‘Y’ is for Your financial health check

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‘Y’ is for Your financial health check

Julia Burn continues with her A to Z of top tips. This month she turns to the letter ‘Y’.

 

As we approach the end of the calendar year, it seems a good time to review and assess your financial affairs to ensure everything is in order. 

There have been so many changes in the economy over the last two years, from Brexit to the fall-out from the Covid-19 pandemic, that now seems like a good time to take a step back and review the financial position of your practice.

 

Preparation of forecasts and budgets are always a tricky process, as although you know how you would expect your income and expenditure to be, you cannot anticipate external factors which will be beyond your control.

These may have a significant impact on your financial position, such as the cost implications that businesses have had to endure through the pandemic.

Support measures 

As mentioned in my previous articles for Independent Pract­itioner Today, the Government gave businesses a variety of different support measures during the pandemic. But these have now all come to an end, so businesses need to try and adapt and return to some form of normality, albeit slightly different to how they ran before the pandemic. 

Forecasts and budgets therefore need to be revisited and updated regularly so that any issues can be identified and tackled early to prevent any unwanted surprises.

Many businesses who have implemented a vast amount of investment into IT to enable them to work from home during the lockdowns are very likely to continue this in some form, whether exclusively working from home or a hybrid of working from home and in the office. 

Working remotely

Lots of patients may previously have worked nearby and popped out in a break for a doctor’s appointment, but this may not be as easy to arrange where they are working remotely from home, which could be a significant distance away.

Where the practice itself has been utilising technology to offer virtual appointments rather than face-to-face ones, it may be a good time to assess your need for premises.

For some independent practitioners, it may be appropriate to consider downsizing or changing the way in which their space is used to better accommodate the current hybrid working models.

Rising taxes

During the last Budget, the Gov­ern­ment stated that corp­oration tax for businesses generating profits before tax of £250,000 or more a year, would be increasing from 19% to 25% with effect from April 2023. 

Companies generating profits before tax of less than £50,000 will continue to pay corporation tax at 19% and those companies generating between £50,000 and £250,000 will require a calculation because they will receive an element of taper relief as they are between the two rates.

Where companies have generated losses up to £2m during the pandemic, these losses will be available for carry-back against profits of the previous three years rather than the usual one year carry-back.

The Government also announced a super deduction for investment in innovation of 130% of expenditure. This may be accessible for medical practitioners involved in clinical research or planning significant capital expenditure.

Business relief

During the Budget, there were no changes to Business Asset Disposal Relief – previously known as Entre­preneurs’ Relief – which currently has a lifetime allowance of £1m. But this change was anticipated, so we will need to watch this space for changes in the future.

Last month, the Government announced its plan to increase National Insurance by 1.25% from April 2022. 

This will not only affect all employees by reducing their disposable income, but will also affect businesses because the cost of employer’s National Insurance will also rise. It will be important to assess how this will affect your business before it is implemented (see ‘New tax to cost private doctors £250+ a month).  

The Government also announced an increase in tax on dividends of 1.25%. This will affect all those consultants who receive income this way from owning shares in their companies. 

It stated that it could not rule out more tax increases, so we will all have to keep abreast of any changes to anticipate how these are going to affect businesses and individuals. By ensuring the fin­ancial reporting of your business is regularly updated, you will be able to manage cash flows more easily.

Julia Burn (right) is a director at Blick Rothenberg and part of the team that advises medical practitioners