paid seven and a half grand tax. At 60 K you paid 11 and a half grand tax, which is which is four grand more, which is because 10,000 plans time. 40% is 4 K. So that’s why that increases. Your national insurance doesn’t jump up as much because you’ve now stopped paying the 9%. You now only paying national insurance, and national insurance at 2% over 50 K. Then we get to 100 K. So we take that jump. You’re now paying 27.5 K income tax. This is where it starts getting a bit twitchy 4.8 K national insurance and then six and a half K student loan. That’s a total of 38.8 K deducted. Now the the we sort of take a pause at this point and says when you start earning over 100 K there’s a sneaky tax. That jumps in is when we said before the first time you’re not a father plan, you are as tax free when you start earning over 100 K. So for every two pounds that you earn over 100 K, you actually lose one pound of your personal allowance. So by the time you’ve got to 125 K you now don’t get that 12 and a half K benefit anymore and you pay tax a debt 20% on that number, which is about two and a half grand additional tax, so 125 K. You’re now paying 40 K income tax, 5.3 K national insurance, 8.8 K so you got that loan. So that’s a total of 51.1 K and again, if it’s your first year that you’ve done that, you’ve had a fantastic year. But you’re also now going to pay 20 odd K and the report is going to be so. The reason why you put 150K in is you’ve now paid everything at that point and then you’re just reporting the next banding. So it’s 50K income tax that’s a 30-year income, god 5.8K national insurance and 11.0. So 11K student loan. So that’s a total deduction of 66.8K that’s come out of your income. Then at 200K, you lose your personal ounce of gone at this point. Now at the 45% tax bracket, because anything over 150K that’s 45%. You now got 72.5K income tax, 6.8k national insurance, 15.5k student loan and 9.8K. That’s a total of 94.8K to pay, which is nearly half of your income gone towards tax, which can be painful. A couple of things to note within this is there are ways to mitigate some of this and that is to either start employing people. If, at this point, you want to start employing people to create the claim expense, it’s interesting how many sole traders don’t realise that they can employ people because they think sole traders are just me.

Dr James: 

No, I didn’t know that. I must say I did not know that.

Dr Bilal: 

That’s interesting. No, you can, I’m all ears. So, yeah, you can start employing people, and it’s right at the end of this sort of straight trainer thought. But there are associated taxes. Employed, but you can employ people. How you do that? Again, either tell your accountant that you want to start employing people or you can speak to HMRC and they’ll send you the PAYE code. So much in the same way. When you were paid before as a foundation, your dentist, your taxes were deducted at source. The same thing applies when you start employing people as well, if they’re going to be regularly employed. If you start employing either an apprentice or an admin assistant or a bookkeeper, wherever you want to do, and you pay them regular amounts each year, each month, then you’ve got to submit that to HMRC monthly as well. But we go through it in a bit more detail. You can do that. There’s interesting parts of this that says you can really max out your pension. Again, the podcast that precedes this is probably the best place to go for that information is if you max out your pension contributions, that’s a pre-taxable amount, so you get tax relief on that, so you incentivize to do it. Then really, as at this point is do I want to start looking at a limited company and then, like I said, increasing your pension contributions? We’ll look at that. If you want to start doing training courses now that really accelerate your career, I’ve got clients who stay the sole traders whilst they were massively investing in their business and did every training course they could and it was tax sufficient to do that and it made absolute sense. So they did that and, like I say, if you do it little and often, the way we do it is we get that information real time. It says, before you start hitting these milestones, we’d reach out to you. That says, james, you’re getting to 100K, what do you want to do? And I don’t want to stay as a sole trader, that’s fine. You get to 150K, james. What do you want to do? I’ll stay as a. I’ll increase my pension contributions, that’s fine. Get to 200K, james. What do you want to do? And I think we take that personally. That says, well, we treat your money much in the same way that I would treat my money. I’d want someone looking out for me. And that then takes us on to the limited company versus sole trader. And I’ll take a pause at this point because I need a drink. But do you have anything you want?

Dr James: 

Feel free. No, Well, listening to you talk, In essence, it’s almost like there’s no, there’s never going to be one shoe that fits for every single person. And I know of and now you’ll know way more about this than me I know there are certain arrangements that you can have where you put your money in your limited company and once you get over 50K, it becomes that much more efficient to do that because you’re in the higher tax rate at that point. And then I know that as well there are certain ways that you can set up your limited company such that you get paid X amount in dividends and then you have your company car. That can come through it as well. But then you’ve just thrown on a really interesting another caveat on top of that, which is that also even to be a sole trader and this is, by the way, this is before we even get into superannuation and things like that, which is another thing that makes it more lucrative to be a sole trader You’ve now thrown the hat of the employees into the ring. And then also as well, the other thing that you mentioned was courses, too, and how it can be more efficient for you to pay for lots of courses via being a sole trader. It really is actually massively nuanced. It really is.

Dr Bilal: 

Yeah, in massively it is. And I think, if we recap slightly. That said, we talked about your foundation year, where you’re employed. You’ve just come out of foundation year and you’re an associate. You’ve paid your first year’s taxes. You’re still trying to find your feet. Maybe you’ve picked a specialism and you started to accelerate your income. So what I would like to call that is a mature associate, where you’ve found your feet, you’ve found your niche and you’re building your own brand. And at this point it starts getting quite interesting because if you want to go buy an NHS practice, you’ve got to either buy that as a sole trader or as a partnership. So if you and your partner were both dentists and you wanted to go buy it together, you’d buy it as a partnership. Now there’s a couple of reasons for that is the NHS contracts aren’t held in people’s names personally. If you want to incorporate that, if you want to buy that through a limited company, the local authority can put suppression on it. So let’s say, the UDA rate on that contract that you’re buying is £40. If you want to then buy it through a corporation, they might turn around and say well, your old bid is lower, your tax rate is lower. We’re not going to give you £40 a UDA now. You’ve now given us the opportunity to renegotiate and will now give you £32, which now you’ve got to re-evaluate whether the tax savings is beneficial, because if you’re buying a dental practice let’s say it’s a rundown practice, the principal didn’t care about it anymore. It’s £200,000 NHS. You think, well, I can now bring my private brand onto this and then run the private income through an intercompany and have all the NHS contract in my name. And that’ll be my nasty thing, because I’m max out my pension contributions for me and my partner for the next 20, 30, 40 years and that’s my pension sorted. And I’ll sell the NHS contract and I’ll make pretty penny on that. And now I’ve got all this money, all my private income, in an intercompany as well. So you’re absolutely right that there is not a one-hat fits all. There really isn’t Layers. Yeah, there’s layers. It’s like in the Shrek music what it’s called faith, with all the layers that comes across.

Dr James: 

I haven’t, but I really like that. That’s really good. It’s really very poetic and articulate. Awesome, that’s a new one for me. It includes the first half of this two-part episode on taxes. Please tune in to episode two to see how the conversation continues. If you enjoyed this podcast, please hit follow or subscribe so you can stay up to date with information on new podcasts, which are released weekly. Please also feel free to leave a positive review so others can learn about this podcast and benefit from it. I would also encourage any fans of the podcast to sign up to the free Facebook community from which the podcast originated. Please search Dentist who Invest on Facebook and hit join to become part of a community of thousands of other dentists interested in improving their finances, wellbeing and investing knowledge. Looking forward to seeing you on there.