If you're working for the NHS as a dentist, hygienist, technician or therapist, and also have private clients, you might be able to reduce your tax bill by registering as a self-employed sole trader or by setting up your own limited company
Which option you choose can have a significant effect on your own tax obligations but also your NHS pension entitlement.
Employed or self-employed?
Employed Dentists
If you are an employee providing dental services, your employer, most likely your dental practice, will deduct Income tax and National insurance contributions form your wages - this is known as Pay As You Earn (PAYE).
See our page on Income Tax and National Insurance to know how these are calculated.
Self employed
If a dentist is self-employed, you'll operate from either a sole trader or limited company and more importantly you'll be responsible for paying your own taxes/ Many associate dentists, hygienists, therapists and dental performers are self-employed contractors.
The contractor typically makes monthly payments to the practice owner in order to use the premises, equipment, materials and staff. HMRC's employment status manual says Dental Associates are usually self-employed as long as an approved British Dental Association contract is in place whilst an assistant dentist is employed
From 6th April 2021, it is the responsibility of the end client, the dental practice in most cases, to determine your employment status for your private work.
A self-employed dentist has freedom over how to treat your patients and devise your own treatment plans as well as greater flexibility and independence as well as reducing your tax liability.
Because HMRC enquiries will typically start with a look at the contracts you have in place.
How the NHS pays self-employed dentists
The payment arrangement for dentists with the NHS varies from country to country within the UK.
In England and Wales, General Dental Service Specialists agree a number of units to work every year and are paid an annual income in monthly instalments.
In Northern Ireland and Scotland both use item of service payments, continuing care payments along with grants and allowances.
Any NHS income is part of taxable income and must be reported correctly when filing your Self Assessment.
Non-NHS income
An increasing number of dentists are carrying out private practices on top of their NHS income. It is not unusual for this to be earn more than the work they do with the NHS.
There are other ways to earn money through private work. A dentist might get paid for providing consultancy to other dentists, marketing dental products, commissions from selling dental insurance or rental income from letting other professionals.
All taxable, non-NHS income must also be reported on your tax return.
What expenses can be claimed for tax-related purposes?
HMRC classify tax-deductible expenses as either "travelling you had to do in your job" or "other expenses you had to pay in doing your job and which relate only to doing your job."
A degree of good judgement needs to be used to assess whether something is allowable for tax purposes or not. Some common expenses you might be able to claim back in your Self Assessment return include:
Travel for business purposes at 45p/mile. You will want to keep a mileage record that shows that you are only claiming back on business travel and not to and from home and a regular place of work.
Any other business travel costs such as public transport/taxis etc.
Training and course costs that update pre-existing knowledge such as annual update courses. Courses that are seen as career progression cannot be claimed and HMRC can be unpredictable as to what counts
Professional fees and subscriptions such as BDA, GDC etc...
Legal advice relating to business matters
Professional indemnity insurance
Cleaning/laundry costs
Printing, postage and stationery
Tools and specialist dental equipment and materials
Common mistakes to look out for
Mixing personal and practice expenses: Extracurricular activities that do not relate to the business will be considered personal expenses
Changes to Dental Tax: Due to frequent change sin tax rules and regulations, being caught unawares will make you lose credit and deductions you are entitled to.
Miscalculating tax relief on contributions: Since tax relief is claimed on the superannuation contributions by adding an amount on the individuals tax return, and not be deducting in the accounts, many dentists make the mistake of not claiming their share.