Learning Center Topics: Accounts for dental associates

In this complete guide, we’ll explain everything you need to know about tax relief as a dentist, including what it is, how it works, and the different types of help available. We’ll also share expert tips and tricks to help you get your expenses back and make the most of your tax relief options.

Understanding the Importance of Tax Relief for Dentists

If you’re a dentist or dental business owner in the UK, it’s crucial to know about tax relief as it can help you save money and improve your tax strategy. Tax relief means getting deductions and allowances from HM Revenue and Customs (HMRC) to lower your overall tax bill.

One big reason tax relief matters for dental business owners is that it allows you to get money back for expenses related to running your business. This includes things like buying equipment, paying for professional services, and even training your staff. By claiming these expenses as tax deductions, you can reduce your taxable income, pay less in taxes and become more profitable.

Tax relief can also create opportunities for investment and growth in your dental practice. For instance, certain expenses like upgrading your dental equipment or expanding your clinic may qualify for tax relief. This means you can get back a portion of the money you spent through tax deductions, which lets you reinvest in your business without shouldering the entire financial burden.

Furthermore, understanding tax relief will help you navigate complex tax rules and ensure you follow HMRC guidelines. By staying informed about the available tax reliefs and allowances designed specifically for dentists and dental business owners, you can maximize your savings while minimizing the risk of potential penalties or audits.

In a nutshell, tax relief is incredibly important for dental entrepreneurs in the UK. It offers many benefits, such as getting money back for various business expenses, supporting growth and investment, and ensuring compliance with tax rules. By learning about the ins and outs of tax relief and seeking professional guidance when needed, you can navigate the tax landscape like a pro and enhance your financial situation as a dental business owner.

Click here for our article and podcast episode on reducing your tax bill as a dentist.

Click here to learn more about our Tax Planning for Dentists services.

Common Tax Relief Options Available for Dental Professionals in the UK

If you are employed by or run a dental business in the UK, knowing about the various tax relief options available to you is really important for making your finances better. By taking advantage of these helpful opportunities, you can actually lower the amount of taxes you have to pay and increase your profits. In this section, we’ll look at some common tax relief options that dental professionals can use in the UK.

1. Capital Allowances: Dental practices often need to spend a lot on equipment and tools. The good news is you can claim capital allowances for these assets, which means you can subtract a part of their cost from your taxable profits. This can save you a lot of money in taxes and help you recover some of your initial investment.
2. Research and Development (R&D) Relief: If your dental practice is involved in innovative research activities or develops new techniques, you might qualify for R&D relief. This relief lets you claim extra deductions or even get a tax credit for eligible R&D expenses. It’s important to keep detailed records of your research projects and consult a tax professional to make sure you follow the specific rules set by HM Revenue and Customs (HMRC).
3. Business Expenses: It’s crucial to carefully track and record your business expenses because you can deduct them from your taxable income. Common deductible expenses for dental professionals include things like rent, utilities, staff salaries, professional fees, marketing costs, and insurance payments. Remember to keep receipts and proof to support your claims.
4. Pension Contributions: Making contributions to a pension plan helps you save for retirement and provides tax relief. Dental entrepreneurs can benefit from tax relief on pension contributions up to certain limits, reducing their overall tax liability while securing their financial future.
   Click here to learn more about Pensions and Payroll for Dentists.
5. Annual Investment Allowance (AIA): The AIA allows dental entrepreneurs to claim a generous deduction for qualifying capital expenditures, such as renovations, building improvements, or equipment purchases. The current AIA limit is £1 million, offering significant opportunities for tax relief on eligible investments.
6. Employee Benefits: Providing employee benefits like healthcare, dental insurance, and training not only boosts staff morale but also offers tax advantages. Some benefits may be exempt from National Insurance contributions or qualify for tax relief, reducing your overall business taxes.

Remember, tax rules and relief options can be complex and subject to changes in the future, so it’s essential to consult with a qualified tax advisor or accountant who specializes in the dental industry. They can guide you through the intricacies of managing your taxes, ensuring compliance, and maximizing your tax relief opportunities. By staying informed and proactive, you can claim expenses like a pro and enhance the financial performance of your dental business.

Click here to read more about R&D Tax Relief for Dentists.

Identifying Eligible Expenses for Tax Relief in Dental Practices

When it comes to running a dental practice in the UK, knowing which expenses qualify for tax relief is crucial for saving money on your taxes. Understanding which costs can be claimed can help you get back a significant portion of your business expenses and reduce your overall tax bill.

To start, it’s important to know that eligible expenses in dental practices can vary depending on the nature of your business and the specific services you provide. However, there are some common expenses that are often eligible for tax relief:

1. Dental equipment and tools: Any expenses incurred for buying, repairing, or maintaining dental equipment and tools are usually eligible for tax relief. This includes items like dental chairs, X-ray machines, dental drills, and sterilization equipment.
2. Lab fees: Payments made to dental labs for services like crowns, dentures, and orthodontic devices can be claimed as eligible expenses. Keep track of these payments to ensure accurate deductions.
3. Staff salaries and training: Salaries and wages paid to your dental team, including hygienists, dental nurses, receptionists, and practice managers, qualify for tax relief. Additionally, the costs associated with training your staff can be claimed as an expense.
4. Facility rent and utilities: If you operate your dental practice from a rented location, the rent you pay can be claimed as an eligible expense. Other utility bills like electricity, water, and heating can also be included.
5. Professional fees and insurance: Fees paid to professional bodies, regulatory fees, and insurance premiums designed for your dental practice can be claimed for tax relief. Examples include membership fees to dental associations or malpractice insurance costs.
6. Marketing and advertising: Expenses related to promoting and advertising your dental practice, such as website development, online advertising, printed materials, and signage, can be claimed as eligible expenses.

We have listed below common key expenses you can claim for in your self assessment tax return as a dentist.

• Travel for business purposes at 45p/mile, and this includes travel to any courses or visiting accountants etc. We would suggest keeping a diary of business travel through the year so that you don’t have to do all of this at once at the year end. You cannot claim mileage to a regular place of work but can claim for travel to other dental practices where this is irregular
• Alternatively, you may put the cost of your car through your business, along with the costs of repairs, MOTs, servicing and fuel receipts. However, we would be required to remove the non-business usage proportion of these costs. For example, if you estimate that you have used your vehicle for 20% business use and 80% private use, then we would disallow 80% of these costs. The 20% that has been claimed may still be more than the alternative option of claiming mileage at 45p/mile.
  Click to read about buying a car through a limited company.
• Any other business travel costs such as trains/taxis etc.
• Training and Course costs that are to ‘update pre-existing knowledge’, such as annual update courses etc. Course costs that enhance your technical knowledge cannot be claimed as a business expense. You have to tread carefully here as we have seen clients get into trouble with HMRC on this aspect.
• Subscriptions to the BDA, GDC etc.
• Professional indemnity insurance
• Legal advice relating to business matters
• Cleaning/laundry costs
• Printing, postage and stationery for business purposes
• Any dental materials purchased
• Accountancy costs!
• Any website or marketing costs you might incur
• A proportion of your telephone bills relating to business use
• A proportion of your home bills due to having an office at home to administer your business and put accounts records together (the HMRC flat rate is £4/week but this may be more depending on evidence provided)
• Loupes or other equipment that you will use for the purpose of your business
• Cost of study texts that you previously purchased as you will refer to these for the purpose of your business
• In addition, your business could ‘buy’ from you the cost of your personal laptop and printer that you use to administer the business if you have these

The above list isn’t ‘exhaustive’ so please feel free to ask if there is an expense that you have paid and are unsure whether you can claim. There is no additional fee for asking about these.

Remember, maintaining proper records is essential when claiming tax relief. Keep detailed records of all your business expenses, including receipts, invoices, and bank statements, to support your claims.

To ensure you’re maximizing your tax relief, it’s advisable to consult with a qualified accountant or tax advisor who specializes in dental practices. They can help you navigate the complexities of tax regulations, identify additional eligible expenses, and ensure that your claims are accurate and compliant.

By identifying and claiming eligible expenses for tax relief in your dental practice, you can significantly reduce your tax burden and allocate more resources to providing quality dental care and growing your business.

Click here for our webinar on tax saving strategies for dentists.

Step-by-Step Guide to Claiming Back Expenses

Getting money back for your dental business expenses is a crucial part of managing your finances properly. You can make sure you make the most of your tax relief opportunities and get your expenses back like a pro by following these steps:

• Step 1: Keep Good Records Start by keeping detailed records of all your business expenses. This means keeping invoices, receipts, and any other documents that show what you’ve spent money on. This will help you see a clear picture of your expenses and make it easier to claim them.
• Step 2: Learn About Eligible Expenses Find out more about the expenses that can be claimed for tax relief. As a dental business owner, these might include things like equipment purchases, dental supplies, lab fees, professional membership fees, utility bills, insurance payments, and even certain travel expenses. Talk to a tax expert or check HMRC guidelines to make sure you’re claiming the right expenses.
• Step 3: Keep Personal and Business Expenses Separate To claim expenses accurately, it’s important to keep your personal and business expenses separate. This means having separate bank accounts and credit cards for your business. This way, you can easily identify and track your business expenses, making the claiming process less complicated.
• Step 4: Categorize Your Expenses Organize your expenses into specific categories, like office supplies, professional fees, or equipment purchases. This organization will make the claiming process smoother and provide a clear breakdown of your expenses for tax purposes.
• Step 5: Consult a tax professional like Samera Dental Accountants to ensure you’re making the most of your tax relief opportunities and claiming expenses correctly. We can provide expert guidance, review your records, and help identify any additional deductions or relief options tailored to your dental business.
• Step 6: Submit your claim once you’ve gathered all the necessary documentation and consulted with a tax professional, it’s time to submit your claim. This can usually be done through self-assessment tax forms or other relevant forms required by HMRC. Make sure you submit your claim within the specified deadlines to avoid any penalties or delays.

By following this step-by-step guide, you can navigate the process of claiming expenses for your dental business like an expert. Remember, maintaining proper records, identifying eligible expenses, and seeking professional advice are essential to maximize your tax relief and improve your financial management.

Click here for help on Making Tax Digital for Dentists.

Tips for Keeping Accurate Records and Receipts for Tax Purposes

When you’re a dental business owner in the UK, it’s vital to keep good records and receipts to get your expenses back and make the most of tax relief. This not only helps you follow tax rules but also allows you to take full advantage of deductions and credits that you’re eligible for.

First, set up a system to organize and store your records. You can do this digitally or with physical files, depending on your preference. You can use accounting software or small business apps to make the process easier and reduce the risk of losing important records.

Regularly practice the habit of keeping all receipts related to business expenses. This includes receipts for things like equipment purchases, office supplies, professional memberships, continuing education courses, and any other expenses directly related to running your dental practice. Even seemingly small expenses can add up and lead to significant tax savings.

In addition to receipts, maintain clear and detailed records of your income and expenses. You can do this by using bank statements, invoices, and financial reports. Keep track of any mileage or travel expenses incurred for business purposes, as these can also be tax-deductible.

It’s important to keep personal and business expenses separate to avoid confusion or potential issues during tax time. Having a dedicated business bank account and credit card can help streamline this process and provide a clear distinction between personal and professional finances.

Consider consulting with a tax professional or accountant who specializes in dental businesses. They can offer guidance on tax regulations, ensure accurate record-keeping, and help you identify additional deductions or credits that may apply to your specific situation.

By maintaining accurate records and receipts, you’ll not only simplify the tax filing process but also maximize your tax relief as a dental business owner. Remember, every eligible expense counts, so stay organized and claim your expenses like a pro.

Maximizing Tax Relief Through Capital Allowances and Depreciation

Increasing tax relief through capital allowances and depreciation is an important strategy for dental business owners in the UK. By understanding and using these methods, you can effectively lower your tax bill and keep more of your hard-earned money in your pocket.

Capital allowances refer to tax deductions that can be claimed on the cost of certain assets used in your dental practice. These assets include equipment, machinery, furniture, and even certain building improvements. Instead of deducting the full cost of these assets in the year of purchase, capital allowances allow you to claim a portion of the cost over several years, providing a significant tax benefit.

To maximize your capital allowances, it’s crucial to maintain detailed records of your purchases and their associated costs. This includes invoices, receipts, and any supporting documents that prove the expense is eligible for tax relief. By keeping accurate records, you can ensure that you are claiming the maximum allowable deductions and avoiding any potential issues with HM Revenue and Customs.

Depreciation, on the other hand, refers to the gradual decrease in the value of assets over time. While depreciation is not directly deductible for tax purposes in the UK, it is still an important consideration when assessing the value of your assets and calculating their capital allowances. Understanding the depreciation rates applicable to different assets can help you determine the most advantageous timing for claiming tax relief.

Tax regulations and rules regarding capital allowances and depreciation can be complex, and they are subject to future changes. Therefore, it is highly recommended to consult with a qualified accountant or tax advisor who specializes in dental business taxation. They can provide expert guidance tailored to your specific circumstances, ensuring that you are maximizing your tax relief while remaining compliant with the relevant regulations.

By effectively using capital allowances and depreciation, dental entrepreneurs in the UK can significantly reduce their tax liabilities and allocate more resources to growing their practices. Take the time to educate yourself about these strategies, seek professional advice, and confidently claim your expenses like a pro.

Exploring Potential Tax Relief Schemes Specific to the Dental Industry

When it comes to getting tax relief for your dental business in the UK, it’s important to look into special programs designed for dental professionals. The government has introduced various tax relief opportunities that can greatly benefit dentists and help reduce their tax bills.

One such program is the Annual Investment Allowance (AIA). With this program, dental business owners can claim tax relief on qualifying capital expenses like equipment purchases, renovations, and practice improvements. The AIA lets you subtract the full cost of these investments from your taxable profits, up to a certain limit, which can boost your cash flow significantly.

Dental professionals can also take advantage of the Research and Development (R&D) tax relief scheme. Many people mistakenly believe that R&D relief is only for scientific or high-tech industries. However, R&D activities in the dental field, such as developing innovative dental treatments, improving dental materials, or implementing advanced imaging technologies, can also qualify for this relief. By claiming R&D tax relief, you can get tax credits or deductions for the expenses incurred during these research and development activities, further reducing your tax rate.

Another tax relief scheme that dental business owners should explore is Capital Allowances. This scheme allows you to claim tax relief on the purchase or renovation of buildings, as well as fixtures and fittings within the premises. Dental practices often incur significant expenses on equipment, furniture, and dental chairs, which are typically eligible for capital allowances. By properly assessing and categorizing these assets, you can claim tax relief on their cost over time, leading to substantial savings for your business.

Finally, the Enhanced Capital Allowances (ECAs) scheme should not be overlooked. ECAs specifically apply to energy-efficient investments, such as energy-saving lighting systems, air conditioning systems, and renewable energy installations. By investing in eco-friendly technologies, dental practices can not only reduce their environmental impact but also benefit from accelerated tax relief through ECAs.

In summary, by exploring and taking advantage of tax relief schemes tailored to the dental industry, you can significantly reduce your tax liabilities and improve your financial position. Be sure to consult with a qualified tax expert or accountant who specializes in dental practices to ensure you are maximizing your tax relief opportunities and staying compliant with the latest regulations.

Overcoming Common Challenges and Pitfalls when Claiming Tax Relief

Claiming tax relief can be a complicated process, especially for dental business owners in the UK. However, by being aware of common challenges and pitfalls, you can navigate the process with ease and maximize your tax savings.

One common challenge is maintaining accurate and organized records of your business expenses. To ensure you can claim tax relief on eligible expenses, it’s essential to keep precise records, including receipts, invoices, and supporting documents. Implementing a robust accounting system and regularly reviewing and categorizing your expenses can help you stay on top of your records.

Another challenge is understanding the specific tax rules and regulations associated with dental businesses. Tax rules can vary depending on the nature of your business, such as whether you are a sole proprietor, a partnership, or a limited company. Consulting with a qualified accountant who specializes in dental businesses can provide you with expert advice tailored to your specific situation and help you navigate any complexities.

It’s also important to be aware of potential pitfalls when claiming tax relief. One common pitfall is incorrectly categorizing expenses or claiming ineligible expenses. This can result in penalties or even an audit from HM Revenue and Customs. Taking the time to understand the specific tax rules and seeking professional guidance can help you avoid such pitfalls and ensure you are claiming tax relief correctly.

Furthermore, staying up to date with changes in tax regulations and rules is crucial. Tax regulations are subject to regular updates, and staying informed about any changes can help you take advantage of new opportunities for tax relief and avoid potential pitfalls. Subscribing to newsletters or attending relevant courses or webinars can provide you with the latest information and insights.

In conclusion, overcoming common challenges and pitfalls while claiming tax relief requires diligence, organization, and seeking professional advice. By keeping accurate records, understanding the specific tax rules for dental businesses, avoiding common pitfalls, and staying up to date with changes in tax regulations, you can claim tax relief like a pro and maximize your savings as a dental business owner in the UK.

As a dentist, dealing with taxes can be overwhelming, but with the tips and strategies outlined here, you can claim your expenses like a pro. By taking advantage of tax relief opportunities, you can increase your savings and ensure that you are keeping more of your hard-earned money.

Be sure to consult with a tax professional like Samera to ensure you are following all the rules and making the most of available deductions. With this guide, you’ll be well-equipped to navigate the tax landscape and enhance your financial success as a dental entrepreneur in the UK.

Keeping your dental practice’s accounts organized and up-to-date isn’t always easy. It’s certainly rarely ever fun, but it is one of the most important aspects of being a dentist or practice owner. 

A well-kept set of accounts not only helps manage your cash flow and lower your tax bill, they will also be crucial whenever it comes to raising finance for your business. 

After 20 years of experience working with dental practices and through owning dental practices myself, it is evident that across the entire industry, many practices are using out-of-date procedures and technology to run their dental practice finances & accounting.

The days of handwriting ledgers, updating cumbersome spreadsheets, and sending boxes of invoices to your accountant at the last minute before the looming submission deadlines, fortunately no longer exist!

The last few years have seen a revolution in the accountancy world. The technology has evolved to the point that much of the sending and processing of invoices can be done with simple technology systems.

Going digital with your accounts doesn’t just mean an end to endless paperwork. It also reduces the amount of manpower required to process accounts, both in the dental practice and in the accountancy office, saving both you and your accountant time, effort, and money!

The Importance of Cloud Accounting Software

One thing we often see in common between poorly run practices is that they have yet to embrace digital accounting and cloud software. Some practices are still relying on paper records for their accounts. Paper records are on their way out and digital accounts are the future.

We have seen many cases of missed opportunities to save tax or improve the profits of a practice. Or at best, the benefits are achieved 6 –12 months too late due to historic accounts reporting.

Typically (and back in the day) there would be a one-off meeting with your accountant after your year-end to go through the historical figures and discuss ways to improve going forward.

The problem with this is the word “historic”. By the time your accounts are finalized and you’re sitting down with your accountant, it’s often 6 months after the year-end, meaning some of the data you’re analyzing could be 18 months old!

Real-time accounting is important because it brings so many benefits to a small business. It’s easier, simpler, faster, cheaper. In short, it’s just better.

Click here to find out more about our dental accountant services.

Benefits of Cloud Accounting Software for Dentists

Share and collaborate with your dental accountant.

By having everything available on the cloud, what you see on the cloud is also what your accountant sees too, allowing your accountant to see real-time information on your practice’s (or your personal) expenses, finances and accounts.

Most accountants will be able to provide advice on tactics and strategies to improve your practices finances, and this is far easier with a clear, instant view of your accounts.

Sharing your accounts and finances digitally with your accountant allows them a much clearer picture of the financial health of your business, which in turn helps you to collaborate more effectively with either them or any other financial advisors.

With constant updates and real-time data, you and your accountant will be able to analyse trends, manage cash flow and identify potential issues far earlier than with old-fashioned hardcopy accounts.

The technology allows you to collaborate and work together to improve the value of your dental practice performance easier than ever before.

You can use cloud-based software from any device with an internet connection. Online accounting means small business owners stay connected to their data and their accountants. The software can integrate with a whole ecosystem of add-ons. It’s scalable, cost effective and easy to use.

Anyone in your business that needs it can have access at any time. You can restrict and retain far more control over who has access to your personal information.

Click here to read more about our financial director services.

Monitoring and improving key performance areas

Software packages such as Xero allow you to automatically run a variety of financial reports for you to analyse over a whole variety of time periods.

For instance, most cloud accounting software packages allow you to run reports such as Profit and Loss, Balance Sheets and Cashflow Reports. You can also create your own templates for reports so that you can see the exact data and trends you want.

These reports make it far easier to keep track of your accounts and finances by doing a lot of the leg-work for you. Instead of wasting your time and effort poring over an entire month’s invoices to spot trends, simply run your favourite saved report and see the data instantly.

We advise clients to run such reports at least quarterly so they can assess and routinely judge and keep up with the performance of their dental practice.

This used to be an area that only large businesses with internal accounting teams could tap into. Nowadays, however, with the help of real-time accounting, any sized business can have access to this data to monitor and improve their practice performance.

If you want to make good decisions, you need to base those decisions on good and timely information. Without such information, changes that you make in your business will be more like wild guesses than informed decisions.

Knowing and understanding the key numbers in your business helps you and your advisors to spot trends and take appropriate action to improve your business’s performance. Your accountant can then spend time really adding value to your business, providing you with better advice and alerting you when things go wrong.

Click here to find out more about How Should a Dental Practice Organise its Finances.

Save money in your dental practice with cloud accounting

We had a client who was paying £450 a month for 3 days of bookkeeping (using manual keystrokes and traditional software). With the implementation of Xero (our preferred Cloud Accounting platform), this was reduced to half of that for a day, saving £4,500 for the year.

The point here is, there is amazing technology available to automate the majority of this necessary evil work. If you are not utilising this, you are basically throwing your money away.

In order to have a business that is operating to its best potential, accounting information needs to be in real-time and your accountant should be able to access this at any point. Not 6-18 months after the event, when it is often too late.

We saw another client recently who saved a whopping £200,000 in tax, simply through having up-to-date information that we had access to!

Watch our talk on saving time, money and tax in a dental practice.

Work smarter with accessible data in the cloud

The beauty of this software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.

Software updates can be developed and delivered faster and more easily in the cloud. This means you don’t need to worry about installing the latest version and you’ll get access to new features instantly. With cloud accounting software, you have the option to run your business remotely, from anywhere in the world. And when data is fluid and accessible, the possibilities are endless.

Make quality decisions

With the technology available to small businesses today, there is absolutely no excuse to be using out-of-date, old fashioned accounting systems. You could be running a far more efficient and profitable dental practice simply by doing digital with your accounts!

By switching to digital cloud accounting software, by using the online functionality to share and collaborate with your accountants and financial advisors and by using the automatically-generated reports, you can ensure that you make better, quicker, more informed decisions to continually improve the efficiency and profitability of your practice.

By looking at the performance detailed in the reports you can identify and interpret areas that need changing in your dental practice, whether it means cutting costs, increasing fees, or increasing marketing activity.

Understanding the management reports can only help you run a more efficient and successful dental practice.

Traditional software problems

Small business accounting software that’s not available via the cloud can be tedious.

Traditionally, it can suck up far too much of your business’s time and effort. This doesn’t add value, and takes the fun out of being in business. Cloud software can save your company time and money.

• The data in the system isn’t up-to-date and neither is the software. This means events such as changes in regulations cannot be reacted to in a timely manner and the benefits of adopting changes are 6-12 months delayed (or too late!).
• It only works on one computer and data bounces from place to place. For example, on a USB drive. This is not secure or reliable.
• Only one person has user access. Key people can’t access financial and customer details.
• It’s costly and complicated to keep backups (if done at all).
• It’s expensive, difficult and time consuming to upgrade the software.
• Customer support is expensive and slow

Click here to find out more about our cyber security and IT support services.

Security and Business Continuity

As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account. With cloud software, this is where the data lives –as opposed to on your hard drive.

In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.

In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.

Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting.

Click here to read our 10 cyber security tips for dentists.

How to Use Cloud-Based Bookkeeping and Invoice-Scanning Software

The Samera Dental Accountants team are huge fans of using the latest cloud accountancy software. Samera is a Xero partner and can help implement the Xero software system into your practice. This will save you time, make the running of your business much more efficient, and at the same time provide very up to date information to you to help you make better decisions about your practice.

Introducing Xero into your practice will also save you money, and ensure at the end of the year you don’t have to send a box of papers to your dental accountant if it has all be book-kept by you through the year on Xero.

By introducing Xero into your Dental practice, both you and your Samera accountant can have access to the same data, enabling you to work together on growing and developing your practice.

With the software available to you today, there is no excuse to not be automating your finances in your dental practice. To do this, you need to make sure you are using cloud accounting software, like Xero. We use Xero to run our clients’ dental practice accounts and tax. 

When you rely on paper records, you waste time and effort paying invoices, sending files and documents, missing key financial trends and a real-time analysis of your accounts. 

Now, however, you can simply scan your invoices into software like Hubdoc. The key information is then extracted automatically and fed into Xero, which processes and prepares the accounts.

With your bank account securely connected to the process, your dental accountant can match off any payments that you make, any income that’s coming in, and reconcile the bank account quickly. All without waiting for paper records to be sent anywhere. 

Instead of having to keep hardcopy records of all your invoices, receipts and documents, storing them and then shipping them off to your accountant when needed, all you need is a smartphone or scanner!

Simply take a photo of your receipts, invoices etc. via the cloud accounting app, or scan the documents with a scanner, and send them off via the app or email.

All your invoices are also stored in Xero too, so trying to find an old invoice is easy as they all reside in the Cloud, accessible 24/7 from anywhere with an internet connection.

Another benefit of digital accounts is that you can also make payments directly from your cloud accounting software like Xero. Instead of paying each individual invoice separately, which is time-consuming, you can tick all the invoices you want to pay and make one single payment to all suppliers you choose.

This means you can process and prepare your dental practice management accounts much quicker and easier, which means the annual accounts are easier and quicker to prepare. All of this can really help you spot cash flow problems sooner and organise your tax calculations and payments. 

Simply put, when you automate your dental practice accounts and finances, you save yourself time, effort and money. 

How to Use Xero to Manage your Associate Accounts and Tax Return

Automating Your Finances with Xero and Hubdoc

How to Understand Your Dental Accounts and Tax Calculations

Running your dental accounts can often feel like the most dreaded and tedious aspect of the job. In this guide, we’ve tried to make accounts for dentists a little more simple. 

It can be easy to fall into the trap of thinking that only practice owners need to really worry about their accounts. As long as your tax bill is kept low and your money keeps moving, that’s all that matters right? Wrong. If you decide to start a dental practice of your own, or indeed if you ever try to raise a business loan, your dental accounts and financial records are going to be crucial.

You will most likely be able to produce a set of accounts without expert help. However, it is almost essential to engage a specialist dental accountant like Samera to go through your accounts with you, should you wish to raise finance.

Profit And Loss Accounts

our profit and loss accounts will show your turnover for each of the last 2 years, usually generated by your service sales. 

You will then list your cost of sales, such as materials. 

Underneath this, you will need to list your expenditures. Here is a list of the kind of costs you will need to include here: 

• Protective clothing
• Travel expenses 
• Laundry
• Use of Private residence
• Vehicle running costs 
• Professional indemnity insurance 
• Printing, postage and stationery 
• Training
• Telecommunications and data
• Accountancy fees
• Professional subscriptions
• Charitable donations 

You will then subtract these expenses from your gross profit. This will give you your net profit for the year. 

Balance Sheet

The balance sheet is also a key document and represents the financial health of your business. The profit and loss sheet shows you the financial situation for that year alone. 

On the other hand, the balance sheet includes all of your assets and liabilities. Assets are split into current and fixed assets. 

Typically for dental associate accounts, current assets will include your bank accounts and any money owed to you. Current assets are assets which can be expected to be sold or consumed within that fiscal year.

Fixed assets are tangible assets, such as loupes and their costs are included on the balance sheet and not the profit and loss sheet. This is because they are an asset of the business which you will theoretically use for many years, not as a one-off material within the fiscal year. The value will be depreciated across the period of its estimated useable life.

Liabilities are people or entities that you or the business owe money to.

Underneath your assets and liabilities, you need to list your Net Current Assets (subtract your total liabilities from your current assets), Total Assets Less Current Liabilities and Net Assets (current + fixed assets).

Balancing this all out is the Capital Account, which is where the accounts owner comes in. Here, you list your brought-forward profits from the previous year. You then list your new net profit for the year just ended. Then, off-setting all of that is what the owner has drawn for personal use, the money they’ve spent.

So, your brought-forward profits plus current year profits, minus drawings gives you your remaining cash reserves. This will also equal your assets minus liabilities (Net Assets).

In most cases, a financially healthy business will have a positive balance sheet. 

Tax For Dentists Explained 

Once you have properly organised your accounts, it’s time for the tax man to get involved. 

On your tax calculation record, you’ll need to include your income received (before tax is taken off). This will typically include your profit from self-employment (as an associate dentist), which you calculated on the profit and loss sheet, as well as interest received from your bank accounts (even if it is only a couple of pounds). This gives the Total Income Received. 

You then take away from this figure your pension contributions and your personal tax allowance. The remaining figure is your taxable profit. 

You will then list out your tax payments categorised by the tax band you need to pay, how much at the basic rate, how much at the higher rate and any additional rate. You will also need to list any taxable interest payments you have received. 

Also, you will need to report your National Insurance payments, which have different threshold bands. This will give you your total National Insurance liability. 

Adding these figures (Income Tax Charged and National Insurance liabilities) together gives you your total income tax. 

You should find that this figure is around 25% of your profit. This is why we recommend to our clients that they set aside 25% of their income to cover their tax bill. 

Click here to find out more about our tax advisory services for dentists.

Paying The Tax

The next document you need to draw up will be the tax payment summary. 

First, list your total tax payments due, which you calculated on the tax report. You will then minus any previous tax payments you have made for that year, as well as any deductions such as previous overpayments and rebates.

The resulting figure is the tax you currently owe for the financial year.

Remember, if your tax bill is over £1,000 you will need to make advance payments on next year’s tax bill, based on this year’s tax bill. You will be required to pay 50% of the total tax due in January and the remaining 50% in July. 

So, your total tax bill due on 31st January will be the tax you currently owe, plus your first advance payment on next year’s tax. 

Click here to listen to our podcast on how to legitimately reduce your tax bill.

What Dentists Can Claim On Expenses 

As a dentist you can only claim on expenses items which have been purchased for business purposes, the items you use for dentistry.

While you may be tempted to try and put everything through the books, this can quite often end you up in trouble with HMRC. That’s why the Samera team have put together a Dental Associates Expenses Guide.

So when it comes to preparing your annual tax return, a degree of good judgement needs to be used to assess whether something is allowable for tax purposes.

Travel from home to practice is a big no no, however, if you travel between practices on a regular basis and keep records to support such journey costs, then this is allowable for tax purposes. Mileage records must be maintained – HMRC just love to investigate such mileage claims and then find that there are not any!

If you use a computer for your business, then some or even all of the capital cost could be claimed on your behalf.

New loupes, or other new kit? Then potentially this can also be claimed for.

Good Judgement is Essential

In respect of training, if you are building on existing knowledge, then this is usually deemed to provide you with CPD, which can then be claimed for. However, brand new knowledge is usually not deemed to be allowable, so again some judgement needs to be used on this aspect.

Click here to read our guide on expenses for dentists.

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