The Tax Mistakes Dentists Make (And How to Avoid Them)

As the end of the UK tax year approaches, many dentists find themselves scrambling to understand their tax position — but the most important decisions often need to be made long before the January deadline.

In this special episode of Just4Dentists, Dr Ruth Baidoo is joined by financial and mortgage experts Martin Febery (Money4Dentists) and Andrew Brown (Mortgages4Dentists) to break down the key tax considerations dentists should be thinking about before the tax year ends.

Together they discuss:

• Why 5th April is the most important tax planning deadline
 • The £100k tax trap and how dentists can avoid paying up to 60% tax
 • How pension carry forward can help reduce your tax bill
 • When to prioritise pensions vs ISAs
 • The impact of Making Tax Digital for self-employed dentists

They also share practical tips on tracking income, planning ahead, and building a financial strategy that supports both your career and your long-term goals.

Whether you’re a newly qualified associate or an experienced dentist running your own practice, this episode should help you make smarter financial decisions before the tax year closes.

Music Credits:

InPlusMusic: ‘Funk Funky Beat Music’

Raspberry Music: ‘Feel Good’

Cold_Fire: ‘Base and Claps’

Have a question, or want expert insight?
 📩 Email info@j4d.co.uk

💬 Join the Just4Dentists Facebook community to keep the conversation going.

Presented by Dr Ruth Baidoo

Guests: Andrew Brown and Martin Febery

Brought to you by the Just4Dentists team 

Produced by Your Podcast Producer Ltd

Disclaimer: The information provided in this podcast is for educational and informational purposes only and does not constitute formal financial or legal advice. Every dentist’s career pathway and financial situation is unique; therefore, you should not rely on this content as a substitute for professional advice tailored to your specific circumstances. The value of investments can go down as well as up, and past performance is not a reliable indicator of future results.

Transcript

DR RUTH BAIDOO 0:00

Hi, I'm Dr. Ruth Baidoo, a dentist who spent years figuring out not just how dentistry works, but how life as a dentist works. This series is all about the human stories behind the profession, the financial decisions, the identity shifts, the pressures, and the moments that define your career. We're going to dive into money, mindset, career growth, and the practical realities of building a life in dentistry. And with the help of industry experts, we'll be breaking down what all of this means for your financial future. So whether you're just starting out, you're deep into your career, or simply trying to make smarter decisions for your future, this podcast is for you. Welcome to Just for Dentists.

Introduction

DR RUTH BAIDOO 0:39

Hi everyone, welcome to a special edition of Just4Dentists. I hope you've all had a really productive week. My week's been full of admin, as per usual, but it's got to be done. And with that, specifically looking at my own tax prep. So as we are approaching the end of the financial year or getting closer to it, there are certain things that we should be thinking of. And one of those things, as we all know as dentists, is tax. Yeah, that three-letter word tax. So on today's special, we're talking about tax and all things tax. To help us navigate this high-pressure window, I'm joined by our series regulars, Martin Febery, principal advisor at Money4Dentists, and Andrew Brown, who's the director and mortgage broker at Mortgages 4Dentists. This podcast is for informational and educational purposes only. The views expressed by myself and my guests are our own and are provided this general expert guidance and industry insight. Because every dentist's circumstances are unique, you should always seek independent advice tailored to your specific situation before making any major financial decisions.

Tax Discussion with Andrew Brown and Martin Febery

DR RUTH BAIDOO 1:42

Let's just get into this topic. Although it's very dreaded for most of us, but let's just get into it.

ANDREW BROWN 1:47

I mean Martin really looking forward to the episode, I think. He'll be like a pig in muck talking about it. I start shivering thinking about it.

MARTIN FEBERY 1:55

Let me shine.

DR RUTH BAIDOO 1:57

Yeah, so Martin, just explain the importance of tax, if you will, as we start off. It's a very sort of bigger loaded question, but why is the endeavour so important for us?

MARTIN FEBERY 2:08

It's really because um it's a it's a hard stop for taxation. We need the tax, that's what runs the country. Um, and you need timelines. Now, what obviously does happen with most people is they leave everything to the last minute. Then there's a great big rush of trying to get everything done and in. Because if you don't get it done by the end of the day on that 5th of April, that's a hard stop. There is nothing past there. You can't make a pension contribution the next day. You can't put into your ICER the next day. It'll go into the next year's allowance. So effectively, apart from pension carry forward, which is a slightly different subject, it's hard stop, hard luck. Um, you can't do anything more about it.

DR RUTH BAIDOO 2:53

And with it sometimes comes a lot, as you kind of mentioned, a lot of high pressure for um self-employed associates and also for practice owners as well. So is there any sort of like variation with from that, you know, from anybody who's listening, from someone who's maybe just recently bought a practice in the last financial year, certain things they should be looking out for regards to tax?

MARTIN FEBERY 3:11

We should always be there's there are lots to look out for for tax. But what it is is about getting advice, but also getting advice early. You can plan for your tax. It doesn't need to be left until the last minute. So if you, for example, keep your books up to date, you can have a pretty decent idea of where your year is going to land. Based on that, you can do things like pension contributions, make sure you're not paying yourself past a tax trap. Just a bit of forward planning means that you can take all those things into account and just not trip over. What often happens um with dentists and many other people is they'll pay themselves during the year, they'll get to the, you know, after the tax year end, and to be honest, quite often the following January, and they'll put all the stuff together and go, oh dear, I've um paid myself too much and I'm now paying over 60% tax because of the hundred thousand tax trap, for example. It's a it's a really big thing. Whereas with a bit of planning, and it doesn't take an awful lot of input from the dentist, to be honest, just getting the team around them and having an accountant that keeps your accounts up to date, having an advisor that understands how the money works and can work with your accountant to make sure that everything is planned ahead and you're not left until after the clock has stopped.

ANDREW BROWN 4:35

Yeah, it's a really good point that Martin makes that I think a lot of people, your mentality is the most important part of the tax year is the 31st of January to submit your personal tax return.

DR RUTH BAIDOO 4:45

Yeah.

ANDREW BROWN 4:46

And I think that is a myth. It's all too late by then because you're submitting for something that's the latest date, and you're submitting effectively nearly 10 months since the last tax year ended. Um, and the only contributions you can make to your pensions happened 10 months ago. So really we need to kind of reshape our thinking if people don't in that mentality of thinking 31st of January important, the most important date is the 5th of April. And really at the start of March, that's when you should be thinking, okay, how much money have I earned in the year? Do I want to make some additional pension contributions? Have I put money into an ISA? Because the ISA limits are around £20,000 each person per year. Um, and it's only probably in the last few years that even myself, I've been really focused now in March. I'm thinking, right, have I done everything how I want it to be on my tax return that I may submit in another six to ten months' time.

DR RUTH BAIDOO 5:42

So, in essence, just you should be thinking far ahead, like not just having these hard and stop dates in our, you know, our diaries, but actually thinking a little bit further ahead so we can plan and make accommodations where necessary.

MARTIN FEBERY 5:53

Absolutely. And you know what? So we know a lot of, I don't work as an accountant now, but we know a lot of accountants, and their January is absolutely jam-packed. Um there's guys doing really serious hours because um some client has turned up with a a shopping bag full of receipts and loads of pieces of paper and said, Okay, can you do my tax return now? And like, you've you've had that information for 10 months, you know. If that was spread over some time, you'd actually get a lower cost from your accountant. And even bringing it up to the end of the day, you could actually do your tax return, you know, on the 6th of April if you really wanted to. The point being, by just a small amount of organ, and it really is a small amount of organization, you really can have a good clue what's going on. We'll talk about making tax digital um later, because it's going to get a bit dry. But actually, that's gonna be some kind of advantage to a lot of people. It it might hurt to start, but it actually will be a big advantage.

DR RUTH BAIDOO 6:57

Massively. So for anybody listening to this, just be nice to your accountant. Just when they ask you for all the information, just send it over immediately. You know, and actually, I can actually testify to this because the first year after qualify, my accounts were all over the place. So, what I do now, I have a strategy. So every time that I have a receipt or an invoice paste it, I save it immediately. So when I get that email from my accountant, I literally just send him the document, the whole file, and then everything's sorted. It just makes it easier for me. And he actually appreciates it as well. So just be nice to your accountant, it pays in the long run. So, next question. For an associate who's had a particularly high earning year, how does carry forward actually work in practice? And is there a danger of overcontributing and hitting a tax trap?

MARTIN FEBERY 7:40

So we're talking about pensions now. Um, so carry forward is a golden opportunity. If we don't get many of those in the tax build, um, and a lot of people don't realise you can use it. So if you haven't used up your full pension annual allowance for the past three tax years and you're a member of a registered pension scheme, you can carry the unused allowance forward and use it in the current year. Quite a few people don't really realise that, and even more people don't utilise it as well as they could. So it means if you had a really good year, you could potentially make a really chunky pension contribution and get tax relief on it. The part where people trip up is there's a couple of things. First of all, if you're making a personal contribution, you have to have enough relevant earnings. That means your earnings from employment effectively, whether self-employed or salaried. Um and you have to watch your total contributions don't exceed what's allowed, because then you'll still have to pay the tax back effectively. More flexibility if you have a limited company, as the company can make contributions that aren't limited by relevant earnings, just by the way. But it is again around making sure that you utilise what you can. What we have to remember as well is um pension contributions paid directly from a limited company are allowable for corporation tax. So you could be reducing your corporation tax bill significantly, worth always mentioning. But the carry-forward part just gives you an awful lot of flexibility, to be honest. If your income is higher, so very possible for principals and associates with a with a good mix, you might get caught by tapered annual allowance rules. That's where the annual allowance starts reducing down from 60,000 per year, as it usually is. Um it can go all the way down to 10,000. That starts to be a concern when your income hits around 200,000. So basically a carry forward is brilliant, but it's easy to get wrong. Um it is pretty important, unless you're an absolute wisdom patient, pretty important to get advice on this because it can be an excellent way of funding your pension, saving yourself some tax. But if you get it wrong, it can really create a problem.

ANDREW BROWN 9:48

Yeah, yeah. And I find that when I meet with a lot of dentists, it's great, by the way, if they do earn to 60,000 or more, and some do. But there can be a lot of dentists hovering around the £100,000 mark. Um, and not everyone will fully appreciate that. Your earnings between £100,000 and £120,000 are effectively taxed at 60%. I won't go into sort of details why, but effectively are because you start to lose your basic allowance. So one way to mitigate that is potentially to make pension investments in the tax year. And effectively, instead of paying 60% tax and you get £40 for every hundred, your pension can have the whole hundred. Um and I think for people who are in those windows, it's absolutely critical to be speaking to your accountant or financial advisor in February, March time. Because if you don't make that pension contribution for the 5th of April, you've lost your chance. Then fast forward, we do our tax return. Oh no, I've earned 108,000. If I'd if I'd known, I would have put 8,000 pounds into my pension.

DR RUTH BAIDOO 10:52

Yeah.

ANDREW BROWN 10:52

Instead, you took the 3,200, we call it, and probably spent it now. Um, but you could have had £8,000 in a pension. And Martin could do some maths, but that £8,000 in 25 years' time, if it grows at 5-6% per year, could now be worth a heck of a lot more. Um, so not only is it sensible to contribute to your pension, you've got to get that timing right. And um I think that's what we're advocating today, aren't we? There's a bit of a theme, is make informed decisions that you've thought about rather than letting a deadline pass and actually is out of your hands then.

DR RUTH BAIDOO 11:28

Yeah, in essence, you just plan and plan ahead.

MARTIN FEBERY 11:31

Yeah, you really do. Um, the the number of times a new client will come along and will have not really understood, and it's completely it's understandable that people don't know all this stuff. That's why you get advice.

DR RUTH BAIDOO 11:45

Yeah.

MARTIN FEBERY 11:45

But they come along and say, I've earned 108,000 pounds, what can I do about it? And from the 6th of April onwards, nothing. Before then, there are things we can do and things we can plan and processes you can put in place. But the fact is, if you're if you're not planning before, you really can create yourself unnecessary costs.

ANDREW BROWN 12:11

And by the way, if anyone's employed, there's not really an excuse because your pay slip in in say February, end of February, will have your year-to-date earnings. Um, it'll say in there in black and white what you've earned. You you know what you're probably gonna earn in your next month. So that there's no no real excuses to to go over. Self-employed is difficult. Um, and that's where I come back to maybe a point that you alluded to earlier, Ruth, about planning. But having accounting software nowadays, there's no excuse not to have that. I started when I first run in businesses about 15 years ago, I think we used Sage. Um, that's still massive, obviously, globally. Um, but there's other software. I don't mind sort of name dropping out, that's okay. But I've tried QuickBooks. I loved Xero. It's so easy. You could do it on your phone, on your computer. Um, and there's no reason why you can't track your income expenditure of your self-employed earnings. You don't have to be a limited company to use it. Um, and you'll know exactly where you're at. It doesn't have to be you necessarily doing it. It could be a friend, it could be a spouse, it could be another family member that is numerate and likes doing that sort of thing. But that's key, you see, because if you've got your accounting software, you've not got your bag of receipts. That's history. Your bag of receipts, you're gonna be done for older for on knowing what you've earned in the year. If you've got it all in a nice accounting software, you're gonna know exactly where you're at and it's gonna help you make good decisions with your financial advisor.

DR RUTH BAIDOO 13:35

100%.

MARTIN FEBERY 13:36

One more thing that's gonna make um a difference, as we were talking to dentists, is obviously around NHS pension.

DR RUTH BAIDOO 13:42

Yes.

MARTIN FEBERY 13:42

Um carry forward and tapering are relevant to a defined benefit pension, like the NHS pension, as as much as they are to a defined contribution, personal pension. What we can do, though, is make sure that a combination between the two still utilizes any carry forward. So unfortunately, calculating the pension input amount, as we call it, into the NHS pension isn't straightforward. Um, of course it's not, it's far too complicated for that. Um the NHS pension is brilliant, but complicated. But using anything left that you can carry forward means that you're optimizing again. So you can have a private pension alongside your personal or your NHS pension, sorry.

DR RUTH BAIDOO 14:26

Yeah.

MARTIN FEBERY 14:26

Making sure that you have get best utilisation about all the allowances that you've got.

DR RUTH BAIDOO 14:31

Definitely. So moving slightly on, but obviously still in the same theme. Um, we know about ISAs and them being tax efficient. So my question is a lot of dentists wonder if they should prioritise their pension or their ISA at this time of year. So what's your expert take on this?

MARTIN FEBERY 14:48

Yeah, we get this one a lot as well. Um, so uh firstly, this just defines a pension or with a pension, the government effectively gives you back up to limits all of the tax you've paid on the money you put into a contribution. So if you're a 40% taxpayer, if you were to put 600 pounds into a pension, um effectively you would get 400 pounds tax back in um part through your self-assessment and part directly into the pension. But it's basically tax efficient at source at the start. And then that pension will grow tax-free until you access it. But you can take 25% tax-free, and then the balance is taxed at your marginal rate of income tax. With an ISA, the money that goes into the ISA is already taxed. So it's taxed money that goes in. However, you never pay tax on it again whilst it's inside that ISA. So when you withdraw it, you don't pay tax. In terms of there are more restrictions on a pension, but that kind of tops the list in terms of the most tax efficient. ISA is behind it, but not a lot. But there are restrictions with a pension. So immediate tax relief, but you put the money in, gets topped up, but you're tied up until you're 55, soon to become 57. So you've got a lot less flexibility. Whereas the ISA gives you no upfront tax relief, but you can withdraw at any time you like. So that might be better if you're planning for a medium-term goal, like a house move or a sabbatical or a kids' university or helping the kids buy a um a home. And ISA gives you that more flexibility, but the pension is better in terms of tax.

ANDREW BROWN 16:31

Yeah, it's worth adding maybe Martin. When when you do withdraw your pension, 25% of it is going to be tax-free and you can get it, but the rest will be subject to tax at the time. So pension isn't completely tax-free, it's growing tax-free, and you get 25% lump tax-free. But then when you start to draw it down, and hopefully by then you might not be a higher rate taxpayer, so the tax won't be so bad. But there is still some tax to pay at the end. So once you put it in the pension, you're locking it away for a long, long time. Yeah. And you're only really able to get the 25% tax-free. You can withdraw some lump sum subject to tax, but 25% is tax-free. So I think Martin made a really good point is yeah, it's sensible to put into a pension, but what might you need money for over the next five or ten years? Maybe you do want to supplement your pension with investments into property, for instance, or you've got university fees, then you don't want to be put into pension. You almost can't get hold of it, then it's it's sort of stuck there. Um, so the the probably the the answer is probably a bit of both, I think, thinking about what you might need. If you're if you are really wealthy, then you could be maxing both, potentially, because your RC limits at £20,000, I think, a year at the moment, Martin. Yep. For for stocks and shares. Um, and the pension limit, I think, 60,000. We talk about how that could taper off. So you could be in a bit of a sweet spot, and that may be earning £150,000 to £200,000, where maybe you can do both, potentially, depending on what expenses you've got.

MARTIN FEBERY 18:02

Yeah, so that's absolutely right. It is marginal rate income tax only withdrawals from a pension. Uh, but you in retirement will have very likely more control over your tax position. But it comes down to where you are now. Um, if you're in a strong cash position, as Andy said, do both. If you have to choose, it'll come down to do I need to access what's my tax position right now, and what are the goals for the funds? So most dentists, especially associates, you might lean towards pensions if you're looking to reduce tax and build um long-term retirement. So that has to be an underlying thing. Um, you're gonna want to retire it sometime and you want to pay for it tax efficiently. And then you use the ISA for flexibility. Also bear in mind the tax trap for personal allowances at 100,000, if we've talked about already. So it's it's only pension contributions that are gonna help you there. And that's the one that can really make a difference where you're getting the advantage of pension and um really making a difference to your tax bill. Allowances reset on the 5th of April. So lose use them or lose them.

ANDREW BROWN 19:12

Yeah, absolutely. I was gonna share like a story about myself because when I first sat down, my pension advisor and is a was probably even in my 30s when I really started thinking a bit more about pensions, because at that point I was investing in property, my own home, buy to let's business. Um, and now I'm 45, I'm definitely thinking pension now. I'm thinking, okay, when am I going to retire? And so the first thing you'd do if you sat down with a wealth manager is they'd ask you that question, well, when do you want to retire? And how much money do you want to have in retirement? And when you have that conversation, I guarantee there's always going to be this gap. Well, you want that, well, but you've only got this. And do you know to get to that, you need to save X every month? And we can make assumptions on what the fun performance might do. So I think you've got to look at it from that perspective as well. Like, how realistic is it that you're going to retire at 65 or 66? I have some clients that tell me when I'm arranging the mortgage, you want to retire at 60. And sometimes I'm thinking, if you thought that through, are you really going to retire? Have you got a pension? Well, no, not really. I was like, Well, you know, the state retire pensions not that much. And you get that age 68 at the moment, probably be later for some people now. I reckon it'll go up. So funding into your pension, you've got to really think ahead, what do I want in retirement? And I would encourage people then to make some cuts now to your spending so that you can have a better retirement. Um, because it's very easy to just spend everything you earn now and not think about retirement.

DR RUTH BAIDOO 20:45

Very easily done. I think it's like a mindset thing that a lot of people don't think, oh, you know, the future, whatever else, you know, I'll cross that bridge when I come to it. But we all know that people are living longer. And with that, you have to plan for the future. I mean, you can't predict what tomorrow holds, but you have to plan for the future. So, yes, it's a very, very necessary topic, even though you might be thinking still very early on in my career year, I don't need to think about pensions, but I would highly recommend it. I can testify, yes, have you know, NHS pension, but also have a private pension, which I started many years ago. But I wish now in hindsight, I even started it earlier. That's my thought. So I wish I started it earlier. So it's worth having both. And as Andy and Martin are saying as well, for anybody listening to this, like if you don't know where to start, you need to speak to somebody, speak to the right people, have sit down, have that conversation, even have that conversation with yourself. Like, do you want to keep on working for the rest of your life? Some people do. If you do, fantastic, great. But I'm sure the majority of us at some point want to slow down. And it's nice to have the freedom and the capacity to do that without feeling like you have to work and be in that situation as well. So very necessary conversation to be having at this present moment in time. Another question in regards to tax, okay. We know that tax is slightly changing now for dentists and with the introduction of. Making tax digital. So it's going to be a big shift for us, especially how we do our accounts and things of that nature. So, what is one thing that an associate can do today with their spreadsheets to kind of make this transition easier for them?

MARTIN FEBERY 22:13

Let's just have a think about what MTD, so making tax digital is and how it's going to work. So it's a big push from HMRC to drag the tax system into the current century. Um, because pretty antiquated as it is. So it but in simple terms, it means that self-employed dentists, so associates and practice owners, often, uh, you'll soon need to keep digital financial records and submit updates to HMRC every quarter instead of just doing one big annual tax return. The idea is to make the system more accurate and reduce errors, eventually make it feel a bit more real time. That is a good thing, but it's going to be quite daunting. So is the bit you need to kind of listen to. Uh so if you're using a spreadsheet and a and a carrier bag of receipts, you're gonna that's gonna need to change. You need to get some NTD compliance software. So zero, as Andy has said, Sage, obviously lots. But things like FreeAgent as well. Um is just worth noting that free agent is a pretty good package that's provided free by Nat West and its partner banks. It's really easy to use. These kinds of things um integrate with your banking and then load the transactions. And in terms of actual bookkeeping, they're really simple to do. They're not designed for accountants, they're designed for just people with businesses to get stuff done. It's really good. Um quarterly submissions part of the deal. Um so if you're used to filling a tax return once a year now, uh, that's gonna change. And the thing is, it's gonna change pretty soon as well. So for a dentist owned, um, so a self-employed person, so associate, sole trader practice owner, if they have individual income, so qualifying income, gross of expenses from these from of over 50,000, then from April this year, you're gonna have to start reporting. That's not long, so I'm sure that you've all spoken to your accountants and have got this all in place, but it is coming. There will be a lot of advantages to it, as I said, but you know, it's gonna be quite a big change. So it's gonna start to be no longer that once-a-year thing. It's gonna be a monthly, effectively, you've got to start treating it like a monthly check-in. For your business and your tax position and your strategy as a whole, that will actually be a really good thing because you can start to plan forward because you know what's coming in, you've recorded your expenses. Um, so it's actually enforcing a bit of discipline, which will not only make accountants' lives easier eventually, um, but also mean that you will get better advantage from your business. So, yeah, if you're still running your accounts in Excel, it's time to kind of change the way you think about it. And you haven't got to become an accountant by any means at all. A lot of the cloud-based um systems are incredibly simple to use, but recording expenses monthly, so it could be real reported quarterly, but I'd still say, you know, keep it up to date all the time because you won't forget what they are. You'll make sure you include all the expenses you possibly can. Um, if you're not sure where to start, speak to your accountant and come up with a simple system, and it will be a simple system to make this kind of painless, not um not a big panic.

DR RUTH BAIDOO 25:41

I think this change is gonna be twofold, right? You're either gonna love it or you're gonna hate it. I don't think there's gonna be any in between. And the reason I say that is because if you're an organised person, this is just gonna give you even more clarity about things every quarter, like how am I doing? How is my business doing me as an entity as a business, how am I doing? But if you're not organised and you're the type of person that waits till the very, very end before you're supposed to submit everything to your accountant or submit it to HMRC, it's yeah, it could be terrible. But I think it's gonna kind of crack the whip and force people to kind of shape up. So you've got no choice ultimately, you have to do it. Um, but I can see it going one of two ways in that in that direction. Me personally, I don't mind it per se. I think it's gonna be helpful and beneficial, but I think I'm gonna have to then try and slot in like certain times where I'm just like, I need to sort of submit everything or make sure that everything's up to date. But I can see how the long-term trajectory for it for the future and things that I have planned for the future, it will actually be beneficial to help me see how I'm doing on paper and then make the necessary changes as I see fit. So yeah, it's it's not all bad.

MARTIN FEBERY 26:50

No, absolutely. And it's going to split as well. So there'll be associates, a generalisation of your associates and self-employed practice owners. If you are running a business, it is in your greatest advantage to keep track of your numbers anyway. Um, not only for saving tax and future planning, but actually to get the best from the business and to make sure that it's actually creating the lifestyle and income that you want it to. Um, there's a lot of burnout with dentists because they don't necessarily pay enough attention to the business part of the business and more about the fixing teeth, which is obviously very, very important.

DR RUTH BAIDOO 27:31

Yeah.

MARTIN FEBERY 27:31

But you're there to make money. For associates, I can see this being more of a pain because um it may feel as if, you know, what advantage am I getting from this? But it it is an advantage. That tax planning part, it will take a kind of person, but it's about getting advice and making sure that it works well. If this encourages more associates to get good advice, they will get a huge advantage from this. Pretty daunting, I think. And yeah, it's going to be a big change, especially for the guys with their carrier bags of receipts and um a hopeful glint in their eye. But it really will over time create a proper opportunity. Definitely.

DR RUTH BAIDOO 28:15

Anything to add, Andy?

ANDREW BROWN 28:16

So one last top tip while we're covering tax and investments. I think we should talk a little bit about a lifetime ISA. Yes. Um, very, very useful for any first-time buyers that are looking to purchase a property if you're not gonna purchase it for another couple of years. Um, you can save up to £4,000 per year, and the government will top that up 25%. So if you put in £4,000, the government will top it up to £5,000. Um, now it's a bit like a pension in a way, in that the money's gonna get locked up for a long time because you can only access that money if you purchase a property or at a certain age, which I'm hoping is £55, but Martin can maybe look this up if I've got it wrong. Or he's put thumbs up, good, it's 55. Now, another top tip on this is if you haven't opened one by the time you age 40, you can't. Um, so I remember I opened mine when I was 39. I thought I must open it because I quite like the idea of I'm a northerner and someone giving me a thousand pounds free for me putting 4,000 is quite appealing. So I've been making sure I do that at the end of each tax year. It does count towards your 20,000 allowance. So if you can put 4,000 into a lifetime ISA, and then you can put 16,000 into your normal ICE, uh, into a regular ISA, it will be topped up. Um, and for me, um, that I look at that as a bit of a a nest egg. I've already bought a property, so I won't be using it for that. But when I'm 55, I figured, well, that would be a nice little lump sum that I'll get. And I'm not really missing the money that I'm putting in each month. I do a regular... I do 50 pounds a month, and then at the end of a tax year, I then top it up to the 4,000.

MARTIN FEBERY 30:06

And it what it does, it's it's it's another tool. It's something else to add on. So you have your um pension annual allowance, which gives you full tax back, um, clearly with less flexibility. But certainly if your um your allowance has been tapered, you're looking for every penny that you possibly can. And it might sound like a bit of fuss, you know, if you're talking about a salary of 200,000 plus and versus 4,000 pounds going into a lifetime ISA. But actually, it's absolutely worth it because you know, once you get to um a certain amount, your um pensions annual allowance is down to 10,000 pounds. You're looking for every other penny you can get. So that four four grand is absolutely worth it.

DR RUTH BAIDOO 30:51

Yeah.

ANDREW BROWN 30:52

Yeah, yeah. So that's just a top tip. And one last thing is you when you get to age 50, you can't contribute it anymore. So you really, from my perspective, I started a bit late at age basically 39. I've got 10 years of of funding it where I'll get 25%. But potentially, if I'd started that earlier, we'd have more money coming from the government and a higher fund. But yeah, hopefully that will help some people either put the money towards a new property, there's limits on how much the property can cost, or potentially help you when you're 55 or over.

DR RUTH BAIDOO 31:25

So one thing I wanted to ask is you know, having conversations with friends, fellow dentists about different types of tax, and you know, especially if you are a sole trader or you're considering going into Liberty Company or you are, for example, can you just sort of unpack for me these terms that we often hear being thrown around? So, like corporation tax, capital gain tax. What's the difference between the two?

MARTIN FEBERY 31:45

So corporation tax is in relation to incorporated companies. And uh the rate is between 19 and 25%. It's it tapers up from 19% when you profits are over 50,000. And that is um charged on trading profits from a limited company. That would include any capital gains in that company as well. So any capital gain that goes into a company, let's say a company sells a property, the gain on that property is subject to corporation tax. You then get the other side of things, which is personal tax. So if you're self-employed or salaried, you will be subject generally to income tax. So any tax that uh sorry, any income that lands in your bank will have been or will need to be taxed as income. That means so that would be um income from employment, self-employed income, rental, and it's subject to the personal allowance, which I'm sure you'll all heard of, of um £12,570. So that's a 0% tax. Then you've got a tax bracket of 20% up to 37,700, then you pay 40% and 45%. You won't concentrate on the rates necessarily, but that's for any income that's coming in. That will include any income that's paid to you from the company. So if you take dividends from a company, from a limited company, you will also pay income tax on those, but the dividend tax rates are different. Um so they are currently 8.75% for any basic rate tax, for example. So it's a different rate. The reason the rate is different is because the company will already have paid corporation tax on those profits. So dividends are paid after tax after company tax. The next part for a person, I told you this would be fun. I'm sorry. The next part for a person is capital gains tax. So that is tax that's paid on any gain that you make on buying or selling an asset. So for example, your residential property is outside of capital gains tax, so that's um exempt. But if you have a buy-to-let property, if you bought it for £100,000 including costs, and you sold it for £150,000 including expenses, then you would have you would be liable to capital gains tax um calculation on the gain of $50,000. So there's an allowance of at 0% for the first £3,000, and then a basic rate of 18% or 24% uh for a higher rate taxpayer. And it's it's the difference between income and capital gain. And actually, some of those things can be um difficult to work out, but in general, it's pretty straightforward. Income from employment or earnings are subject to income tax, and income you create from selling an asset, say, uh, or the gain you create from selling an asset will be due liable to capital gains tax.

DR RUTH BAIDOO 34:51

Thanks, guys. You know, it's really important that we have this conversation. I know it can seem like it's overwhelming, especially if you're new to all of this. You know, you're new, say if you are a newly qualified dentist or you've been in the game for a while, it can still feel overwhelming. But I think the biggest thing that I've learned from this conversation is that the earlier you start, the better and the easier it will be for the future. It just makes planning so much more easier rather than kind of taking a stab in the dark at this and kind of hoping for the best. So if you haven't already, speak to somebody, speak to a financial advisor, get your ducks in a row and start as early as you can. There's going to be no harm or detriment to you by starting early. So thank you so much for your input, guys. Really appreciate it.

ANDREW BROWN 35:31

No problem.

MARTIN FEBERY 35:31

Y eah, no problem at all.

DR RUTH BAIDOO 35:36

A huge thank you once again to Martin February, principal advisor at Money for Dentists, and Andrew Brown, director and mortgage broker at mortgages for dentists for taking the time to guide us through such a critical window. Now, if today's deep dive has raised specific questions about your own tax position or pension carry forward, we're here to help. You can get in contact for specialist financial advice by emailing info at j4d.co.uk. And you can also join the Just for Dentists Facebook community group to keep the conversation going with other dentists navigating these same deadlines. You'll find show notes and extra resources from today's conversation at www.j4d.co.uk. Make sure you're following and you're subscribed. And if you can, leave a quick rating or review to help other dentists discover the show. Can't wait to see you in the next episode. Bye. You've been listening to Just for Dentist, presented by me, Dr. Ruth Badu. Just for Dentist is brought to you by the Just for Dentist team, experts who are proud to provide dental professionals with the right insights to navigate the financial and business decisions dental school didn't teach us. For more resources, insights, and tools to help you get the most out of your career, head over to www.j4d.co.uk