The main points that will affect GP locums and salaried GPs in 2014-15 are:
- Increases in personal allowance (the amount you can earn before you pay tax) to £10,000 with a small adjustment to the level before you pay higher rate tax. So for higher rate taxpayers earning less than £100k, tax savings will amount to just £195.
- For those of you with savings income, you will be able to contribute more to ISA’s (to be renamed NISA’s) - £15,000 from 1st July 2014 and this can be either in cash or stocks and shares. The Premium Bond limit will also be increased to £40,000.
- The major pension changes announced affect defined contribution schemes – so will not affect those of you who only contribute to the NHS scheme which is a defined benefit scheme. No changes have been made to the Annual Allowance or Lifetime Allowance, beyond those already in place.
You can find out more about the Budget changes on the Honey Barrett website.
2014 tax returns
Notices to complete a tax return for 2013-14 should be dropping through your doors in early April.
What if you need to complete one but haven’t received it? If you don’t have a professional adviser:
- Did you notify HMRC that you were self employed?
- If so, was it very recently? It will take a while to get through their system
- If long ago, do you have a letter giving you your UTR (unique taxpayer reference)
- If you do, then they’ve got you on the system, if nothing heard by end of April, call them to check
- If you haven’t, they’ve probably not registered you properly – call them to sort it out.
- If you do have a professional adviser, get them to sort it – calling HMRC yourself can cause confusion.
When you have the notification, use it as a prompt to collate your tax paperwork. It’s hugely tempting to think the deadline’s ages away and put it down – but it’s much easier to deal with while it’s all fresh in your mind – and as the advert says, you’ll have peace of mind once it’s done!
If you are planning on submitting a paper return – 31st October 2014; If you are filing on-line – 31st January 2015. Tax payment dates - 2nd payment on account – 31st July 2014
So if there is a chance that your taxable income in 2013-14 is less than 2012-13 (which forms the basis of the payments on account) you’ll want to deal with your return before 31st July so that you don’t pay more than you need.
What has changed since last year?
Small businesses – with turnover less than £79k p.a. for 2013-14 can now use the cash basis rather than the accruals basis and there are some simplified rules for expenses. Once you’ve started using cash basis you can continue to do so until turnover exceeds £150k. Note that this is not available for companies.
What does this mean for you?
Cash basis looks at income and expenses based on the date of receipt/payment; accruals basis works on the basis of work done and expenses incurred. This can give you a timing benefit – and that’s all, it’s not a tax reduction. So for example work done in March for which you only got paid in April would not be taxed for another whole year. The downside of course is that when you stop, there is a tax liability after you stop working on income earned before you stopped – so there will probably be more tax than you would expect when you cease self employment to become salaried or to join a practice as a partner – or indeed on retirement.
The timing basis works the other way round for expenses. So for example under an accruals basis the accountancy fee for the year in question is ‘accrued’ in the accounts although you do not pay it until many months after the year end usually. On a cash basis, you won’t get tax relief until you actually pay it.
You may use 45p per mile (up to 10k miles per year) instead of a percentage of total car usage. You still need to keep a record of business miles.
Note that HMRC’s attitude towards business journeys has changed too. If you are doing locum work with no pattern in lots of different places, then one can probably continue to argue that it is ‘itinerant’ work and that home is the place of business. However if you do any regular locums – such as Mondays in Practice 1, Tuesdays and Thursday in practice 2 etc, then they are likely to argue that they are separate places of work and travelling to them is personal commuting costs.
You may use a fixed amount for use of home as office. But the rules are much stricter than using the ‘percentage of total use’ basis. You must work at least 25 hours a month at home on ‘core business activities’ for this to apply.
Core business activities comprise:
- Providing goods and/or services – unlikely to be relevant
- Maintaining business records – yes, but not large number of hours
- Marketing and obtaining new business – possibly
Whether you are claiming the fixed rate or the percentage of the whole, you need to keep some records of the time spent on working from home. It’s probably unrealistic to maintain a daily time sheet for the whole year – but a sample diary for a month would be sensible – updated if there is any change in working practice.
There are other simplifications with no capital allowances, but an expense deduction instead – but that is not likely to have any practical effect on locum practices.
If you are going to do your return yourself, do it promptly after 5th April while everything is fresh in your mind and there is less risk of making errors by doing it at the last minute in a panic.
If you decide you want to use an accountant for your next return, ask colleagues for referrals, find someone who specialises in the medical profession and arrange to meet them – either face to face or on the phone - to see how you get on with them. The most brilliant accountant with whom you cannot communicate is no better than the friendly one who doesn’t have the knowledge.
If you already have an accountant, try to get information to them early so that they can advise you properly, rather than just fill in a return for you at the last minute.
Make this the year you get everything settled early – there’s enough stress in the GP world, without adding tax to it!
Liz Densley is medical specialist partner with Sussex Chartered Accountants, Honey Barrett, and is secretary of AISMA (the Association of Independent Specialist Medical Accountants). Contact her at firstname.lastname@example.org.
First published in the NASGP Newsletter April 2014.