We’ve been working with a new dental associate customer who has recently moved from a sole trader dentist to a limited company.
He has brought his wife into the limited company to take advantage of her lower tax rates.
Keeping his and his wife’s dividends and salaries at a rate of £50,000 annually means he can claim child benefits for his two young children.
This child benefit is worth approximately £2.2k a year to him until the children leave full-time education. At today’s rates, that’s about £40k over 18 years and is paid tax-free.
This wouldn’t have been possible if he hadn’t incorporated and been able to bring his wife into his limited company.
Cautious management of his income and the company’s balance sheet is required. He has expressed great satisfaction with now possessing a:
- Child benefit claim,
- free childcare placements and
- a top-up of tax-free childcare account
This has given him breathing space and the family’s finances with his young children.
Associates who are currently operating as sole traders can potentially achieve substantial long-term tax and cash flow benefits by transitioning to a limited company, particularly if they
- Have a young family.
- A non-working partner to whom they can pay dividends at lower tax rates.
- Don’t have any issues with leaving the NHS pension scheme.
- Want to drive an electric car to work and
- Have annual profits above £100k.
I’d recommend any dentists reading this to get in touch to see how they could benefit and keep more of the money they earn.
