Navigating Tax and Accounting for Healthcare Professionals: An Expert Interview with Nichols & Co
Coherent Healthcare sat down with Steve Nichols, Managing Partner at Nichols & Co, to delve into the intricacies of tax planning and accounting tailored specifically for healthcare professionals. Steve offers invaluable insights into the day-to-day operations at Nichols & Co, the range of services they provide, and essential advice for healthcare practitioners navigating tax and financial matters. Let's explore Steve’s expertise in helping medical professionals achieve financial peace of mind.
Coherent: Can you share a bit about what you do on a day-to-day basis and an overview of the types of services you offer healthcare professionals?
Steve: We offer tax and accounting services for medical professionals. including everything from income tax planning, advice on whether to form a limited company, inheritance tax planning, VAT advice, and general accounting and compliance services. We offer holistic advice to our clients, taking into account their personal, family and business circumstances. Our goal is to provide them with peace of mind.
It may be a cliché but what I love about my job is that no two days are the same. I split my time between client work and team leadership. I’m very lucky to have a strong team around me and I'm committed to ensuring that everyone at Nichols & Co is continuously improving and advancing in their roles through training and mentorship. I'm also involved in business development, seeking innovative ways to expand our services and reach more healthcare professionals in need of specialised tax and accounting support. Keeping up to date with the latest changes in regulation and industry shifts is crucial for our firm to offer quality advice and maintain our competitive edge.
Coherent: Tax preparation can be quite a daunting concept for a new practice owner. What advice would you give a healthcare professional when submitting a tax return for the first time? What records should they keep for their tax return? Is it necessary for every healthcare professional to engage an accountant?
Steve: Complying with HMRC and Companies House, especially for new practice owners, can seem overwhelming. My first piece of advice is to get in good habits early on and maintain organised records of bank statements, invoices, payroll data, and VAT receipts for purchases. Keeping a digital record can simplify this process significantly and I would definitely recommend speaking to an accountant early on about which software to use.
While it's not mandatory for every healthcare professional to use an accountant, it's definitely advisable. The complexity of tax regulations and the potential for minimising tax liabilities through proper planning make professional advice invaluable.
Coherent: What are the basic financial and accounting principles a healthcare professional needs to know to run a practice?
Steve: Firstly, understanding the nature of your trading entity—be it as a sole trader, partnership, LLP, or limited company—is crucial. Each type comes with its own set of financial, legal, and tax implications that can significantly affect your practice. If you are trading through a limited company, its important to understand that the company is a separate legal entity from yourself. Its also helpful to have a good understanding of how best to draw funds from your company, probably through a combination of payroll, dividends and directors loan account.
Secondly, VAT is a complex area, especially for medical services. It's essential to determine whether the services you provide are subject to VAT, as this will impact your pricing, billing, and reporting processes.
Another critical area is being aware of HMRC deadlines to avoid surprise tax bills. This includes self-assessment bills, payments on account and corporation tax payments. If you draw funds from a limited company, you must be disciplined about putting money aside to pay future tax bills. Your accountant should be able to provide estimates of future tax liabilities.
In addition to these specifics, running a successful practice requires a solid understanding of cash flow management, profit margin analysis, and the ability to read and interpret financial data. Developing a strategic financial plan and employing effective budgeting techniques will lay the groundwork for the sustainable growth and financial health of your practice. Regular financial reviews will ensure you remain on track to meet your goals.
Coherent: Could you share some best practices on setting up a pension plan?
Steve: Pension advice is regulated, so its best to seek advice from a financial adviser. At Nichols & Co we work very closely with advisers so we can liaise with them to provide a seamless service for clients. However, some general advice would be to appreciate the value of the NHS pension scheme. Although it may not be glamourous, it is generally accepted to be a ’gold plated’ scheme that the private sector simply cannot compete with.
Its also important not to overlook the State Pension. You can check your forecasted State Pension entitlement on the government website here. If your forecast falls below the maximum State Pension amount, you may be able to make voluntary National Insurance contributions to increase your entitlement.
More generally, Pension contributions are an invaluable tax planning tool. They can reduce your total taxable income, potentially lowering your tax bracket and keeping you out of the dreaded 60% effective marginal rate of tax between £100k-£125k. If you trade through a limited company, you could also consider pension contributions for your spouse or other family members.
Coherent: Do you have any additional resources a healthcare practitioner can refer to if they’d like to learn more?
Steve: For more great tips and to stay up to date with the latest news in the industry, check out the Medics Money podcast. Hosted by Dr Tommy Perkins and Dr Ed Cantelo, the series offers tailored advice for Medical Professionals.
By adhering to best practices in tax planning, accounting principles, and pension management, healthcare professionals can navigate the financial landscape of their practice with confidence and efficiency.
