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Tax Relief

Do you have a Personal pension plan or a Subscription payments that you have not claimed tax relief on?

The rules covering claims for tax relief on personal pension payments and subscription payments made in previous years are changing.

For each pound you contribute to a personal pension scheme, the pension provider claims tax back at the basic rate which is currently 20%. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot.

In addition, if you are a higher tax rate payer, you can claim additional tax relief on the contributions. This additional tax is usually claimed back on your annual self assesment return. If however you have not made this claim in earlier tax years a separate ‘ overpayment relief’ claim can be made

You may also be able to make an ‘overpayment relief’ claim for professional subscriptions that you have incurred which you have not previously claimed for.

Overpayment relief

Overpayment relief replaces the old ‘error or mistake’ rules for individuals, partnerships and companies from 1st April 2010.

The taxpayer must make the overpayment relief claim within four years of the end of the relevant tax year or accounting period.

This would mean that the earliest period that you can go back to, to make a claim would be the 2006/2007 tax year.

However, there is also a transitional rule that give a longer time limit for income tax returns for the year 2005/2006. If you think you may have a claim for this year, you need to act soon before this transitional period expires.

"Article written by Debra Williams for Professional and Medical March 2011"

Trading Style - Getting the Legal Structure Right

Tax rates have risen to 50% and certain levels of income now suffer marginal tax rates of 60%. Every pound extra that you earn could suffer income tax at 50%, superannuation contributions at 8.5% and national insurance on income above the higher earning threshold at 2% (total 60.5%).

No-one expects tax bills to fall for several years so any opportunity to reduce tax rates or utilise additional tax allowances and reliefs must be explored.

One way of doing this is to consider which legal structure is the most ‘tax’ appropriate for your business. You could choose from four main legal structures:-

Sole trader

  • Partnership
  • Limited liability partnership
  • Limited company

Choosing the most appropriate legal structure for your private practice income could allow you to acheive the following:-

  • Split income with a spouse or civil partner
  • Cause income to be taxed at 40% or 20% rather than 50%
  • Reduce national insurance contributions from 9% to 0%
  • Shelter income in a corporate structure where it will suffer tax at 20% rather that 50%

However, tax is not the only consideration and, not all NHS contracts give you the freedom to choose your legal structure. Each medical practitioner's circumstances are different and this type of tax planning is not appropriate for everyone.

We can put you in touch with experienced accountants who can assist you in considering all these relevant issues. Please call us if you would like to discuss all your individual circumstances.

"Article written by Debra Williams for Professional and Medical May 2011"

National Insurance Review

Many consultants have at least two sources of income - NHS and private practice income.

Both these sources of income are liable to national insurance contributions (NIC’s). A consultant will pay NIC’s on their NHS salary as well as NIC’s on their private practice income.

There is however a maximum amount of national insurance contributions which any individual tax payer has to pay in any year.

Normally, your accountant will be apply to have the national insurance contributions on private practice income cancelled or ‘deferred’. This is because normally a consultant will have paid the maximum national insurance contributions due on their NHS salary alone.

However, in our experience it is not uncommon for this “deferment” to be missed by an inexperienced or non-specialist accountant. If the accountant does not request that the national insurance contributions are deferred the consultant will pay more national insurance than is due. The Inland Revenue has no procedure to prevent this from happening and it would not be unusual for a consultant to pay £2,500 per annum in unnecessary contributions. The consultant receives no additional benefits for these additional contributions.

We can put you in touch with a specialist who will be able to calculate if you have overpaid National Insurance and obtain a refund for you if applicable.

"Article written by Debra Williams for Professional Medical April 2011"

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