Many doctors in the UK don’t realise that tax relief can substantially increase the bottom line of their bank accounts, through tax deductions on expenses or items related to their practice.
The term ‘tax deductible’ refers to the cost of an item or expense that can be subtracted from your adjusted gross income in order to reduce the amount of income that is subject to tax.
A tax-deductible expense is an expense that you have incurred solely in the performance of your duties of employment. This is the ‘wholly, exclusively and necessary’ rule demanded by HMRC (Her Majesty’s Revenue & Customs).
Lowering Your Costs
There are many ways doctors can lower their costs to practice medicine, and tax relief is an effective way to do that. Doctors can claim tax relief on fees paid to professional entities such as the GMC (General Medical Council), BMA (British Medical Association), MPS (Medical Protection Society), and other Royal Societies, just to name a few.
A good way to see if your expenditures satisfy the ‘wholly, exclusively and necessary’ rule is to check HMRC’s allowable annual subscriptions to these and other approved associations. For now, doctors can’t claim tax deductions on expenses incurred for continuing education, including the cost of course exams and fees.
You can claim tax reimbursement on work related expenses such as stethoscopes, theatre shoes, medical equipment and other such articles. Some other examples of expenses that can be reimbursed are:
- Furniture removal fees
- Solicitor fees
- Agency fees (for rental properties)
- Travel and sustenance expenses incurred while searching for property
- Stamp duty
- Private pension contributions
- Telephone expenses while on call
- Specialist education training courses and conferences
If your job requires traveling, you may have tax reimbursed on a mileage basis, up to certain limits set by HMRC, but this doesn’t include traveling to and from work. This expense can be claimed whether using public transportation or your own vehicle.
Doctors have to declare income received in addition to their base salary, which also means fees received as part of cremation services. Remember, retroactive claims can be made for up to four tax years.
Making Tax Deductions
Besides cutting costs through tax relief claims, reimbursement of taxes on expenses can be made in other areas or where extra income can be obtained.
Many junior doctors undergoing training for their medical degree are required to relocate. A maximum of £8000 can be reimbursed as a tax free allowance and is cumulative from foundation year one to the certificate of completion of training.
Although HMRC doesn’t allow tax deductions for courses and exams, your local trust can help you on the amount of your entitlement for a study budget. However, be sure to inquire ahead of time, as many hospitals don’t allow retroactive claims.
HMRC is clear, however, that the costs of travel to courses, course fees and other associated costs are generally tax deductible if attendance at the event is a duty and an intrinsic part of employment.
These are some of the ways junior doctors can make money that is potentially tax deductible. But regardless of their stage in career development, all doctors can find expenses that can be claimed.
How to Claim Your Expenses
If your claim is less than £1,000 you can send a letter to HMRC with a summary of the details and the total for the tax year. If your claim is for over £1,000 but under £2,500, you will have to complete and send form P87 obtained from the HMRC website. Anything over £2,500 you will have to claim via self-assessment.
Due to the complexities of what you can and can’t claim, you should engage the services of a good accountant or tax adviser. This is especially true if you want to claim your expenses going back a number of years, or if you have multiple income sources.
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