The new tax year is approaching, are you ready?
Featured Products Promotional FeaturesPosted by: Dental Design 6th March 2022
The end of the tax year is often the perfect opportunity to assess your taxes, look at any financial goalposts you have in place and take a fresh approach to your income.
In 2022, the tax year is set to come to an end on April 5th. From this date, certain important financial aspects reset for the new tax year, such as your tax-free Personal Allowance on your earnings and your Annual Allowance for your pension scheme/s.
So, with these changes approaching, now is the time to take a wider look at your finances:
Income Tax – what does this mean for you?
Due to the highly skilled work involved, it’s likely that the vast majority of dentists will fall under one of the higher Income Tax brackets. First of all, regardless of earnings, Personal Allowance remains at £12,570, which means that you will earn this amount, tax-free without fail.
The Higher Rate for the income tax bracket applies to those who earn between £50,271 and £150,000, which means that you would pay 40% tax rate on any earnings in this bracket. If you earned £60,000 per year, for example, you would pay the Basic Rate of 20% on the first £50271 of your income, and the Higher Rate on the remaining £9,729.
For lucky individuals who net over £150,000 a year, they will be placed in the highest band rate of income tax available – the Additional Rate. In this circumstance, individuals will pay 45% income tax on any amount they earn over the 150k threshold. It’s worth noting that if you do earn over £100,000 a year, your personal allowance is reduced by £1 for every £2 earned over that amount until it reaches £0.
With these figures in mind, now is a good opportunity to assess how this sets you up for the coming year. It’s highly likely that as a result of the pandemic, your income levels will have changed. While dental services have begun to head back towards pre-pandemic normality, certain measures and restrictions mean that, for the most part, practices are likely to have had lower income than they would usually expect during the 2021 tax year. As dentists are self-employed, this may have pushed you into a lower income tax bracket if your earnings were near one of the thresholds to begin with, which can have a knock-on effect for how your finances work for the year ahead.
There are other allowances to consider depending on your financial position. Marriage Allowance and Dividend Tax Allowance, for example, may allow you to make further savings.
Is your pension scheme still working for you?
It’s all too easy to stick to the pension scheme you know, but does your policy work best with your current financial situation? As the past couple of years have been so unpredictable, there’s every chance that your current pension policy may not be working in your best interests.
Now that the time for Annual Allowances is drawing to a close, it’s a good opportunity to explore some alternative options and see whether there are policies out there that would allow you to save more efficiently and support any future financial goals you have in mind. This is particularly pertinent if you are planning any big changes to your working life within the next few years, such as moving towards retirement. Planning early and setting yourself up to be in the best financial position is a smart move, and your pension is instrumental in this, especially if you want to save as much capital as possible for your next step.
So, where to begin? The most important thing to consider is what your goals are. Do you have a certain sum you want to save? Are you willing to take some risks? Some factors to bear in mind include contribution limits, annual fees and the investment strategy of the pension plan you’re taking out. Remember, a policy that looks good at first glance may actually not be as beneficial as it initially appears so it’s always good to really explore the small print and see how each individual policy relates to your personal situation.
Advice tailored to you
Ultimately, the best way forward when it comes to considering your finances for the new tax year is to seek advice from the experts. The award-winning team of financial advisers at money4dentists have helped dentists to navigate any challenges the new tax year brings for decades. Giving high-quality, impartial advice based on unrivalled industry knowledge and a passion for helping those in the profession, the team can help you with pensions, income tax, retirement plans and more – effectively any financial matter that you are facing.
Prepared is best
While a new tax year isn’t necessarily a big change, it still provides an opportunity to look at some of the financial measures you have in place and see if they are going the distance. Seeking expert advice to help guide you through any queries and to update any financial policies is always a smart move, especially if 2022 turns out to be as unpredictable as the year before.
Richard T Lishman
Managing Director of the 4dentists Group of companies
For more information please call 0845 345 5060 or 0754DENTIST.
Email info@money4dentists.com or visit www.money4dentists.com
