Reduce that painful tax bill by optimising use of allowances
Paying tax at 40 per cent is nothing to smile about, so make the most of legitimate tax allowan-ces. Since the top tax threshold has been deliberately allowed to rise more slowly than inflation, young GPs now pay a greater proportion of tax at the top rate than ever before.
But if you pay £40 per £100 earned on most of your income, it also means you can save the same amount by ensuring that you make the most of the legitimate tax allowances and forms of relief available.
As an employed GP you are taxed monthly via your salary. The amount of tax deducted by your employer is dictated by your tax code. This is governed by the allowances and reliefs that you have claimed via your tax return. Any of you who have never completed a tax return should arrange for this to be done as soon as possible.
Either phone your local tax office or go online at
Should you complete your own tax return? I advice against this for three reasons.
A good accountant is most likely to maximise your claim.
They will also give you proactive advice.
And their professionally presented submission is less likely to attract HM Revenue & Customs attention than your handwritten one.
Do use a GP specialist accountant. To find a good one, ask friends, colleagues or approach your GP employer's accountant. Expect to pay around £400. This is a tax-deductible business expense so actually costs £240 – money well spent.
Your accountant will send you a checklist of items that are required. The average employed GP should have £4,000 of business expenses to set against tax.
As an employee you can only claim for expenses 'wholly, exclusively and necessarily' involved in your occupation. Medical defence, GMC, BMA and RCGP subscriptions certainly fall into this category. Medical books and equipment also count, as does a mobile phone if it is used exclusively for your work.
Motoring costs incurred as part of your job (excluding your journey to and from work) are usually allowed as an exception, provided you do not get a mileage allowance from your employer. These are usually set as a proportion of all costs (petrol, servicing, insurance, road tax and AA/RAC cover).
This proportion is the ratio of business to total mileage annually – so if visits mileage is 500 miles and total mileage is 7,500 you could claim 6.67 per cent of your motoring costs against tax.
Keep a written log of your business mileage – perhaps two months out of 12. This will act as proof should the taxman need it. Maintain careful records of all business expenses and keep these on file for at least six years.
Unfortunately you also pay 40 per cent tax on interest earned from savings and investments, unless they are in tax-
exempt schemes such as ISAs, so ensure you make full use of your £7,000 annual allowance. Premium bond winnings and some National Savings schemes are also tax exempt.
If you are a full-time employed GP and make a comprehensive claim, rather than just claiming your personal allow-ance and superannuation, your new tax code could save you at least £1,600 a year – something to put a smile on your face.
John Couch is a GP in Ashford,