Dr James, 1m 15s:

Good evening everybody, welcome to this webinar. We haven't done a webinar like this in quite some time, and that's why I really wanted to go out of my way to do that this evening. And I would talk specifically on limited company versus soul triggers for dentists, which is a little bit of a that's not what always occurs for a dentist, but it always seems to pop up uh again again over the years, and we're never quite clear because I feel and ask you, correct me if I'm wrong, unless I feel like a lot of the content just don't have the time to properly explain that dentist plants, and that's what we're talking about. Go through everything that you need to know and more than that position, of course, please do it. You can do a fast question of possible because that is of course one of the easiest ways we can keep my money in your pocket, and of course you have to do it and of course you have one pop plate. You don't jump out what you do, but of course, just making sure more of that cast makes through makes it quite three from your top line, your bottom line. So, what I'm gonna do in this evening guys, we're gonna jump straight in straight away because everybody's came to see this weapon art tonight. So we don't want to tell it, we just want to jump in on the subject matter up and just a few but people think it's important to mention four times. I know that this might be power lots of questions from the audience tonight, so that's the fucking 55. If you're happy to put your questions in the top, uh the weapon off the cross, so once you have 20 minutes, I'll give it a defense to answer any questions to put audience my app. After 50 minutes on the dog, so it's collecting 15 minutes to find the one after 15 points collected. So first one, first or two questions in the top. So once you have 20 minutes, I'll give it 14. 50 might like to ask 14 and 51. Guys, I'm right covered towards 1025. 15.51 is maximum, and he represents DJ. As ever, you can claim your CPD for this episode within the official Dentists Who Invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar stories on finance for dentists, including how to become as tax person as possible, as well as understanding investing. All of this content counts as verifiable CPD, and you can download your certificates there and then on completion each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principles, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. Matthew, I think it's time for me to pass the mic over to you if you'd like to do a little bit of an intro about yourself, just so everybody knows who you are, and then we can jump in with the subject matter at hand, which is of course limited company sole trader for dentists.

Matthew, 4m 8s:

Fantastic. Yeah, thanks very much for having me on, James. I really appreciate it. So, as James says, my name is Matt Norton. I'm a chartered accountant at DJH. Um, I've been specializing in acting for dentists for coming up to 10 years. Um, so that's everything from sort of onboarding newly qualified dentists up through to working with clients who have maybe several dental practices, and I'm looking to set up kind of mini corporates really. Our team are pretty much wholly exclusively. Well, our team actually in my in my Chester office who work with me are working exclusively with dentists. We have a few, as dentists will know, spouses, you may have other projects on the side or side businesses, but ultimately we only work exclusively with dentists across the UK. Um, so we have clients on the South Coast, a few with Scotland, you know, even in Northern Ireland. So we can help across the breadth of the UK with that. And obviously, that dental specialism means that we can help with interacting with the NHS pension scheme, looking at practice valuations, specific dental incorporation, which is one of the main reasons I'm here for today, and ultimately model what you need to understand actually what the best thing for you is. A lot of the time, accountants can just sort of focus on the headline rates with tax, but I think it's really important to actually understand the client's needs and what they're looking to achieve. Um, you know, it's it's it's it's no good putting a blanket answer on most things, most tax issues come down to people with individual circumstances, and that's something I'm really keen to work with on clients. So, in terms of what we're looking to get out of today, the main talking point here today is looking at limited company versus sole trader and looking at those looking at those key differences between the two to establish the kind of background, really. Ultimately, the main reason we're looking at this is the tax. What tax implications are there? Is it tax more tax efficient to be trading through a limited company? Or something myself and James have been speaking about the last couple of days. For those particularly associates who are actually already in a limited company, is that still the best model for you? There's been some real tax changes in the last few years, and just because that was the right decision maybe five or six years ago, it doesn't necessarily mean it's the right decision today. So it's maybe possible to maybe review your current circumstances and see if things do need a bit of a review. And as I said right at the start there, choosing the structure that suits you, not just putting a blank answer on things, speaking to clients, understanding what their goals are, what their family dynamics are, and ultimately what they're looking to achieve from their career in dentistry, and tailor the numbers for them. So company car changes specifically within limited companies, because there's some real changes coming up that I'm not convinced many people are aware of. So I was going to touch on that at the end as well. And I think as well, it's really important to highlight some of the common mistakes we see and how to avoid them. Um, you know, dentists are very good at what they do, and I like to think I'm very good at what I do, and therefore sometimes you know, dentists can set a company up, think if everything's ticking over nicely, but actually there's certain things they haven't thought about. Um, and just highlighting some of them maybe common mistakes that we can maybe address nice and early. So if we looked to sort of set the scene initially, so I think most people will be familiar with with yourself as a sole trader, you are the business effectively. So the sole trader, you know, you come out your first year of foundation trading straight into an associate position, you register with HMRC as a sole trade self-employed individual, and a kind of a way you go pretty much. You are the business, you know, the the business's liabilities lie with you as the individual. Hopefully it never happens, but if you were to get sued or have legal action against you, then theoretically they could go after your personal finances, your house, um, and things like that. And that's known as unlimited liability. You know, the case can go as far as it needs to to get the money out of you as the individual. With a limited company, you are a separate legal entity. And I think it's really, really important to highlight that a separate legal entity means the separate legal obligations, but generally speaking, it means that you have limited liability with inside that limited company. That means that if again legal action was opened against you or you were sued, then you would only be exposed with within what inside that limited company. The only real exceptions we ever really see is if something fraudulent's gone on, where potentially the court could say we can go after the director and majority shareholder, but that's very, very rare. As I said, one of the big advantages of the limited company is that limited liability. Soul traders, as many of you will know already, will be paying income tax and national insurance. And that is worked out purely on your profit for the year. So your taxable profit. The downside to that is that if you have a taxable profit of, say, let's say £150,000, but you still, you know, you have very low outgoings, you have a big amount in savings, and you're not spending very much of that money, you're still going to be taxed on that £150,000 no matter what. And that's where better planning with a limited company could come in really useful. And the advantage of the toll trader, I suppose, is historically, and I'll use that word strongly, historically, it's been a much lower admin burden on the individual. Now, I'm sure a lot of you are familiar with making tax digital that came in in April 2026. I'm not going to spend too long on that because I know we've done a few webinars on that already. But ultimately, the taxpayers or self-employed individuals and landlords with turnover revenue, so that's before your expenses, above £50,000 in the 2024-25 tax year would have been mandated into making tax digital from the 6th of April 2026. And that simply means that going forward, you will have to do quarterly updates to HMRC alongside your tax return and what they're now calling a final declaration. So when I say as a lower admin burden, that has actually increased quite a bit over the last few months. With regards to a limited company, a limited company isn't being mandated into MTD, because that's one thing off your list. If you're a limited company, you don't need to be worrying about MTD. In terms of the tax side of it, limited companies are taxed corporation tax, which I'll go into in a minute, and you are taxed personally on the money that you extract from that limited company. And it's very, very important to differentiate between the company's money and your own money as an individual. The downsides of the limited company are generally more reporting obligations, having to file accounts at a company's house, just a general extra admin burden, and generally the accountant costs will be a little bit higher for a limited company. So I'm not going to spend too long on this. I think I I think most people know how a sole trade business works. But in a fair, profits are taxed on you personally up to the highest rate of tax in the UK, which is currently 45% on those earning above £125,000. As I mentioned before, there is no legal separation between you as the business and your personal finances, which can be a worry to a lot of people and give them a lot of exposure. Ultimately, it's easy to access that cash. You know, that cash once it hits your bank account. Yes, you've got to be setting aside amount of tax, but it's ultimately your cash and your money. It's not trapped with inside a company, and it's very much easy to access. Also, national insurance, class four national insurance on profits above twelve thousand five hundred and seventy. And as I've said a couple of times, there less so these days of making tax digital, but generally speaking, it's one self-assessment tax return plus your MTD submissions now, simpler, less less submissions. So let's get more into the into it really. So looking at the limited company, going over the basics, corporation tax is charged at 19% on profits up to £50,000. Profits then between £50,000 and £250,000 are taxed at what's called marginal rate, which in effect is 26%. And then profits exceeding a quarter of a million pounds are then taxed at a flat 25%, and that 19% band has unfortunately been gone and been lost. In terms of actually structuring how you extract money from the company, it's generally done in two ways. As a director's salary, commonly these days, we'll look at two options. The director's salary will look at the £12,500, which will match up with your personal allowance. Also, since the employer's national insurance dropped to £5,000 before that became payable, a lot of individuals now are looking at salaries in the region about £6,500. The reason for that is that they get a national insurance stamp, their state pension and other benefits. But also, it means that you're not paying quite as much national insurance. Again, it's a conversation to have with your accountants and just work out the best salary for you. There can be in rare instances, times, where actually a salary can actually be more beneficial than dividends. Um, historically, it was always the case that pretty much you would pay a £12,500 salary as a director and take everything else as dividends. But there can be a point sometimes where actually the salary can be more beneficial. Dividends are taxed at 10.75% rather than 20% basic rate, which is why it looks quite appealing. And 35.75% for higher rate taxpayers. And the big advantage of the limited company, as I sort of spoke about before, is often another level, if you like, of tax plan opportunities. As I said, you are going to be taxed on your profit or corporation tax rates, but then you only pay additional tax on what you extract from the company in the form of salary and dividends. To put it quite simply, the less money you extract from the company, the less personal tax you're going to pay. You know, obviously that's got to be balanced with a realistic extraction policy in terms of you need a certain amount of money outside of the company to pay your mortgage, to pay your bills, and live your lifestyle. I wouldn't want to be advising a client to just live off beans and toasts, beans on toast for the next 10 years because it means you can take dividends out. You want to be able to live your lifestyle, enjoy your holidays, but also be saving tax where you can. And that idea retaining profits within the company means you can take that money out when it suits you. And there's big indicators there. The best place to do it. So again, a lot of you may be aware of this already, but once your income hits £100,000 on that threshold, for every two pounds you go over £100,000 personally, you lose one pound of your personal amount. Once your income hits £100,000, you also lose your tax-free childcare. And as a father of two, I know how expensive childcare can be. So again, that's a real, real driver for people to keep their income below £100,000, which just outside of making private pension contributions as a sole trader, you can't really do anything, anything about besides spend more on expenses. With a limited company, it can be more planning involved just to make sure that you are staying below that £100,000 threshold. So that pretty much sums it up for associates, I'd say, in terms of what you're looking to achieve with a limited company, is maximizing tax reliefs by coming up with a salary and dividend extraction plan to make sure you're not paying more tax than you need to. There will be some instances, and we'll go onto a slide in a minute and look at the how the how it swings. There'll be times where actually, if you put the money into a limited company or get the money paid into a company, and then just simply take it all back out again, subject to your paying corporation tax, actually, you can actually be worse off. And we'll take a bit of a look at that in a minute. But one of the big things I wanted to talk about at this point was looking at it from a dental practices' point of view, because there's just a lot more to think about as a practice owner and as an associate about incorporation. So if we use an example of a sole trade dentist with a maybe an NHS contract, um goodwill in the sole trade name at the moment, they have the option to actually sell that goodwill into a limited company. What that does is it could potentially create a capital gains tax liability. Now, the first conversation I have with a lot of people is that oh, I don't want to do it because I don't want to be paying a capital gains tax today. But actually, if you're willing to pay capital gains tax at a rate of 24% today by selling the goodwill of your sole trader dental practice into a limited company, then over the next however many years, you can get that money out potentially tax-free. Yes, you pay 24% to get the money into the company, effectively, or the business into the company, but when you take it out, rather than paying dividend rates at potentially near a 40% later on, you can effectively you effectively pay the tax on that upfront at 24%. So it's a real benefit if you've got that money to pay capital gains tax up front. And time is really important as well. So as you'll know, as a sort of most self-employed people, you will pay tax in January following the 5th of April in the tax year. So a lot of the time when we look in corporations with dental practices, we'll generally look to push it through after the 5th of April. What that does is it means that rather than following January, the capital gains tax being payable, actually, because we've triggered that tax at the 6th of April, it gives you another 12 months to pay that capital gains tax. And it can be a big weight off your shoulders in terms of your tax bill and gives you a bit of breathing space with it.

Dr James, 19m 40s:

Matthew, I might have missed that. How do you get the money out of the company and into your name tax-free? Is that what you said?

Matthew, 19m 46s:

Yes, yeah, yeah. So effectively, what we do is we we do a valuation of the dental practice, and we'd say we value it a clock, say half a million pound. We then sell it to the limit into the limited company, and this is a newly created limited company, so at that point in time, it doesn't have any money to actually pay the half a million pounds. So what the company does effectively write pretty much an IOU to the director and the shareholders who's the previous owner, the sole trader. And that means that the company owes the director half a million pounds. So over the next however many years, the director can and the shareholder can draw down the half a million pounds when the money's there to be drawn down from. Now, what the best way to do it generally is to do a combination. So what I would generally do with my clients is I would the big question I'd ask is how much money do you need after tax? Because what we can do is we can say take salary and dividends up to maybe £50,000, basic rate level, or up to £100,000 if they need more out. We can really capped that £100,000 mark, but we can't because we have the availability to draw down from this money that's already in the company, known as a director's loan account. Does that make sense there, James?

Dr James, 21m 3s:

That makes sense. That that was the part that I perhaps didn't hear. Yeah, it's done to it's done as a loan and then effectively done as a loan.

Matthew, 21m 9s:

I owe I owe you from the company back to the shareholder and the debt, the original sole trade owner. And that money can be taken as and when over the next few years. So sit down with your tax advisor, accountant, and plan the best remuneration strategy.Yeah.

Dr James, 21m 24s:

You have to be a little bit careful. Because this is actually part of the point of the webinar. We want to talk about the obvious, like day-to-day stuff, limited company sole trader, but also this like niche stuff that is worth so much whenever people know it. So thank you for sharing that and more of that to come, guys.

Matthew, 21m 39s:

Yeah, definitely. And you know, as well, it's not quite as straightforward again as nothing is in life that if there is an NHS contract involved, you do have to get the NHS to sign off on the cut the contract going into the limited company and the CQC, and you would need to be telling your insurance providers and your other suppliers as well that this is happening. There's other complexities involved with the staff as well. So, for example, the staff would be in the business, they would need to what's called two-ped across, or transferred into the limited company. The staff, it doesn't affect their circumstances because they will keep their employment history. They do need to be moved across to the company payroll to be really important. But as I said, if you've got an NHS contract and you're looking to transfer the goodwill into the limited company, generally speaking, you will need the NHS to agree and sign off on it. The NHS, as a lot of you dentists will know out there, can be a little bit funny, a little bit awkward. And as everything is done on a regional basis, we can get different answers across the UK, to be honest, on this. Some regions are quite receptive to the incorporation of the NHS contract, other areas aren't as receptive. Other areas may try and make changes to the contract. So they may look to change UDA rates, they may look to get you to do maybe some emergency dental care work for that privilege of putting that contract into a limited company. What I always say is if you have any contracts in sort of LAT or in that area, then maybe just see if you can reach out to them and just get a feel for how receptive they've been. To it before you put any sort of formal application in with them. Another thing to consider as well is as an associate dentist going into a limited company, your NHS contract or your NHS pension can't go into the limited company. So generally with associate dentists, we would be looking at just putting the private fees into a limited company and keeping your NHS income outside of the limited company. Potentially, you could opt out with a pension scheme and have your NHS money going into the limited company as well. However, speaking to a lot of financial advisors and from my own experience realistically, that is very much a no-no. You know, the NHS pension is a good thing. Um, you know, you don't want to be opting out just to save a little bit in tax in the short term. So if you have got an NHS, you're an NHS associate and you do some private work, yes, you can have a private way of going to the limited company and the NHS income stay outside of it in your personal name. That way you get the best of both worlds. You can do a bit of tax planning with the private income, retain your NHS pension and other NHS benefits outside of it. Now, by doing that, you do have to look at the kind of tax side of it and actually work out is it beneficial to do so. Obviously, if you're fully private, it makes life a lot more straightforward. But certainly, I would want to be sitting down with my clients, having that conversation about again, how much money ultimately after tax do you need to be living off? And then we can plan around that and really sit down and work out if it's beneficial for them to do the incorporation. With the NHS practice, you can continue to receive your NHS pension benefits and be paying into the pension scheme if that NHS contract is inside the limited company and the NHS have agreed to it ultimately. So it's two ways of looking at it there. Another thing to consider is a lot of the time the dentist will own the premises, the dental practice itself. And then it's a conversation in terms of do we actually transfer the property into a limited company? And again, that can have tax consequences. That can be a good way to maybe look to pass a bit of wealth on to the next generation, particularly on an acquisition. So if you're buying a dental practice, one of the bits of advice I would generally look to be given is that what is the right structure for you at that point as well. If you're acquiring a dental practice, are you doing it as a sole trader and acquiring the assets? Or are you acquiring the shares in an existing limited company already? Or third option, you're acquiring the assets of an existing limited sorry the asset of an existing sole trade or partnership business, but you can still set your own limited company up to go away and buy that dental practice. Quite commonly, what we'll suggest is that the newly formed limited company would then buy the assets of the acquisition of the dental practice, and we may look to set a separate limited company up, a property company, to buy the freehold. And we have an arrangement in place where we charge rent from the property company to the trading company. The reason for that is to future proof it that would mean that when later on in life you come to sell the business, you could still retain the property, but you're just selling the shares in the trading entity separately. And it just gives it that bit of separation and allows for a little bit more tax planning further down the line. As I said, going back a little bit, particularly for associates, I would say the margins between setting up a limited company and a sore trader have got really tight over the last few years. So I'd like to show you a little graph about how it how it looks these days. And as you can see there, the yellow line is indicating the effective tax rate of using a limited company. And this is operating through a limited company and withdrawing all the funds versus just simply being a sole trader. And it's a bit of a bit of a snake, really. It kind of swings in sole trader favour, and it swings with a way to limited company is better, back to sole trader being better, and then so on and so on as it goes up and up. So it's very difficult for me to say when your income gets to a certain threshold, purely based on the effective tax rates, you need to set a limited company up. What I'd generally be saying is that once your income gets in excess of £100,000, that's when you need to be doing some tax planning. And a limited company could be a really good option for you just because it allows that flexibility. Once your income hits this mark, go and set up a limited company. There's so much more to be thinking about.

Dr James, 28m 29s:

Matt, this is an interesting one because I think probably a lot of people are wondering why it crosses over back and forth at various different points. Uh would would you be able to elaborate on why that is? You can even point at each stage with your mouse and say, this is why this happens at this stage, and this is why it happens at this stage, just so people know what the considerations are. I think that'll be I think that'll be fascinating.

Matthew, 28m 52s:

Yeah, sure, yeah. So we've got to remember that kind of the company's paying corporation tax initially. So people sometimes get drawn in by that dividend tax rate, the 10.75%, and 35.75%, but the company is initially paying corporation tax on its profits. So when your income's down here, the lower end, as a sole trader, you're paying 20% tax. The company is paying 19% tax, so it's still marginally lower, but then don't forget you're then paying additional tax when you're taking that money out of the limited company. So at that point in time, about first or £50,000 or so, the limited company option generally becomes more expensive because you're paying tax twice.

Dr James, 29m 40s:

Right. I I've understood. So these two lines assume you're taking all the money out of the company. That's it, yeah. Right.

Matthew, 29m 48s:

It'd be great to sit here and do a chart that kind of shows if you're able to retain money in the limited company at different points, but everyone's circumstances are slightly different, James. And I think you couldn't plot a graph for 101 scenarios uh without getting a little bit confusing, I think.

Dr James, 30m 3s:

Makes sense.

Matthew, 30m 5s:

But as well here, so as it goes up here, as that given tax rate drops, so as I said, that first £50,000 at 19%, it then increases to effectively a marginal rate of tax on corporation tax at 26%. So once you get above £50,000 with your income inside the limited company, you're effectively paying 26% on the corporation tax. But don't forget, once you hit over £50,000, you're paying £40 income tax. So generally speaking, at that small point there, a limited company is marginally better. The one I really want to highlight is kind of here, this £100,000 mark. And again, this is simply taking out £100,000. So by taking out £100,000, you're paying dividend tax at £5, but the company is paying marginal corporation tax at £26 on £50,000 as well. So again, it swings effectively to the company method isn't quite as good. And then as it goes on and on, as the 26% ban kicks in on more of that taxable profit, the sole trader option actually starts to look quite good again. But as I said, I've got a kind of word example I was just going to run through, and I think just to really highlight this a long-term tax plan we need to be thinking of.

Dr James, 31m 34s:

Yeah, yeah. Do you mind if I ask a quick question that just for one? If we just go back to that, because perhaps a lot of people are thinking this. If you let's say you have a limited company, but you just paid yourself, I don't know, a hundred thousand pounds as a salary instead of profit and dividend. Yeah, am I right in saying that the reason that that does not work out the same is because of the employer's national insurance that you'd have to pay yourself? Is that correct? UK Dennis, Dennis Who Invest now has an official platform where you can learn about finance and obtain UK compliant verifiable CVD at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK Dentists. This includes complete courses on how tax works for UK Dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course and how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best of the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit to celebrate the launch of the Smart Money Members Club. And given that the CPD deadline is coming up soon, I've decided to offer the first month of this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

Matthew, 33m 48s:

Yeah, partially. So don't forget that you you pay employees national insurance as an employee of a company. You also pay income tax, and the company also pays employers' national insurance as well.

Dr James, 34m 0s:

Yeah.

Matthew, 34m 0s:

Now there is something called employment allowance, which is a £5,000 allowance to cover the employer's national insurance. Now, to qualify for that, you would have to have at least two people on the payroll, which you know for husband and wife wouldn't be a problem. But if you're paying high level of salary, you can see how quickly that employer's national insurance, which is 15%, you know, that £5,000 doesn't stretch that far realistically.

Dr James, 34m 27s:

Yeah. No, I just wanted to ask that just to clarify. So that's why that is not a consideration on this graph, right?

Matthew, 34m 33s:

Yeah, exactly.

Dr James, 34m 33s:

Yeah. Fine. Makes sense.

Matthew, 34m 36s:

As I said, if we just look a bit of a work example here, so we've got £150,000 worth of profit for an individual. And the entire profit, as I said before, is taxed. It doesn't matter if that sort of trader's got loads of money set on their savings account and not spent it, or they've they've the lavish lifestyle and spent it all, they're still going to be paying tax on that £150,000 profit. And when I'm going to look at that versus the same scenario, £150,000 profit with the corporation tax being paid first, income tax when the money's extracted, and then what we'd have to be looking at to kind of save tax on that realistically. So I've got a slide actually, sorry. So I'll just go through the numbers. So we've got profit of £150,000 with the limited company. We would generally, as I said, look to take salary of £12,500. As James correctly said, there will be some employers' national insurance on that of about £1,200. But generally speaking, that still is the better way to take that money out. So at that point, you've cost you £12,500 in salary and £1,200 in national insurance. The corporation tax on that profit would look like it would be about £32,000. That would mean that after corporation tax, you would have available £104,000 to distribute as a dividend to yourself. The total tax on that dividend would be about sort of £50,000. So about £32,000 plus the £32,000 corporation tax. So in all, you'd be looking at a tax, national insurance, and corporation tax bill of about £64,000 with the limited company method. With that sole trader, you're just going to be taxed purely on £150,000 with national insurance as well. So that would mean that by the limited company route, your net income for the year, so after you pay all your taxes, that what's actually in your back pocket would be about £85,000, versus if you stayed as a sole trader, you would have about £92,000 in your back pocket. So there's quite a big difference there. And actually, you know, I would much rather have the £92,000 in my pocket rather than £85,000, forgetting about all the extra admin burden of a limited company. And due to the tax change we've seen over the last few years, this swing is quite noticeable now. So what we'll be looking to do in this scenario is I would be advising the client, okay, you need all that money out of the limited company. Unfortunately, that would mean you're gonna be worse off. And something me and James spoke about actually yesterday was this idea that actually is limited company still the right thing for you? You know, if you've got a limited company as an associate dentist at the moment, is that the right thing for you today? It may have been five years ago, but actually, if it's not today, what can you do about it? Well, you can go back to being a sole trader. There are certain things you've got to plan for, you've got to plan for extracting the money from the limited company, but by all means you can go back to being a sole trader. And in this scenario, that would make perfect sense. If the individual was able to leave money with inside that limited company, then at the point they were leaving money inside it, they would be able to save a lot more money. So, say, for example, if they would only need to live off, say, I don't know, say £75,000, £80,000 and leave £30,000 of that retainable profit inside the company, then I can guarantee there would be tax savings on the individual in that given tax year. But don't forget, you'll then be left with a pot of money inside the limited company, you've got to do something with. So having a think, what are your plans in the short to medium term? Do you have a spouse potentially who's a basic rate taxpayer? And we could bring her into the limited company, make her a shareholder and pass her some dividends. Are you planning on buying a practice in the next few years? We could look to retain money inside the limited company, save tax, and then that money has been pulled inside the limited company, really taxed efficiently, to go and buy a practice in the future. Or simply the limited company can make payments into your personal pension. The company gets corporation tax relief on then personal pension contributions as an employer contribution, and also that's a really tax-efficient way to get it out of the limited company into your personal name. Now, that being said, obviously going into a pension fund, you can't then touch that money right away. So you've got to be comfortable you're seeing for the long term in that method. The limited company could also potentially make investments as an individual in stocks and shares. It can even acquire property. Or we can set up another company, you know, as a special purpose vehicle, SPV company, to maybe buy a rental property for you, and your limited company can loan money that it's got in the bank account because you've saved it to the new company to go and buy maybe some investment property, and that can be done tax-free. As you can see, it's really important to come up with a plan for this money because if you're simply going to sit and leave it in the limited company and then in two, three years' time go, hang on, I need that £100,000 out today to go and buy a new house, and all that good tax planning work's just gone to waste. And you just line the pocket of your accountants over the few years, and probably you're going to be paying more tax by taking that out as a lump sum later on. So it's really important to think about your personal circumstances when looking at limited companies. You know, you could have an individual who lives at home with mum and dad today, and general outgoings are maybe two or three thousand pounds. So they're already in the fortunate position where they can leave money in the limited company. But actually, in two years' time, they need a big deposit to go and buy their first house. As I said, if that money's always inside the limited company, they're going to be stung when they suddenly try and take it out in one big lump sum. So speaking to your accountants, making sure they understand your personal circumstances. As I said, if you've got a spouse or a relative you want to bring in as a shareholder, you know, that's absolutely fine. As long as we can sort of justify the dividends we're paying to them with maybe alphabet shares, that's not a problem at all. As I spoke about quite a bit today, there's been some changes over the last few years, and most notably the tax-free dividend allowance has gone down over the last five years. So five years ago, it was £5,000. Tax-free dividends, it's been whittled away now. So now you can only take £500 dividends tax-free. Anything above that is taxable. The big change this year has been that dividend tax rates have gone up by two percentage points. So from 8.75 to 10.75 and 33 to 35.7%. And actually, that's just pushed their margins tighter and tighter again when looking whether to incorporate. Which is why I just really highlighted the fact that it only really works these days if you are fortunate enough to be able to leave money in the company to invest or do something with in the future, or you maybe have a spouse who's a maybe a basic rate taxpayer, and you can use some of their unused allowances. So savings and property income from April next year actually going up by two percentage points. So at the moment, rental income and savings income is just treated as general income on your tax return and tax at your 40, sorry, 20, 40, 45%. From April next year, that's actually going up by two percentage points. So it could be another reason to look at maybe a limited company for investments and property investments in particular. And for those clients out there who are thinking about incorporating a dental practice, if you were looking to claim incorporation relief, so I spoke quite a bit about paying the capital gains tax by selling the goodwill of the limited company, that's fantastic because it means you're getting money out effectively at 24%. But if you don't want to pay any tax up front at all, but you're happy to pay the tax later on at a higher rate of dividends, then you could claim what's called incorporation relief. And effectively you're it's a deferral relief or gift holdover relief, is another relief we can look at, and you pay that tax when you sell the business later on. But that now must actively be claimed from April 2026, uh, where historically we could just claim that automatically. The good news, realistically, with the corporation tax side is there's no change at the moment this year to the corporation tax rates. There's still in the band between 19 and 25 percent. I'm sure a lot of you are aware. Obviously, we have a new Prime Minister and Andy Burnham, and we have an upcoming autumn budget in October, I believe it is. So capital gains tax, I've touched on a bit today, corporation tax could potentially be something they do look to increase. So just obviously be aware of that in the immediate future. As I said, realistically, I just want to focus really on just making sure your numbers are getting reviewed, really. So everyone's circumstances are different, and it's just having that conversation with your accountants, understanding your options. um from my talk today and having a conversation with them really about what you need ultimately when you come to sell the business potentially later on. Then income need, as I said, drive the decisions. If you need a certain amount of hours for the company to live off and there's nothing you can do about it, you've got a mortgage that you're committed to. Unfortunately there's not loads of options. But I'll tell you what we can do, we can review the numbers for you and at least you then know you are doing the best thing today whether that's stay as a sole trader or operating through a limited company. Because sometimes the worst thing is to not know it and think you know I've heard people talk about limited companies never look into it. At least by doing the running the numbers for you you can rule that option out and just sleep a little bit better at night. Growth plans as well so if you are looking to invest you know as an associate in making investments or looking to build on your current dental profit is limited company is going to be a really good option because again it's all about retaining that money with inside a limited company rather than drawing it out. It can be a great way to build up funds to go and buy that second third fourth profit as a shareholder as well as a limited company you can potentially look for further investments as well so by owning the shares you could potentially sell shares to an individual to get some more investment as well I know that's I've got some clients who potentially sometimes sell shares to their family members with a view to them buying into the practice bring a little bit investment in a bit a bit more money into the business help with things like cash flow or investment or another practice and then they can pay that shareholder dividends as a reward for their initial investment into the business effectively and as I said you've got to be thinking about associates in particular if you have an NHS pension it's just not as simple as just setting a limited company up and having the money paid into a limited company. I've done some work with a client recently who was with a non-dental specialist accountant and they actually advised them just to get out of making tax digital to set a limited company up and have their income go into a limited company and they were actually fully NHS dentist which meant that they would have lost a lot of money by losing out on their pension because the limited company can't have NHS pension contributions. As I said earlier it's a separate legal entity to the individual so if that had been going on and continue for a number of years when this client or the new client as they are now comes to retirement they could potentially be in for a nasty surprise through some you know pretty bad advice by using a non-dental specialist accountant. As I said everyone's circumstances are different so everyone has different family setups everyone has a different end goal in life in terms of when they want to retire and what they want of a practice as well you know some of you out there will be thinking to themselves I've got a practice today I'm just happy maximizing the profits I have to pay as little tax as possible and retire off into the sunset. There'll be other individuals out there who have a limited company and a practice and thinking how do I maximize tax efficiency to be able to buy second third or fourth profit and as I said every conversation is different but I'm just so keen to have conversations with you individually to see how we can help you and make sure that you'll be as tax efficient as possible. And I think as well one thing just to mention on that front is that if you are an existing practice owner in particular you know speak to an accountant like myself or tax advisor a good few years before you're looking to sell. There's so much more constructed advice and planning we can do if we're maybe three or four years out from any potential sale in terms of bringing in possible holding companies and things like that. So if you know you are thinking about selling the next three or four years now's a really good chance to make sure there's a good tax plan to ensure that when you do sell you know generally for a lot of money you are being as tax efficient as possible both upon sale of the business but also in terms of passing down wealth to your next generation as well by things like family investment companies and holding company structures and trusts great stuff.

Dr James, 50m 0s:

Matthew by the way I am just very conscious that we did say we'd do questions and uh we're we're running out of time here slightly um and I know that that's because we went in to be fair when we started getting into that there was there was a lot to it to do it properly and you've been really great at being uh super descriptive descriptive this evening I beg your pardon um but listen you know um I know that in your next two slides you've got a common mistakes and then I think a little bit about cars and company cars and things like that. Is that right? Yeah uh it's worth noting maybe if we go on to the next slide we show the company car uh one really quick oh okay we've got more in here we've got a fair bit to get through don't we um yeah there's there's a little bit about company car here cars here but what I wanted to say guys um we did make the promise that we were going to do some questions at the start Matthew and cover some of those so I think it's only fair uh that we do that obviously there's a lot to talk about probably a lot more than what we've got scope for this evening so actually I did want to before we do the questions I did want to mention Matthew does actually have a free gift for the audience tonight which I think is on the next slide. Yeah I'll put that up on James thank you Matthew does actually have a free gift in that he's happy to audit the tax position of five dentists who register using this QR code so you can go through the numbers and just see what's what and see if there's anywhere to save see if Limited company makes sense for you or company car makes sense for you see if any of these common mistakes are happening which might mean that somebody's overpaying or anything along those lines obviously it takes a little bit of time so we can't extend it to absolutely everybody so it's very much if you want to be in with a chat on this feel free to scan the QR code that's on the screen right now and you can go ahead and register yourself and Matthew will reach out to you very soon. We're also going to put a link in the chat on that one for those people who are on the phones so they can go ahead and hit the link. Guys I know we've had absolutely loads of questions which is brilliant we have exactly 11 minutes to round up on these uh so I'm gonna call time unfortunately on the questions because I know that there's absolutely tons on there but thank you to everybody who did submit we do want to work through them on a first come first served basis.

Matthew, 52m 9s:

Matthew are you all right with that absolutely fine with that James yeah so as I said through the session so important to have tailored conversations so as James said the first five people uh who scan the QR code I will give that free audit of their current situation too.

Dr James, 52m 24s:

Sure sounds good sounds good and Matthew I just wanted to take two seconds to just give you a little bit of a clap up for that tonight because everybody learned something okay I know that that's every day to you but everybody learned something and I really like the graph as well I find that fascinating but yeah plenty more where that came from obviously a little bit beyond the scope of what we had time for this evening. Let's go to the questions in the chat let's get through as many of these as we can in the in the next 10 minutes first question comes in from Mohammed so shout out to Mohammed he got his question in within uh 30 seconds I think it was understanding that there's gonna be question time at the end so didn't mess around he saw his opportunity and he grabbed it that's for sure Mohammed can you claim Mohammed says can you claim interest can you claim your interest that you have on a mortgage as a as an expense uh claiming back as a as a as a tax deductible expense is that something that you can do Matthew yeah great question Mohammed there so there's been some changes about three four years ago on this so historically if you had a a buy to let uh property as a residential property you could claim the mortgage interest as a fully tax deductible expense uh I think it was three or four years ago it changed so as a sole trader individual you you can only claim 20% tax credit against that mortgage interest or if that limit if that property is inside a limited company a limited company can claim 100% of the mortgage interest as a tax deductible expense nice one and that's important to say that that's isn't it from memory now correct me if I'm wrong it's only on the interest but not actually the full repayment isn't that yeah just the interest yeah you don't get any tax fee from the capital repayments of the of the debt so you've got to that's one to watch out for because I I remember making that mistake myself and equating the word interest for the full repayment but that's not the case if it's in it so the full repayment comes after the repayment of the principal sorry comes after corporation tax in the limited company is that correct in effect yes it'll come out it wouldn't show in the profit and loss statement it wouldn't be shown for tax purposes it would just come off the balance sheet as luring the uh the debt down there you go great question by the way next question comes from Faddy Fatty says can you be an associate dentist getting paid through a limited company um through a limited liability company sorry and still be part of the NHS pension scheme I think we dealt with that one but maybe we can just recap it in about 10 seconds Matthew yeah so I I don't believe you can a limited liability LLP effectively is is still a separate legal entity uh and it still has require uh filing requirements separate to you as an individual nice one thank you for clearing that one up like I say we want to whiz through a few of these uh this evening because we did say we'd do questions I'll try and keep my answers as punchy as possible James yeah well that well that that's it that's it well we can elaborate where possible we we got we got seven minutes don't we and we we've we've accepted the fact we won't get through all of them that's what the QR code is about I guess uh can you keep the NHS as a sole trader and private income put into limited company so to keep NHS pension I'm just reading these out as they come I'm hoping that was clear that question Matthew yeah I think I did touch on that one possibly after the question came in but yes certainly so if you've got as I'm assuming you're an associate dentist if you've got NHS income and private income you can have your private income going to a limited company and if you don't need that to live off you can keep that inside the limited company and you live off your NHS income effectively and still retain your NHS benefits and NHS pension. Great stuff thank you for that Matthew hope that cleared things up cola uh I believe who asked that question uh next question is from Victoria Victoria asks if in a mixed practice if in a mixed practice and keep NHS payments and a separate limited company for private work as this isn't the full income is there a lower threshold of private income that we you would say a limited company is just not worth pretty much goes back to the the the the the graph really I think um you're gonna be paying more for the accountanty services of a limited company it's difficult to put a figure on it but if you're literally going to put that private income into the limited company and then just pay the corporation tax and take it all back out again I'd be surprised if you'd be saving anything in tax. There you go good to know great questions by the way and again if anybody would like some follow-up on this again maybe that's another reason why you might want a tax audit I guess really because obviously we can only speak at a high level this evening and we'd need to be able to relate these to everybody's individual circumstances on that situation James as well there's no harm in looking at it because you can weigh the numbers up and at least then you know you're doing the right thing by not having a limited company. Yeah well this is true. Well I mean the the the the rhetoric that everybody throws around is okay go limit it as soon as you can but looking at that graph you showed earlier it's really not the case for a lot of people or certainly not anymore. Yeah definitely that piste asks is it standard for a limited contract as an associate to pay 100% of the lab bill uh currently going through negotiations on my practice and I've been told it's BDI standard contract um it's a little bit beyond the remit of accountancy but surely you see a lot of pay slips Matthew I don't think that's normal is it no not at all to be honest it shouldn't really you know just because you're a limited company shouldn't change how the labs have devied up effectively and we quite we're seeing commonly now more and more dentists being asked to pay the labs up front and then the practice reimburses 50% rather than the old fashioned method of you just having 50% deducted from you.

Matthew, 57m 54s:

So maybe there's a bit of a mix up there possibly in communication but certainly that wouldn't be the norm. Interesting interesting that that's people are proposing that as a thing now really I guess principals are just trying you know things are getting tougher the in financial climate it's getting much more tough so we have to look at how we can kind of um compromise somehow basically yeah it's it's a big indication of self-employment and um using limited companies for the tax system so that's a that's probably a webinar itself so I won't go into too much detail there.

Dr James, 58m 24s:

There we go. Roxar asks we have a limit to withdraw 50k annual dividends to be tax efficient pretty much so if you're taking up to £500 you'd be paying 10.75% on them dividends anything above that you'd be paying 35% I'd generally say that if you're able to keep below £1000 though um that's a really good way to be if if you can keep below £500 then even better amazing thanks so much uh Michaela asks if if you are an associate do you still need the NHS to sign? I think that was in reference to the NHS contract. Yeah that was it yeah yeah no so if you're an associate you don't need the NHS to speak to NHS that's absolutely fine that was only if you were incorporating um a NHS contract as a practice owner nice thank you for that Matthew we've got three minutes got 180 seconds let's see if we can get few get through a few more uh before the final whistle Sangida asks I'm not getting a monthly NHS pension still working can I put this amount into my private pension will this be beneficial with a 40% tax break hmm I think what I'd probably say on that one is probably more the realm of financial advisor um question that one to be perfectly honest I wouldn't want to comment either way and say the wrong thing. That's an interesting one though isn't it you're getting your income from your NHS pension but it the different you know obviously private pension is 57 and you might be getting your NHS pension sooner.

Matthew, 1h 1s:

So does it make sense to put it back in grow it uh yeah I think you'd be looking at a situation where you'd be losing kind of um if you took your NHS pension early you wouldn't be getting the full amount you could be losing out there and then when you're putting your money into the private pension you're gonna be getting a bit of tax relief but then you could be paying you're gonna be paying tax later on don't forget when you take that private pension out.

Dr James, 1h 22s:

That's an interesting one there we go.

Matthew, 1h 24s:

I think that's really a good question for a financial advisor to sit down and work through the numbers with you.

Dr James, 1h 28s:

It's the it's number crunching it's taxes but it's also the growth of your investments and your time frames as well so there's a lot of variables there. So yeah financial advisor territory for sure uh sorry we can't be any more help on that one Sangida uh Parvin asks uh this is probably the final question I'm gonna have time for Parvin asks I have mixed dental practice and I'd like to become sole trader uh to limited am I keeping my NHS pension if I go limited I do own only the business not the building thank you yeah so it goes back to up the you have a couple options of that you can you could look potentially just to incorporate the private element I don't think I said that before but if you didn't want to get the NHS involved you could potentially just incorporate the private element of your business it's a bit more admin and you have to have two card machines and it's a bit a bit messy.

Matthew, 1h 1m 15s:

You could test the walls with the NHS your local area team uh local area committee and just see if they would agree to you navating the NHS contract across into the limited company because ideally that is the cleanest way to do it.

Dr James, 1h 1m 28s:

Thank you so much Pargin hope that clears everything up and the same to everybody else who asked questions sorry we couldn't get to the rest of them I'm scrolling down my little chat window here and there's absolutely loads so I'm really really sorry guys uh but yeah like I say uh these are obviously all things that can be discussed off the webinar of course especially relating them specifically to your circumstances and I wanted to make some time tonight again just to say thank you for Matthew uh give to for Matthew to give up his evening uh so I really think that we should all take some time to put our hands together uh on behalf of the audience tonight on behalf of Dennis who invest to say thank you to Matthew for being so generous with the time and generous with his wisdom and congrats everybody who came along this evening because obviously learning about these things is massively useful and when you get it right you literally don't have to do any more work or work any harder and more money comes in your bank account because you're being tax efficient and you're doing it properly as well so I think that is a wondrous use of a Wednesday evening personally guys we do run these webinars every four six weeks in Dennis Invest platform keep your eyes peeled for the next one we're gonna be announcing that very soon in the meantime thank you to Matthew once again congrats everybody who came along this evening hope everybody has a lovely Wednesday and we'll catch up very soon in the meantime see you all later have a great evening bye bye and talk soon cheers