Specialist advice for GP Medical Practices

Working within the NHS, resources and funding are always going to be critical to your general practice, but so is getting the correct financial and accounting advice to guide you through the myriad of conditions, rules and restrictions.

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Paying Family Members

Why employ a family member?

Provided you bear in mind the points below, the cost of wages paid to a family member will be an allowable deduction from the profits of the business.

It will be tax efficient to employ a family member if:

  • You pay tax on the profits of the business and the family member does not have any taxable income, or:
  • You pay tax at the 40% or 45% rate and the family member pays tax at 20%.

But it must be real work

This is very important – you must not charge wages to the business unless there is a commercial justification for doing so. The work must justify the pay.

The tax inspector may well ask questions about wages paid to family members, so it is important to be clear about the hours worked, the rate per hour and the duties involved.

If your family member has no other employment income, then you can pay them up to £6,240 per year without having to deduct any tax or NIC or even needing to run a payroll, however, you will need to run a monthly payroll if the amount is above £6,240.

And it must be real pay

It is not enough simply to make an entry in the books for the wages – the family member must actually be paid, preferably by cheque or direct debit into their personal bank account. This provides an audit trail if HMRC raise any query.

However, please note that the wages should not be paid into a joint account. It could be argued that the taxpayer has not really paid the family member as the tax payer still has access to the money.

It is also suggested that the wages are paid monthly.

You could pay pension contributions instead

Some of our clients make pension contributions in place of wages for a spouse or civil partner who has worked in their business. As well as reducing a household’s tax bill this can help provide a pension for a non-working spouse or civil partner.

A simple example

Dr Ali does some medical reports from his home. His 18-year-old son helps him out for five hours a week at £10.00 per hour, earning a total of £50 per week. This amount equates to £2,400 a year, assuming four weeks’ break.

Dr Ali can offset the £2,400 he pays his son against his profits for income tax purposes.

Provided his son has no other income, he does not have to pay any tax on the money because he falls well below the annual tax-free personal allowance (£11,500 in 2017/18).

If Dr Ali had done the work himself instead and not employed his son, that £2,400 would remain part of his taxable profits for the year and he would be liable to pay tax on it. If he was liable to income tax at the higher rate of income tax of 40%, the household would have received only £1,440 (£2,400 less 40%) instead of the full £2,400. National Insurance contributions may reduce the household income even further.

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Contact us for specialist medical accountancy services for GP Medical Practices

If you’re looking to plan your finances for the future or trying to find an answer to a problem then get in touch today.

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NHS PENSION REVIEW

Are you in danger of being hit with a huge tax bill on your pension growth? Our NHS Pension Review Service can provide an advance warning of impending pension issues.

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TAX ENQUIRY PROTECTION

HMRC have increasingly got GPs in their sights and many Practices have been subject to lengthy tax investigations. Make sure you’re covered with our annual insurance scheme.

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EXPERT CONSULTATION

Talk to one of our Medical Accounting Team for free. We can discuss your circumstances and how we can help you achieve better financial management, reduce your tax bills or plan for the future with a tailored fixed price plan.

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We have a panel of subject experts and a team of professional accountancy support staff to make sure your specific needs are met reliably and cost effectively.

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What our clients say…

Tracy Ford, Practice Manager

We have been with Nichols & Co for over a year now. Very smooth transition with good communication at all times. We found them very professional and their knowledge of general practice is very reassuring. They make what can be complex situations easy to understand.

They have also introduced us to a Personally Administered Items claim review service, which has helped us not only making a retrospective claim for the missed income but also delivering improvement in our PAI income going forward.

I wouldn't hesitate to recommend them to anyone looking for an excellent, friendly, reliable accountancy service.

Dr William Jasper, GP Partner

We have received an excellent service since we moved to Nichols & Co. The transition has been the most hassle-free and transparent. They are always very helpful with any queries you might have and have a very good working knowledge of General Practice and are keenly aware of the challenges Practices face within the changing environment of the NHS.

We have been very impressed by the way Nichols & Co continue to deliver the range of services they provide from Accounts to Tax and NHS Pension advice.

At the year-end meetings, the accounts are presented in an understandable format without any unnecessary jargons. We have found Practice consultation and advice on Practice as well as personal tax matters from Nichols & Co specifically helpful.

We would not hesitate to recommend them to other GP Practices.

Drs R and N Nair

Nichols & Co have been our accountants for the last 6 years and we always feel that we are a valued client of theirs. They respond promptly to any queries you have either via email or telephone or if need be, in person. Each year Debra visits me at my practice and takes time to go through the accounts with me so that I really understand them, helping me make better decisions.

In 2017, we moved into new premises, and Nichols and Co were able to assist me with claiming back a large amount of tax on the refurbishment of our new premises.

Our practice has changed a great deal over the last few years and having the support of a good accountant has been a great help. I would recommend them without reservations.

GP Partner, London

Nichols and Co have provided high standard medical accountancy services to our GP practice for many years. 

They are experienced in their field and provide a dedicated partner who attends our annual financial partnership meeting. This meeting allows time for all involved to raise queries regarding issues such as tax and pension. Additionally, wider comparisons are made with local and national figures. Queries raised at other times are dealt with in a professional and time efficient manner.

I can recommend them.