Medical professionals: An additional source of income is great, but what are the tax implications?
Receiving private practice income in addition to your regular salary is chargeable to income tax as a self employed basis, this may include liability to National Insurance Contributions depending upon your level of additional income.
This income would be declared via your self assessment tax return which you will be required to complete once you have informed HM Revenue & Customs of your private practice income. If you fail to do this your could end up with a £100 fine.
When compiling your accounts, your income must be declared on an 'Earnings' basis - meaning as soon as any work reaches a stage where it is deemed billable, the client should be noted as a debtor and included in your accounts. This works both ways and you can declare expenditure that you will incurr but not pay until after the accounting-end in your accounts too. You will find yourself paying tax on income in some cases before you have received payment 'into your bank'.
With expenses you can claim whatever you wish as long as it is proveable the it is 'wholly, exclusively and necessarily' for the purpose of your private practice.
Expenses can include:
- Secretarial/Admin costs
- Spouse's wages - This is a specialist area (contact TaxPenny for tax return advice).
- Medical equipment
- Subscriptions and Journals
- Courses & Conferences - CPD
- Room hire costs
- Postage and Stationary
- Software and Accessories for your computer
- Motor Expenses - as per your business mileage records
- Other travelling expenses (hotels etc)
- Telephone costs - as per your records
- Accountancy, Legal etc
Capital Allowances can be claimed on items where you have spent sums for assisting your private practice work once depreciation is factored, for example:
- Computers, IT
- Medical equipment
The type of asset and date of purchase will affect the allowance made. If any non-business usage is made the allowance will also reflect this.
More information on Doctors Tax Returns