UK Dentists: Collect your verifiable CPD for this episode here >>> https://courses.dentistswhoinvest.com/smart-money-members-club
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The clock is ticking on Making Tax Digital, and we’re cutting through the noise with a straight-talking guide tailored for UK dentists. If you earn self-employment income as an associate or rental income from buy‑to‑lets, this is the moment to get clear on thresholds, timelines, and the smartest way to stay compliant without drowning in admin.
We unpack the real meaning of “relevant income” and why HMRC looks at gross receipts, not profits, when deciding who must file quarterly. You’ll learn exactly who is in scope right now at £50,000, why PAYE and dividends don’t count for MTD for income tax, and how planned drops to £30,000 and £20,000 will bring many more clinicians into the regime. We also cover the penalty system you need to avoid: an initial grace year for late submissions, points that stack to a £200 fine, and a 24‑month compliance runway to reset. Most crucially, we explain the three‑year lock-in once you’re on the system and how that affects timing if you’re considering incorporation.
From there, we move to tools and tactics. Prefer minimal effort? Ask your accountant about bridging software so you can send simple spreadsheets or bank statements each quarter and let them handle the submission. Want more control and real-time insight? We compare software options like FreeAgent, Sage, Xero and QuickBooks, highlighting free tiers, bank feeds, common setup pitfalls, and how live data can help you steer clear of the 60 percent effective rate band with timely pension and expense planning. We set out the dates that matter: Q1 runs 6 April to 5 July, with the first update due 7 August, and why registering before 5 April buys breathing space and avoids easy points.
We finish with a practical checklist you can act on today: register for MTD or ask your accountant to do it, choose between full bookkeeping or a bridging route, and schedule your July data handover so the first submission lands on time. It’s a clear, calm path through a complex change, built for busy clinicians who value certainty and time.
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Dr James (01:43):
Making tax digital is hot on the tongues of a lot of
dentists out there and a lot ofaccountants too.
And you know what?
From what I've seen with myconversations with accountants,
there's a real variety as to howdentisters are responding to
this.
Some people are just stickingtheir heads in the sand, some
people are cracking on with it.
We're here today to facilitateand aid people in making the
right choice so that theyunderstand how to un how to how
(02:03):
to overcome the impending makingtax digital changes.
I'm joined today by expertaccountants to dentist, Mr.
David Hossiens.
In this podcast today, we'll becovering what making tax
digital is so that we can justensure that everybody knows 100%
how it affects them, what thatmeans for dentists, who it
affects and who it doesn't, andwe're even going to be giving
(02:25):
you actionable takeaways by theend of this podcast so that you
will know exactly what to do.
Looking forward to this one asever.
As ever, you can claim your CPDfor this episode within the
official Dentist Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple mini courses
and webinar series on financefor dentists, including how to
become as tax efficient aspossible, as well as
(02:47):
understanding investing.
All of this content counts asverifiable CPD, and you can
download your certificates thereand then on completion of each
lesson.
In addition to this, we alsoinclude a whopping 10% discount
on your dental indemnity and a5% discount on lab bills for
dental principals, amongst otherperks and discounts for
members.
Please use the link in thedescription to claim your
(03:09):
verifiable CBD for this episode.
David, this is of course thesecond time that we've sat down
about making tax digital.
At least the second time frommemory, then was there three in
there?
Maybe did we do more publicpodcasts?
David (03:27):
Yeah, it'd be the second one just on MTDB MTD, but we
have touched on it in kind ofprevious ones.
But I think we need it.
Um it is coming up around thecorner, and a lot of people are
still asking questions on it, sostill a lot of confusion, I
think.
Dr James (03:41):
Well, you know what?
From memory, the last podcastthat we did, David, we did it in
maybe it was like August time,September, something like that,
right?
No, no, no, October, that'swhen it was, right?
And you know what?
Because of what hadhistorically happened, HMRC had
kicked the can down the roadwith this stuff.
We were like, hmm, is it 100%gonna happen?
(04:01):
But we're we're in, we're quiteliterally in March now, right?
We're like a month out from thedeadline, so we're it's pretty
much official at this stage.
So you know what?
It might be good to do.
It might just to be, it mightjust be a good idea to start
from the start, David, and coverwhat making tax digital is,
then we'll move on to who itaffects.
David (04:22):
Yeah, absolutely.
And you're right.
I think we were all secretlyhoping HMRC would pull the plug
on it because they did for umthey have pulled the plug for
companies, but for income tax,it is here, um, and it's it is
around the corner.
So definitely good to do anoverview.
Let's go over what it is, whatit means.
Um, a couple of updates sincethe last time we talked about
(04:45):
it.
Because in the budget there wasa change that was announced, so
I'll cover that as well.
Dr James (04:48):
Nice.
David (04:49):
Um, but just yeah, so just getting into it.
So MTD, it stands for makingtax digital.
It is a new requirement forquarterly submissions for people
who are affected uh via incometax.
Um it only affects people whohave self-employed income and
(05:10):
rental property income.
That is what is um assessed asyour relevant income.
And depending on how much thatis, we'll determine if you have
to do MTD.
So we'll get into kind of thethresholds.
Um, but I suppose a bit aboutwhy HMRC want to do this.
So HMRC believes there is a taxgap of about 5 billion from
(05:32):
poor record keeping.
So the driver behind it is theythink it's poor record keeping
by taxpayers, specifically theself-employed, and this is their
way of encouraging theself-employed to have better
records.
Now you have to have digitalrecords and a software to manage
that.
So that's their purportedreason for pushing it forward.
(05:54):
Um, it has been around for awhile for VAT, and this is the
second phase to put the sameregime over to income tax.
Corporation tax and companiesare not affected, they've
formally taken it off the tablebecause they've not been able to
get the software right or thesystems to do it.
Dr James (06:11):
So just to be hyper clear, that's VAT when you're a
sole trader, as in you're notincorporated.
David (06:16):
No, VAT for anybody, yeah.
So if you're a sole trader or acompany and you do VAT, if you
and you submit VAT returns, thathas a separate MTD regime
already.
And most likely youraccountants are doing that for
you in the background if you dohave a VAT registered business,
um, which will be the same forincome taxes, it's um yeah, over
(06:37):
to your accountants again.
Dr James (06:38):
Interesting, because okay, I guess that's well the
reason why it doesn't affect alot of Dennis is because they're
not VAT registered, of course.
But but yes, anyway, okay, no,that's fine.
Anyway, back to what you weresaying.
Yep, no problem.
David (06:53):
So um the first thing is the relevant income.
So what what is the um therelevant income?
The relevant income is solely,and I'll just talk on
specifically with regard todentists.
So most dentists will be caughtif they are an associate who is
a sole trader, so not using acompany, that means you have
self-employment income.
That is one category ofrelevant income.
(07:16):
Um, if you are a practice ownerand again you are not
incorporated, the practiceincome is your relevant income
for the purposes of MTD.
On top of that, if you havebuy-to-let properties that you
rent out, that is also rentalincome that comes into the
category of uh relevant income.
(07:36):
So giving that again, soassociates who are
self-employed, your gross incomefrom the practice.
Um, as a principal, thepractice gross income and any
income you receive frombuy-to-let's rental income.
Okay, a commercial propertyalso.
So all of that is your relevantincome.
If the relevant income is over£50,000 based on 24-25 tax
(07:59):
returns, the one you've justdone, then from the 5th of
April, you are required to be inthe MTD regime.
That drops to 30,000 from 2027and 20,000 from 2028.
So the government really wantsto capture most self-employed
and people with rental income,because if you think about it as
being 20,000, just a couple ofbite-lets I'll get you that.
(08:22):
So it really is going after alot of the um the self-employed
uh uh taxpayers.
So what does that mean?
So there's a few things thatneed to be done.
The first thing that needs tobe done is you have to actually
tell HMRC you are signing up forMTD, you need to get a
(08:43):
government gateway ID, proveyour identity, answer all the
security questions, and say,yes, I am registering for MTD.
Failure to do that could umresult in a penalty point.
I will come on to penaltypoints later because
consequences of non-complianceis really why accountants we're
talking about this, because wedon't want people to have
(09:05):
non-compliance, um, becausethere is a penalty regime, and
I'll come on to that.
So failing to register on timecould result in a penalty point,
and we'll pick up that a bitlater.
And to talk about thresholds.
Um last time we did this, therewere a lot of questions that
surprised me because I thoughtthat um it you know it made it
(09:25):
obvious, but it's it's it isvery confusing for people.
So I want to go over this bitas well in terms of what does
not qualify, so making it superclear for people what does not
qualify for MTD.
And these are things like ifyou're a partnership, so if you
want to practice by apartnership, that is not caught
by MTD.
If you have a company, thatdoes not caught by MTD.
(09:46):
If you are employed, so if youhave um, let's say you you are
an associate self-employed, butyou have um a hospital job
that's by PAYE, the PAYEemployment income does not count
towards MTD.
Dividends that you receive froma company also do not count
towards MTD or benefits that youmight receive.
(10:07):
So making that super clear thatthat category there does not,
it's just self-employment andrental income.
That's that's the only thingthat we're primarily concerned
about MTD.
So just making that reallyclear for people.
Dr James (10:19):
Interesting.
So just on that one example,employed income, 30,000 pounds a
year, self-employed income isalso 30,000 pounds a year.
You wouldn't qualify becauseyour self-employed income is not
over 50,000 pounds, right?
Exactly, exactly.
David (10:33):
You are okay until it comes to you know the threshold
gets lower.
Dr James (10:37):
So not to be pedantic, but are we using the 50,000
pounds as shorthand for 50,270,which is the basic tax rate?
No, it it is.
Oh, it's literally 50k.
Okay, there we go.
Yeah, well, you just I thoughtI was being pedantic there, but
it's good to it's good becausepeople do that, don't they, all
the time.
They say, hey, uh basic taxrate ends at 50k, right?
(11:00):
And what they mean is the50,270, right?
David (11:03):
Yeah, no, and it's a very good question.
There's no there's no uhthere's no wrong question, so
anything that people have got wecan ask, and yeah, good
question.
Good to clarify.
I do have some examples to kindof make it clear.
Um I think that when you getinto it, like asking like that,
it becomes clear what we'resaying.
So example number oneself-employed dentist also has a
(11:25):
part-time employment.
Um, it is income, not profits,and that's the distinction.
So um the associate has umassociate fees of £52,000 from
um the practice that he worksat, but after his expenses, his
profits are only £38,000, and healso has a salary of £10,000 at
(11:48):
a hospital.
Now we've got £52,000 income,38,000 profit, 10,000 salary.
So salary, don't need to thinkabout profits of 38, it's not
profits, it's income.
So it's not after expenses,it's what the practice pays you.
That's your income.
So it's not after expenses.
(12:08):
So most associates, you will becaught by this if you're not
using a limited company.
And and that's kind of onescenario there.
Um, the second scenario is withrental profits.
So in this situation, thedentist has um fee income, so
works at a practice, gets£45,000 worth of income.
After expenses, £36,000profits, but we we're not
(12:31):
considered profits, it's justincome.
So that was £45,000, but he hasrental income of £12,000, and
after his expenses on that,profits of eight, but it's not
profits against income.
So £45,000 income, 12,000rental income, MTD is
applicable.
So again, most associates willdefinitely be corporate.
(12:53):
Whether it's pan practiceowners who are not incorporated.
That's that I want to talkabout um penalty regime as well,
because this is this was thething that changed actually.
So when we spoke about this, alot of accounts we are trying to
get the message out there.
Look, you have to deal withthis, you have to deal with this
because there's penaltiesinvolved.
(13:13):
So I'll just talk a bit aboutwhat happens if you're not
compliant.
Um, so the first thing is youhave to register by the sixth um
5th of April.
You can either do it yourself.
Um, for our practice, we areregistering it for our clients
um on their behalf because it'sa lot easier, we can do it via
our practice portal.
We already have copy of yourpassport and proof of address
because we check that anywaywhen you become a client.
(13:36):
So most accounts will do thatfirst before you, and that's the
first thing to do to avoid apenalty point.
Um the budget confirmed thatthey will not apply late
submission penalties in thefirst year.
So that's really good news.
On the one hand, that thisfirst 12-month period, if you
are late, you won't get apenalty point.
(13:57):
Now, that's important to sayI'm not encouraging people not
to be compliant because startingit with good habits will carry
forward into the year after.
And the penalties are 200pounds if you get four penalty
points.
So if you get four penaltypoints, you get a 20-pound
penalty, and you are trapped inthe penalty system then.
And the penalty system is hardto get out of because once you
(14:20):
you triggered the four penaltypoints, you're in the system,
and you only get out of it byhaving 24 months of compliance.
So a scenario I could seehappening is somebody registers
late, they get a penalty, theymiss a few submissions, and then
they're in the four penalties,they get they get a financial
cost of that 200 quid.
And if they miss one penalty ayear, say one submission a year,
(14:41):
it's very hard to get out ofyou know this penalty system.
So really want to just say yes,it is true that the first year
they're not going to apply them,but get into good habits and
good behaviors because that willhave a compounding effect as we
go into this.
Um a really kind of unfortunateaspect of MTD is like coming in
(15:05):
and out of us.
So a question we had from aclient recently was Um, What if
I set up a company?
Does that get me out of MTT?
And the answer is yes, becauseyou would have dividend income
from the company, it's no longerself-employed income.
And then the question was,okay, when do I need to deal
with this by?
And the answer is now, becauseum the way the system works is
(15:27):
that £50,000 threshold is basedon your last year's tax return.
So if by the 5th of Aprilyou've not changed that status,
you have to you have to enterinto the system.
And something that I think isreally unfair, which are you
know is in the rules, that onceyou're in the system, the only
way to leave it is if you've gotthree consecutive years of not
(15:48):
being eligible or sorry, notbeing required to yeah, three
you're in it for three years.
So if you if you join, you'rein the system for three years.
Now I think that's reallyunfair because for the VAT
system, once you're in, you canmake a declaration at any point.
Actually, my qualifying incomeis below the threshold, I'm out
of the VAT system.
(16:08):
We can do that at any point,and you said that's a good faith
thing that people predict theirincome.
But for MTD, the currentguidance is that once you're in,
you're there for three years,even if you set up a company to
get out of it, which I thoughtthat's that's pretty unfair, but
it is what it is.
Now, whether the mechanics ofthat change um once we're into
(16:29):
it could be, but I don't don'tcount on it.
So please take it seriously,you've got to deal with this.
If you're thinking ofincorporating, do it quickly.
Dr James (16:37):
And can I just actually refer back to the
penalty point thing that youjust said?
So the submissions arequarterly, right?
Yeah.
So if you do no submissionsover a period of 12 months,
basic math is gonna tell us weget four penalty points, right?
Yeah.
So if you don't get yourcompany sorted before the 5th of
April and you don't doanything, you're gonna get your
(16:58):
penalty points pretty fast,right?
Because it's gonna be withinthe first year.
So you lit yeah right.
Just to just to really drivethat home.
If I got that right.
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David (18:56):
That is how the current position is.
Absolutely.
Now I think that's reallyunfair and not consistent with
VAT.
And I would love to predict andsay once we're into it, they'll
update the the mechanicsbecause there's a lot of
software behind this.
But that is the currentposition as I read the
legislation, so I have to kindof say it as it is.
So yeah, we are we are withthat at the moment.
(19:19):
So it is it it could be anightmare if you just get in and
then you incorporate, butyou're still in the system, so
you still have to do those nilsubmissions, which is just it's
ridiculous, but it is what itis.
That is the current position.
Dr James (19:31):
Yikes.
Well, listen, I'm really gladthat you shared this stuff
because we haven't went to thislevel of detail in any other
podcast about MTD, that's forsure.
But anyway, you were you're infull flow there.
That question just came to me.
David (19:42):
Yeah, no, no, no problems at all.
Um, so we talked about theregistration side of it.
Um, once you've registered, youhave to submit a digital.
So it's four quarters.
The first quarter will be umthe 6th of April to the 5th of
July.
It's always the 5th to the 6th.
(20:03):
So in practical terms, it's umApril, May, June's revenue.
So you have to declare yourrevenue and your expenses.
The first submission thatpeople need to do will be on the
7th of August.
So like big thing is just getyourself registered quickly.
So you know, talk to youraccountant, ask them to register
it for you, because then youget a bit of breathing space
(20:24):
until August.
So key takeaway for people isif you're stressed about it,
you're not sure where to start,and your accountants contacted
you, just ask them to registeryou for MTD, then you know, you
can you can take a bit of abreather.
From our side, that's how we'replanning our workflow.
And then once the firstquarter's finished, so we've
come to the end of June, we willbe reaching out to people to
(20:46):
get that um first return done.
Um, how it's done is viadigital software, and it's been
such an interesting experiencefor us as a practice, just like
seeing all those differentsoftware companies pop up and
their pricing and how they'rekind of you know dealing with
it.
Um, you do need to have asoftware for this.
Um I did a slide, I know I'mnot sharing it, but I just kind
(21:08):
of because we get so manyquestions from people on what
software to recommend.
Now, the reality is that aslong as it's compliant and HMRC
has a list of software that arecompliant, and most of them are,
there's no real difference.
They all do the job.
Um, so what does that mean interms of advising people?
Most people want free softwarebecause it's it's very little
(21:29):
added value.
Um, so there are free softwareproviders out there.
I'll just find my slide onthat, I've got a summary.
Yeah.
So free agent was the one thatreally started from the
beginning as look, we're a freesoftware to deal with MTD.
So if you've got a qualifyingbank account, Metal Network,
(21:51):
RBS, and it's a business bankaccount, um, free agent will
give you a free software.
Now it does have to be forlife.
This is the this is thequestion.
Now, if I was a cynical person,I would be predicting that a
software company is a businessand doesn't do things for free,
and they might do it for acertain period of time, or they
(22:12):
get incentives from the banks tokind of encourage people to
open bank accounts.
But it surprised me also thatSage, which is another
accounting software, and it'sit's one of the I don't want to
call it a dinosaur becausethey'll sue me, but it's a very
old kind of like yeah, it's avery like old-fashioned pioneer
in the sector.
So everybody used to use Sagewhen uh software came out for
(22:35):
accountancy practice.
Um, so it's it's one of the oldold school ones.
Dave launched a free version,and I only was made aware of
that recently.
But again, my thought processwas is look, these these
companies are businesses.
Yes, they're saying it's freenow.
Could that change in thefuture?
I think there's no guaranteethat it's free today means free
tomorrow.
And if I was thinkingcommercially and I owned a
(22:56):
company, I would probablyincentivize people with a free
version and it would come inacross you know down the line
because it's a business at theend of the day.
Um, but where we ask where weare asked to provide um a
recommendation, well, look,these two are free Sage and free
agent are free.
You have Zero, which is really,you know, pretty comfortable to
(23:18):
say one of the market leadersin terms of what it can do as a
software.
It's got all sorts of open APIintegrations for complicated
reporting.
That's not really what MTD isabout, but it's it it does also
do that.
That starts at about 16 poundsper month.
QuickBooks starts at about 10pounds a month, um, but there
are free versions out there.
Now, to share a bit of kind ofour experience so far, because
(23:40):
we've been doing a lot of workon this in February telling now,
Clive.
So you need to deal with this,we need to help you with this,
we need to get you set up withthe software.
What would you like to do?
Um, a common feedback that wegot from clients was look,
David, I'm really busy, and howcan we make this as simple as
possible?
To which we were like, Well,you know, the free ones are
(24:01):
free, but there is a time costinvolved of subscribing,
connecting, linking, refreshing.
It is time to deal with thesethings.
Um and we got asked thisquestion enough to us to think
as a practice, well, how do wemake it as easy as possible for
people?
And kind of one thing thatwe've done, and I suspect uh
other accounts have, but youmight need to talk to them and
(24:23):
kind of see if they can do this,is we we've invested in a
bridging software that bridgesfrom our um practice software,
our portal and HMRC, some fancyspreadsheets in the background,
but we we can do it now withoutsoftware.
So well, we can do it with oursoftware, so it is possible to
do it.
So if so if you look at thesoftware options and you go,
(24:43):
look, I don't know where tostart, I don't know the
difference between free agent, Idon't know what's needed from
from me.
Ask your account, can you usetheir bridging software?
Because most accounts umshould, I would I would say
should have something like that.
If we do, I expect other peopledo as well.
Um, and that's been very wellreceived by people.
In the instead of having to goand log in the software and do
all sorts of refreshes, they canjust quarterly forward over the
(25:06):
data to us and we deal with itat our side.
So software options are kind oflike that.
So that that's interesting toknow.
Dr James (25:15):
Nice, interesting.
I didn't I didn't know that waspossible.
So there you go.
And uh all I can say is I mean,dentists slash business owners,
sorry, sorry, let me backtrackon that.
Well, no, it might it mightaffect some principles, I guess.
You know what I mean?
So there'll be a few businessout there uh who this affects as
(25:36):
well, um, in the sense thatthey have dental practice.
They just they just don't havetime, do they?
Because we're so friggin' busy,and it's like it's good to know
this stuff, but it's also goodto make it really actionable as
well.
And we're actually going to dothat at the end of this podcast,
too.
Uh, so heads up on that one.
But yes, anyway.
David (25:55):
Yeah, you're absolutely right.
And it it has been veryconfusing for our clients as
well.
And so, well, what is it?
You know, just getting thatmessage across the what is it,
what do I need to do?
People are very confused aboutwhat they need to do, what are
the consequences of not doingit, and it doesn't kind of help
that I'm having to say itdoesn't matter for the first
year because it does.
Like you get into habits, andyou know, the first year is an
(26:16):
amnesty because I think HMRCrecognises there's a lot of
work, and accountants andtaxpayers are quite confused,
and there's time involved insetting it up, and you want to
set it up correctly.
And I don't think there's a onesize sorry.
Dr James (26:28):
Go on, sorry, go on, sorry.
I thought you were finished.
David (26:30):
No, I was just gonna say I don't think there's a one size
fits all as well.
So I think that it's definitelya discussion about do I just
want a quick solution to what isperceived by myself as I'm
getting no value from this, Ijust want it dealt with some
compliant, or actually I do wantthe software so I can track
things and see what I'm up to.
And that's um we've I think usas a business, we're guided by
(26:52):
our clients and what they tellus.
So we provide a menu of youknow, these are your options.
Do you want to book in a callto discourse?
And but people have I thinkmore people went down the route
of just use your bridgingsoftware, I want it dealt with
quickly with like less input, aslittle input for me as
possible.
That kind of surprised me, butit makes sense because people
want a solution that's quick andeasy, and I think great for us
(27:14):
as well, because there is a lotof time that goes into setting
up the software and refreshingit and connecting it, it's it's
it's not very easy.
Dr James (27:22):
Understood.
And by way of the dentist'sinput in terms of what's
expected from them when theyhave the bridging software, is
they will just send you thespreadsheets of what they do.
Is that is that right?
Or how does that how does thatwork?
What will they send you?
David (27:40):
Yeah, so what the the interest of what's required to
be declared, and that is incomeand expenses.
So that can be as umstraightforward as forwarding
your payslips and your invoices,or if you've got a spreadsheet
that you use yourself to trackand some other clients do that,
and if they don't, we canprovide you one and you can
forward that to us once you'veput in your income, or we have
(28:01):
some clients who are justdownloading their bank
statements once a quarter andjust folding that over, and then
we lift it from there.
So I don't think there's onesize fits all, and it is really
people find different things,like people got different
systems for themselves, and it'swhatever works for you, really.
We're quite, you know,flexible.
I think to we're notprescriptive in that it has to
be done this way, it'swhatever's easiest for you.
Dr James (28:23):
Nice, okay, understood.
And am I right in saying just afew things that are floating
around in my head before we moveon that might be in the minds
of the audience as well?
Two things.
First thing was let's say worstcomes to worst and someone does
miss the April thing, as in theApril 6th deadline, and we're
not encouraging that whatsoever.
If they then registersubsequently before April, May,
(28:46):
June, July, if they registerbefore July, will they incur
only one penalty point?
David (28:54):
Yes, if they then do the submission on time.
That's that's my understanding.
Dr James (28:58):
Fine.
And then the second thing wasyou know, okay.
David (29:01):
But that but that that one point stays for 24 months
period.
So if in the next 24 months youmiss three others, you get the
200, and you're trapped in thiscycle of you know, sure.
Dr James (29:14):
And I definitely don't mean to diminish that we should
miss you know the the thedeadline or anything like that.
I'm just kind of playing outthe worst case scenario here.
Uh so yes, that is that's avery good thing you mentioned,
David.
And then the second thing iswhen it comes to I know you've
got your bridge and software,which is great.
Is it fair to say that there'sother advantages of having
bookkeeping software anyway?
(29:35):
Will there will be, won'tthere?
David (29:37):
Yes, there definitely are.
And if you are somebody who umwill use it, then it can um be
quite quite powerful.
So this time of year, it'sMarch, we get a lot of um
requests for look, I'm gettingto the end of the year, I need
to check where my income isbecause I don't want to get
caught in the 60% tax trap, anda lot of associates and um are
(30:01):
caught with that.
So if your income's over100,000 up to 120, that chunk of
your income is trapped at 60.
Quick fixes for that, oh well,let me put some money into my
pension that gets my uh incomedown, or I'm thinking of doing a
course.
Can I accelerate what I'm doingto kind of but if you've used
the software accurately for youknow when we've got we've had
(30:21):
the data outside, we can jumpinto zero free, whatever it is,
and say, yeah, based on what wecan see now, this is where you
are.
And if you were putting moneyin, this is how much you'd have
to put in, and that would giveyou you know a clearer um
picture.
So it can help you be moreproactive with your tax,
definitely.
Dr James (30:38):
Nice, and you know what's a huge one that I see on
that.
Uh when you have a zeroaccount, obviously it can
connect to your bank account,right?
So, or for example, just youknow, I'm just I'm sure the
other ones do as well, but I'veseen zero firsthand, it can
connect to your bank account,right?
So when it's set up, what thatmeans is you don't have to keep
(31:00):
these spreadsheet recordsbecause the you can literally
see the transactions just inzero, and then you can attribute
them to uh if it's like acourse, you can say, like,
here's the invoice for thecourse or whatever, this is tax
deductible, and things alongthose lines.
So that's it's it's I guessit's a more on the fly way of
keeping up to date with that,uh, just to really spell that
(31:22):
out to people.
Because I know there's lots ofpeople out there who mightn't
even have bookkeeping softwareas yet, so those would certainly
be the advantages.
Agree with that, David.
I've got a I've got somethingmore to add on top of that,
which is interesting, and I'msure you've seen that.
But before we move on, is thatfair to say?
David (31:38):
Uh no, absolutely.
I fully agree, and I think thatmy observation would be that
clients who haven't done that,that it what's the barrier?
Because there's a there is abenefit.
There's a benefit to havingyour records kept digitally,
having access to it, being ableto see what your income is
before you know you the end ofthe year finishes.
Definitely the benefit of that.
So, what's the barrier?
And the barrier is people'stime, and it's you know, is
(32:01):
there a cost to the software?
If I if I get it for free, Ihave to potentially open a new
bank account and it has to be abusiness account.
So applying for that and it'sthe setup time that I think is
the barrier for most people.
But to answer your question,there's definitely a benefit.
There is definitely a benefit.
Dr James (32:17):
Is it fair to say?
I mean, from what I've heard ofother accountants and even my
own personal zero account, I'msure there's things I could
brush up on in there, but a lotof the time when people set it
up on their own, they don't setit up properly.
Would you say that that I'veI've heard accountants say that?
Would you agree?
What are your thoughts on that?
David (32:35):
For for bigger businesses, yes, if there's
multiple bank accounts involved.
Um, if it's for an associatewith 12 pays coming in, I think
the common thing that people getwrong is the start date,
because you have to choose adate when the software
activates.
And if you're using a bankfeed, you've got to get that
date right, otherwise it willmiss transactions, which is
(32:57):
probably the biggest common ummistake we see we see.
It's entirely fixable.
So let's say you, you know, youdo this, you set your bank, you
set uh zero free up in June andyou connect it and so it, but
you choose June as your startdate.
So it didn't download April,May, or June, but then the first
of the first part of June, thatwould be missing from the
(33:17):
software.
So if that was us, we wouldtake a look and see, oh, well,
just to let you know it's notconnected from that day.
Please give us thosetransactions manually via an
Excel, you know, download fromyour bank statement, and we can
upload it to plug the gap.
But that's that's probably themost common setup error, is just
getting the dates wrong.
Dr James (33:36):
Nice.
Okay, because that is I've hadit before where the balance is
just completely wrong in there.
It's like way higher, way lowerthan it should be.
So it sounds it sounds likethat probably, and then my my
accountant fixed it, so itsounds like that was what
happened there, really.
David (33:52):
So that's the setup side.
Um, these softwares use what'scalled a screen scraping
technology.
So there's very like strictrules on what communication can
happen between your bank and thesoftware from a fraud
pretension protect perspective.
The banks don't want thesoftware to talk to the bank
because you know the banks haveto deal with fraud, so it's only
(34:14):
really one way one-waycommunication of data coming out
of the bank, not the softwaretelling the banks to make
payments.
So that's really one aspect toit.
But because it's a screenscraping technology, um, it's a
different level of accuracy andit it does miss transactions, so
it can like miss a few things,and then then you look at it and
(34:35):
you go, Oh, it's out by 10grand because it's missed a
transaction, and then what theteam do we say, oh, we can see
it's owl, let's uh get a naturalcopy of your bank statements in
it.
Excel, and we find out what'sbeen missed, and we manually add
it.
So that's that that is aprocess that we have to deal
with.
So they're not perfect.
Dr James (34:50):
Cool.
Anyway, not to digress, becausethere's two really big things
I'd love to cover before we wrapup this podcast.
So the first thing isaccountancy fees and how
accountants have adapted tomaking tax digital.
Is now a good time to move onto that, or is there anything
more you wanted to say on makingtax digital?
No, no, that's absolutely fine.
Yeah, we've we've covered mostof it there.
(35:10):
And um because just to share onthat one, I've seen you see
Pete posts on forums all thetime, and Dennis are like, my
accountant wants to charge me1,500 now, and previously they
were charging me 500 a year.
Uh, is this correct?
Is this right?
What to do?
What are your thoughts on that,David?
Or how have accountants adaptedto this change?
David (35:32):
So to be fair to us all, it is um four times the work
because it's four times thereturns we have to do.
So I think it's understandablethat um accounts are putting the
fees up to deal with it.
Um, it is also worth sayingthat you can do it yourself.
You you don't have to have anaccountant to do it.
So we we also give our clientsthe option that if you want to
(35:53):
do it yourself, you can do it,but obviously if we're doing it,
it's more work.
Um we've tried to staycompetitive, and I and I've seen
the variety of quotes that youknow people see on the forums as
well.
Um, but kind of our side, we'veput it to a flat fee of £75
plus VAT per month.
Um, so you know, 900 quid um ayear plus the VAT.
(36:15):
And that's I think where we'vetried to be fair to people and
that like it's not an addedvalue to you.
You can use our bridgingsoftware, which is free as well.
So we've tried to keep it ascompetitive as possible, but
also then just making sureyou're compliant with that.
Includes us registering you tostart with, our bridging
software if you want to usethat.
Um if you want to use asoftware, that's absolutely
(36:36):
fine, and we'll give you time toset that up.
That's also included in that.
But then, as I say, it's thatflat fee of £75 plus far per
month going forward.
Dr James (36:45):
Cool.
All right, well, that certainlyseems I mean, I've seen over a
thousand quoted for this.
Uh and um question for aquestion on your behalf, because
what I've seen or what I'veheard from murmurs of
accountants saying is that theones that have managed to keep
the fee more equitable, shall wesay, uh, have leveraged
(37:06):
slightly outside of the boxsolutions like AI and everything
along those lines.
Is that part of your workflow?
David (37:12):
No, no, we're not using AI.
We've we've um I think for us,we are so we're a national firm.
We've got a lot of clientsthroughout the UK, you know, as
far as top of Scotland toLondon.
Um but I think that we're asmaller firm, so we're a smaller
independent practice, thatwe've not got massive overheads
and multiple offices.
Um, so you know, and I think wewe we I think that just feels
(37:36):
right to us when we look at it.
We just kind of go, what's thework involved?
What's the value being addedhere as well?
And we didn't want to tryquadruple our fees, but we
thought that's a modest increasethat recognises more work for
us, and it it kind of gets thejob done for everybody, and you
know, but it's all it is achoice whether you you can do it
yourself.
And um, I don't think we've hadanybody say they're doing it
(37:58):
themselves yet.
We have had some people who arestill not responding to us, and
we say, look, you need to dealwith this, it's coming up, and
that's kind of a bit more workout our side of telling and
getting the message across,which is why it's really helpful
to have these podcasts and getit out to people because a lot
of people are unsure.
Like, what is it, what does itmean, what do I have to do?
It's it's very confusing forpeople.
Dr James (38:18):
Boom.
Okay, thank you for that.
And then one final thing justto wrap up, because we did
promise this at the very start.
David, if we had some sort ofactionable to-do list that
basically summarizes thispodcast, and then a dentist
could just play back wheneverthey want to themselves and be
like, right, I need to do this,this, this, this, and this, or
even write it down if theywanted to.
(38:40):
If we could condense it down tomaybe three, four action
points, how would that look?
David (38:46):
Yeah, just so three three things.
First thing is make sure youregister for MTD before the 5th
of April.
Um, that'll save you onepenalty point, and then you
don't need to think about ituntil your first return.
So, first thing is register forMTD or tell your accountant to
do it for you.
Um, number one.
Second is make a decision on doyou want a software to set up
(39:07):
and manage, or do you want tojust give it to your accountant
for them to use their bridgingsoftware?
And if you are going with theuh I want a software, put some
time in the diary after, youknow, well, as soon as possible,
really.
So we're we're offering peoplefrom now to do that setup
because um it's a you know,usually March is a bit quiet for
us, so just being mindful ofwhen accounts are busy as well.
(39:28):
Um once you've done that, yournext kind of box to tick is
before the 7th of August, you'llhave to do your first return.
So get your data over to youraccountant before, well,
hopefully in July at some point,and then get into good habits
going forward of quarterly.
So from our side, the practiceuh manager will be you know
contacting people quarter tosay, Yeah, don't forget you need
(39:49):
to do return, these are thingswe need, and you know, get into
that habit going forward of oncea quarter, you have to do this
new return.
Dr James (39:56):
Thank you so much.
That is really useful.
It's just really crystallizeit.
Shout out to Mr.
David Hossein, who's been onthis podcast today.
David is, of course, availableon the Facebook community if
anybody's a member of that.
Uh, and David represents hisfirm or two or two accountants.
Thank you so much, as ever,David.
We'll see each other very soon.
Thanks, sounds good to catchup.
Making tax digital is hot on the tongues of a lot of
dentists out there and a lot ofaccountants too.
And you know what?
From what I've seen with myconversations with accountants,
there's a real variety as to howdentisters are responding to
this.
Some people are just stickingtheir heads in the sand, some
people are cracking on with it.
We're here today to facilitateand aid people in making the
right choice so that theyunderstand how to un how to how
(02:03):
to overcome the impending makingtax digital changes.
I'm joined today by expertaccountants to dentist, Mr.
David Hossiens.
In this podcast today, we'll becovering what making tax
digital is so that we can justensure that everybody knows 100%
how it affects them, what thatmeans for dentists, who it
affects and who it doesn't, andwe're even going to be giving
(02:25):
you actionable takeaways by theend of this podcast so that you
will know exactly what to do.
Looking forward to this one asever.
As ever, you can claim your CPDfor this episode within the
official Dentist Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple mini courses
and webinar series on financefor dentists, including how to
become as tax efficient aspossible, as well as
(02:47):
understanding investing.
All of this content counts asverifiable CPD, and you can
download your certificates thereand then on completion of each
lesson.
In addition to this, we alsoinclude a whopping 10% discount
on your dental indemnity and a5% discount on lab bills for
dental principals, amongst otherperks and discounts for
members.
Please use the link in thedescription to claim your
(03:09):
verifiable CBD for this episode.
David, this is of course thesecond time that we've sat down
about making tax digital.
At least the second time frommemory, then was there three in
there?
Maybe did we do more publicpodcasts?
David (03:27):
Yeah, it'd be the second one just on MTDB MTD, but we
have touched on it in kind ofprevious ones.
But I think we need it.
Um it is coming up around thecorner, and a lot of people are
still asking questions on it, sostill a lot of confusion, I
think.
Dr James (03:41):
Well, you know what?
From memory, the last podcastthat we did, David, we did it in
maybe it was like August time,September, something like that,
right?
No, no, no, October, that'swhen it was, right?
And you know what?
Because of what hadhistorically happened, HMRC had
kicked the can down the roadwith this stuff.
We were like, hmm, is it 100%gonna happen?
(04:01):
But we're we're in, we're quiteliterally in March now, right?
We're like a month out from thedeadline, so we're it's pretty
much official at this stage.
So you know what?
It might be good to do.
It might just to be, it mightjust be a good idea to start
from the start, David, and coverwhat making tax digital is,
then we'll move on to who itaffects.
David (04:22):
Yeah, absolutely.
And you're right.
I think we were all secretlyhoping HMRC would pull the plug
on it because they did for umthey have pulled the plug for
companies, but for income tax,it is here, um, and it's it is
around the corner.
So definitely good to do anoverview.
Let's go over what it is, whatit means.
Um, a couple of updates sincethe last time we talked about
(04:45):
it.
Because in the budget there wasa change that was announced, so
I'll cover that as well.
Dr James (04:48):
Nice.
David (04:49):
Um, but just yeah, so just getting into it.
So MTD, it stands for makingtax digital.
It is a new requirement forquarterly submissions for people
who are affected uh via incometax.
Um it only affects people whohave self-employed income and
(05:10):
rental property income.
That is what is um assessed asyour relevant income.
And depending on how much thatis, we'll determine if you have
to do MTD.
So we'll get into kind of thethresholds.
Um, but I suppose a bit aboutwhy HMRC want to do this.
So HMRC believes there is a taxgap of about 5 billion from
(05:32):
poor record keeping.
So the driver behind it is theythink it's poor record keeping
by taxpayers, specifically theself-employed, and this is their
way of encouraging theself-employed to have better
records.
Now you have to have digitalrecords and a software to manage
that.
So that's their purportedreason for pushing it forward.
(05:54):
Um, it has been around for awhile for VAT, and this is the
second phase to put the sameregime over to income tax.
Corporation tax and companiesare not affected, they've
formally taken it off the tablebecause they've not been able to
get the software right or thesystems to do it.
Dr James (06:11):
So just to be hyper clear, that's VAT when you're a
sole trader, as in you're notincorporated.
David (06:16):
No, VAT for anybody, yeah.
So if you're a sole trader or acompany and you do VAT, if you
and you submit VAT returns, thathas a separate MTD regime
already.
And most likely youraccountants are doing that for
you in the background if you dohave a VAT registered business,
um, which will be the same forincome taxes, it's um yeah, over
(06:37):
to your accountants again.
Dr James (06:38):
Interesting, because okay, I guess that's well the
reason why it doesn't affect alot of Dennis is because they're
not VAT registered, of course.
But but yes, anyway, okay, no,that's fine.
Anyway, back to what you weresaying.
Yep, no problem.
David (06:53):
So um the first thing is the relevant income.
So what what is the um therelevant income?
The relevant income is solely,and I'll just talk on
specifically with regard todentists.
So most dentists will be caughtif they are an associate who is
a sole trader, so not using acompany, that means you have
self-employment income.
That is one category ofrelevant income.
(07:16):
Um, if you are a practice ownerand again you are not
incorporated, the practiceincome is your relevant income
for the purposes of MTD.
On top of that, if you havebuy-to-let properties that you
rent out, that is also rentalincome that comes into the
category of uh relevant income.
(07:36):
So giving that again, soassociates who are
self-employed, your gross incomefrom the practice.
Um, as a principal, thepractice gross income and any
income you receive frombuy-to-let's rental income.
Okay, a commercial propertyalso.
So all of that is your relevantincome.
If the relevant income is over£50,000 based on 24-25 tax
(07:59):
returns, the one you've justdone, then from the 5th of
April, you are required to be inthe MTD regime.
That drops to 30,000 from 2027and 20,000 from 2028.
So the government really wantsto capture most self-employed
and people with rental income,because if you think about it as
being 20,000, just a couple ofbite-lets I'll get you that.
(08:22):
So it really is going after alot of the um the self-employed
uh uh taxpayers.
So what does that mean?
So there's a few things thatneed to be done.
The first thing that needs tobe done is you have to actually
tell HMRC you are signing up forMTD, you need to get a
(08:43):
government gateway ID, proveyour identity, answer all the
security questions, and say,yes, I am registering for MTD.
Failure to do that could umresult in a penalty point.
I will come on to penaltypoints later because
consequences of non-complianceis really why accountants we're
talking about this, because wedon't want people to have
(09:05):
non-compliance, um, becausethere is a penalty regime, and
I'll come on to that.
So failing to register on timecould result in a penalty point,
and we'll pick up that a bitlater.
And to talk about thresholds.
Um last time we did this, therewere a lot of questions that
surprised me because I thoughtthat um it you know it made it
(09:25):
obvious, but it's it's it isvery confusing for people.
So I want to go over this bitas well in terms of what does
not qualify, so making it superclear for people what does not
qualify for MTD.
And these are things like ifyou're a partnership, so if you
want to practice by apartnership, that is not caught
by MTD.
If you have a company, thatdoes not caught by MTD.
(09:46):
If you are employed, so if youhave um, let's say you you are
an associate self-employed, butyou have um a hospital job
that's by PAYE, the PAYEemployment income does not count
towards MTD.
Dividends that you receive froma company also do not count
towards MTD or benefits that youmight receive.
(10:07):
So making that super clear thatthat category there does not,
it's just self-employment andrental income.
That's that's the only thingthat we're primarily concerned
about MTD.
So just making that reallyclear for people.
Dr James (10:19):
Interesting.
So just on that one example,employed income, 30,000 pounds a
year, self-employed income isalso 30,000 pounds a year.
You wouldn't qualify becauseyour self-employed income is not
over 50,000 pounds, right?
Exactly, exactly.
David (10:33):
You are okay until it comes to you know the threshold
gets lower.
Dr James (10:37):
So not to be pedantic, but are we using the 50,000
pounds as shorthand for 50,270,which is the basic tax rate?
No, it it is.
Oh, it's literally 50k.
Okay, there we go.
Yeah, well, you just I thoughtI was being pedantic there, but
it's good to it's good becausepeople do that, don't they, all
the time.
They say, hey, uh basic taxrate ends at 50k, right?
(11:00):
And what they mean is the50,270, right?
David (11:03):
Yeah, no, and it's a very good question.
There's no there's no uhthere's no wrong question, so
anything that people have got wecan ask, and yeah, good
question.
Good to clarify.
I do have some examples to kindof make it clear.
Um I think that when you getinto it, like asking like that,
it becomes clear what we'resaying.
So example number oneself-employed dentist also has a
(11:25):
part-time employment.
Um, it is income, not profits,and that's the distinction.
So um the associate has umassociate fees of £52,000 from
um the practice that he worksat, but after his expenses, his
profits are only £38,000, and healso has a salary of £10,000 at
(11:48):
a hospital.
Now we've got £52,000 income,38,000 profit, 10,000 salary.
So salary, don't need to thinkabout profits of 38, it's not
profits, it's income.
So it's not after expenses,it's what the practice pays you.
That's your income.
So it's not after expenses.
(12:08):
So most associates, you will becaught by this if you're not
using a limited company.
And and that's kind of onescenario there.
Um, the second scenario is withrental profits.
So in this situation, thedentist has um fee income, so
works at a practice, gets£45,000 worth of income.
After expenses, £36,000profits, but we we're not
(12:31):
considered profits, it's justincome.
So that was £45,000, but he hasrental income of £12,000, and
after his expenses on that,profits of eight, but it's not
profits against income.
So £45,000 income, 12,000rental income, MTD is
applicable.
So again, most associates willdefinitely be corporate.
(12:53):
Whether it's pan practiceowners who are not incorporated.
That's that I want to talkabout um penalty regime as well,
because this is this was thething that changed actually.
So when we spoke about this, alot of accounts we are trying to
get the message out there.
Look, you have to deal withthis, you have to deal with this
because there's penaltiesinvolved.
(13:13):
So I'll just talk a bit aboutwhat happens if you're not
compliant.
Um, so the first thing is youhave to register by the sixth um
5th of April.
You can either do it yourself.
Um, for our practice, we areregistering it for our clients
um on their behalf because it'sa lot easier, we can do it via
our practice portal.
We already have copy of yourpassport and proof of address
because we check that anywaywhen you become a client.
(13:36):
So most accounts will do thatfirst before you, and that's the
first thing to do to avoid apenalty point.
Um the budget confirmed thatthey will not apply late
submission penalties in thefirst year.
So that's really good news.
On the one hand, that thisfirst 12-month period, if you
are late, you won't get apenalty point.
(13:57):
Now, that's important to sayI'm not encouraging people not
to be compliant because startingit with good habits will carry
forward into the year after.
And the penalties are 200pounds if you get four penalty
points.
So if you get four penaltypoints, you get a 20-pound
penalty, and you are trapped inthe penalty system then.
And the penalty system is hardto get out of because once you
(14:20):
you triggered the four penaltypoints, you're in the system,
and you only get out of it byhaving 24 months of compliance.
So a scenario I could seehappening is somebody registers
late, they get a penalty, theymiss a few submissions, and then
they're in the four penalties,they get they get a financial
cost of that 200 quid.
And if they miss one penalty ayear, say one submission a year,
(14:41):
it's very hard to get out ofyou know this penalty system.
So really want to just say yes,it is true that the first year
they're not going to apply them,but get into good habits and
good behaviors because that willhave a compounding effect as we
go into this.
Um a really kind of unfortunateaspect of MTD is like coming in
(15:05):
and out of us.
So a question we had from aclient recently was Um, What if
I set up a company?
Does that get me out of MTT?
And the answer is yes, becauseyou would have dividend income
from the company, it's no longerself-employed income.
And then the question was,okay, when do I need to deal
with this by?
And the answer is now, becauseum the way the system works is
(15:27):
that £50,000 threshold is basedon your last year's tax return.
So if by the 5th of Aprilyou've not changed that status,
you have to you have to enterinto the system.
And something that I think isreally unfair, which are you
know is in the rules, that onceyou're in the system, the only
way to leave it is if you've gotthree consecutive years of not
(15:48):
being eligible or sorry, notbeing required to yeah, three
you're in it for three years.
So if you if you join, you'rein the system for three years.
Now I think that's reallyunfair because for the VAT
system, once you're in, you canmake a declaration at any point.
Actually, my qualifying incomeis below the threshold, I'm out
of the VAT system.
(16:08):
We can do that at any point,and you said that's a good faith
thing that people predict theirincome.
But for MTD, the currentguidance is that once you're in,
you're there for three years,even if you set up a company to
get out of it, which I thoughtthat's that's pretty unfair, but
it is what it is.
Now, whether the mechanics ofthat change um once we're into
(16:29):
it could be, but I don't don'tcount on it.
So please take it seriously,you've got to deal with this.
If you're thinking ofincorporating, do it quickly.
Dr James (16:37):
And can I just actually refer back to the
penalty point thing that youjust said?
So the submissions arequarterly, right?
Yeah.
So if you do no submissionsover a period of 12 months,
basic math is gonna tell us weget four penalty points, right?
Yeah.
So if you don't get yourcompany sorted before the 5th of
April and you don't doanything, you're gonna get your
(16:58):
penalty points pretty fast,right?
Because it's gonna be withinthe first year.
So you lit yeah right.
Just to just to really drivethat home.
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David (18:56):
That is how the current position is.
Absolutely.
Now I think that's reallyunfair and not consistent with
VAT.
And I would love to predict andsay once we're into it, they'll
update the the mechanicsbecause there's a lot of
software behind this.
But that is the currentposition as I read the
legislation, so I have to kindof say it as it is.
So yeah, we are we are withthat at the moment.
(19:19):
So it is it it could be anightmare if you just get in and
then you incorporate, butyou're still in the system, so
you still have to do those nilsubmissions, which is just it's
ridiculous, but it is what itis.
That is the current position.
Dr James (19:31):
Yikes.
Well, listen, I'm really gladthat you shared this stuff
because we haven't went to thislevel of detail in any other
podcast about MTD, that's forsure.
But anyway, you were you're infull flow there.
That question just came to me.
David (19:42):
Yeah, no, no, no problems at all.
Um, so we talked about theregistration side of it.
Um, once you've registered, youhave to submit a digital.
So it's four quarters.
The first quarter will be umthe 6th of April to the 5th of
July.
It's always the 5th to the 6th.
(20:03):
So in practical terms, it's umApril, May, June's revenue.
So you have to declare yourrevenue and your expenses.
The first submission thatpeople need to do will be on the
7th of August.
So like big thing is just getyourself registered quickly.
So you know, talk to youraccountant, ask them to register
it for you, because then youget a bit of breathing space
(20:24):
until August.
So key takeaway for people isif you're stressed about it,
you're not sure where to start,and your accountants contacted
you, just ask them to registeryou for MTD, then you know, you
can you can take a bit of abreather.
From our side, that's how we'replanning our workflow.
And then once the firstquarter's finished, so we've
come to the end of June, we willbe reaching out to people to
(20:46):
get that um first return done.
Um, how it's done is viadigital software, and it's been
such an interesting experiencefor us as a practice, just like
seeing all those differentsoftware companies pop up and
their pricing and how they'rekind of you know dealing with
it.
Um, you do need to have asoftware for this.
Um I did a slide, I know I'mnot sharing it, but I just kind
(21:08):
of because we get so manyquestions from people on what
software to recommend.
Now, the reality is that aslong as it's compliant and HMRC
has a list of software that arecompliant, and most of them are,
there's no real difference.
They all do the job.
Um, so what does that mean interms of advising people?
Most people want free softwarebecause it's it's very little
(21:29):
added value.
Um, so there are free softwareproviders out there.
I'll just find my slide onthat, I've got a summary.
Yeah.
So free agent was the one thatreally started from the
beginning as look, we're a freesoftware to deal with MTD.
So if you've got a qualifyingbank account, Metal Network,
(21:51):
RBS, and it's a business bankaccount, um, free agent will
give you a free software.
Now it does have to be forlife.
This is the this is thequestion.
Now, if I was a cynical person,I would be predicting that a
software company is a businessand doesn't do things for free,
and they might do it for acertain period of time, or they
(22:12):
get incentives from the banks tokind of encourage people to
open bank accounts.
But it surprised me also thatSage, which is another
accounting software, and it'sit's one of the I don't want to
call it a dinosaur becausethey'll sue me, but it's a very
old kind of like yeah, it's avery like old-fashioned pioneer
in the sector.
So everybody used to use Sagewhen uh software came out for
(22:35):
accountancy practice.
Um, so it's it's one of the oldold school ones.
Dave launched a free version,and I only was made aware of
that recently.
But again, my thought processwas is look, these these
companies are businesses.
Yes, they're saying it's freenow.
Could that change in thefuture?
I think there's no guaranteethat it's free today means free
tomorrow.
And if I was thinkingcommercially and I owned a
(22:56):
company, I would probablyincentivize people with a free
version and it would come inacross you know down the line
because it's a business at theend of the day.
Um, but where we ask where weare asked to provide um a
recommendation, well, look,these two are free Sage and free
agent are free.
You have Zero, which is really,you know, pretty comfortable to
(23:18):
say one of the market leadersin terms of what it can do as a
software.
It's got all sorts of open APIintegrations for complicated
reporting.
That's not really what MTD isabout, but it's it it does also
do that.
That starts at about 16 poundsper month.
QuickBooks starts at about 10pounds a month, um, but there
are free versions out there.
Now, to share a bit of kind ofour experience so far, because
(23:40):
we've been doing a lot of workon this in February telling now,
Clive.
So you need to deal with this,we need to help you with this,
we need to get you set up withthe software.
What would you like to do?
Um, a common feedback that wegot from clients was look,
David, I'm really busy, and howcan we make this as simple as
possible?
To which we were like, Well,you know, the free ones are
(24:01):
free, but there is a time costinvolved of subscribing,
connecting, linking, refreshing.
It is time to deal with thesethings.
Um and we got asked thisquestion enough to us to think
as a practice, well, how do wemake it as easy as possible for
people?
And kind of one thing thatwe've done, and I suspect uh
other accounts have, but youmight need to talk to them and
(24:23):
kind of see if they can do this,is we we've invested in a
bridging software that bridgesfrom our um practice software,
our portal and HMRC, some fancyspreadsheets in the background,
but we we can do it now withoutsoftware.
So well, we can do it with oursoftware, so it is possible to
do it.
So if so if you look at thesoftware options and you go,
(24:43):
look, I don't know where tostart, I don't know the
difference between free agent, Idon't know what's needed from
from me.
Ask your account, can you usetheir bridging software?
Because most accounts umshould, I would I would say
should have something like that.
If we do, I expect other peopledo as well.
Um, and that's been very wellreceived by people.
In the instead of having to goand log in the software and do
all sorts of refreshes, they canjust quarterly forward over the
(25:06):
data to us and we deal with itat our side.
So software options are kind oflike that.
So that that's interesting toknow.
Dr James (25:15):
Nice, interesting.
I didn't I didn't know that waspossible.
So there you go.
And uh all I can say is I mean,dentists slash business owners,
sorry, sorry, let me backtrackon that.
Well, no, it might it mightaffect some principles, I guess.
You know what I mean?
So there'll be a few businessout there uh who this affects as
(25:36):
well, um, in the sense thatthey have dental practice.
They just they just don't havetime, do they?
Because we're so friggin' busy,and it's like it's good to know
this stuff, but it's also goodto make it really actionable as
well.
And we're actually going to dothat at the end of this podcast,
too.
Uh, so heads up on that one.
But yes, anyway.
David (25:55):
Yeah, you're absolutely right.
And it it has been veryconfusing for our clients as
well.
And so, well, what is it?
You know, just getting thatmessage across the what is it,
what do I need to do?
People are very confused aboutwhat they need to do, what are
the consequences of not doingit, and it doesn't kind of help
that I'm having to say itdoesn't matter for the first
year because it does.
Like you get into habits, andyou know, the first year is an
(26:16):
amnesty because I think HMRCrecognises there's a lot of
work, and accountants andtaxpayers are quite confused,
and there's time involved insetting it up, and you want to
set it up correctly.
And I don't think there's a onesize sorry.
Dr James (26:28):
Go on, sorry, go on, sorry.
I thought you were finished.
David (26:30):
No, I was just gonna say I don't think there's a one size
fits all as well.
So I think that it's definitelya discussion about do I just
want a quick solution to what isperceived by myself as I'm
getting no value from this, Ijust want it dealt with some
compliant, or actually I do wantthe software so I can track
things and see what I'm up to.
And that's um we've I think usas a business, we're guided by
(26:52):
our clients and what they tellus.
So we provide a menu of youknow, these are your options.
Do you want to book in a callto discourse?
And but people have I thinkmore people went down the route
of just use your bridgingsoftware, I want it dealt with
quickly with like less input, aslittle input for me as
possible.
That kind of surprised me, butit makes sense because people
want a solution that's quick andeasy, and I think great for us
(27:14):
as well, because there is a lotof time that goes into setting
up the software and refreshingit and connecting it, it's it's
it's not very easy.
Dr James (27:22):
Understood.
And by way of the dentist'sinput in terms of what's
expected from them when theyhave the bridging software, is
they will just send you thespreadsheets of what they do.
Is that is that right?
Or how does that how does thatwork?
What will they send you?
David (27:40):
Yeah, so what the the interest of what's required to
be declared, and that is incomeand expenses.
So that can be as umstraightforward as forwarding
your payslips and your invoices,or if you've got a spreadsheet
that you use yourself to trackand some other clients do that,
and if they don't, we canprovide you one and you can
forward that to us once you'veput in your income, or we have
(28:01):
some clients who are justdownloading their bank
statements once a quarter andjust folding that over, and then
we lift it from there.
So I don't think there's onesize fits all, and it is really
people find different things,like people got different
systems for themselves, and it'swhatever works for you, really.
We're quite, you know,flexible.
I think to we're notprescriptive in that it has to
be done this way, it'swhatever's easiest for you.
Dr James (28:23):
Nice, okay, understood.
And am I right in saying just afew things that are floating
around in my head before we moveon that might be in the minds
of the audience as well?
Two things.
First thing was let's say worstcomes to worst and someone does
miss the April thing, as in theApril 6th deadline, and we're
not encouraging that whatsoever.
If they then registersubsequently before April, May,
(28:46):
June, July, if they registerbefore July, will they incur
only one penalty point?
David (28:54):
Yes, if they then do the submission on time.
That's that's my understanding.
Dr James (28:58):
Fine.
And then the second thing wasyou know, okay.
David (29:01):
But that but that that one point stays for 24 months
period.
So if in the next 24 months youmiss three others, you get the
200, and you're trapped in thiscycle of you know, sure.
Dr James (29:14):
And I definitely don't mean to diminish that we should
miss you know the the thedeadline or anything like that.
I'm just kind of playing outthe worst case scenario here.
Uh so yes, that is that's avery good thing you mentioned,
David.
And then the second thing iswhen it comes to I know you've
got your bridge and software,which is great.
Is it fair to say that there'sother advantages of having
bookkeeping software anyway?
(29:35):
Will there will be, won'tthere?
David (29:37):
Yes, there definitely are.
And if you are somebody who umwill use it, then it can um be
quite quite powerful.
So this time of year, it'sMarch, we get a lot of um
requests for look, I'm gettingto the end of the year, I need
to check where my income isbecause I don't want to get
caught in the 60% tax trap, anda lot of associates and um are
(30:01):
caught with that.
So if your income's over100,000 up to 120, that chunk of
your income is trapped at 60.
Quick fixes for that, oh well,let me put some money into my
pension that gets my uh incomedown, or I'm thinking of doing a
course.
Can I accelerate what I'm doingto kind of but if you've used
the software accurately for youknow when we've got we've had
(30:21):
the data outside, we can jumpinto zero free, whatever it is,
and say, yeah, based on what wecan see now, this is where you
are.
And if you were putting moneyin, this is how much you'd have
to put in, and that would giveyou you know a clearer um
picture.
So it can help you be moreproactive with your tax,
definitely.
Dr James (30:38):
Nice, and you know what's a huge one that I see on
that.
Uh when you have a zeroaccount, obviously it can
connect to your bank account,right?
So, or for example, just youknow, I'm just I'm sure the
other ones do as well, but I'veseen zero firsthand, it can
connect to your bank account,right?
So when it's set up, what thatmeans is you don't have to keep
(31:00):
these spreadsheet recordsbecause the you can literally
see the transactions just inzero, and then you can attribute
them to uh if it's like acourse, you can say, like,
here's the invoice for thecourse or whatever, this is tax
deductible, and things alongthose lines.
So that's it's it's I guessit's a more on the fly way of
keeping up to date with that,uh, just to really spell that
(31:22):
out to people.
Because I know there's lots ofpeople out there who mightn't
even have bookkeeping softwareas yet, so those would certainly
be the advantages.
Agree with that, David.
I've got a I've got somethingmore to add on top of that,
which is interesting, and I'msure you've seen that.
But before we move on, is thatfair to say?
David (31:38):
Uh no, absolutely.
I fully agree, and I think thatmy observation would be that
clients who haven't done that,that it what's the barrier?
Because there's a there is abenefit.
There's a benefit to havingyour records kept digitally,
having access to it, being ableto see what your income is
before you know you the end ofthe year finishes.
Definitely the benefit of that.
So, what's the barrier?
And the barrier is people'stime, and it's you know, is
(32:01):
there a cost to the software?
If I if I get it for free, Ihave to potentially open a new
bank account and it has to be abusiness account.
So applying for that and it'sthe setup time that I think is
the barrier for most people.
But to answer your question,there's definitely a benefit.
There is definitely a benefit.
Dr James (32:17):
Is it fair to say?
I mean, from what I've heard ofother accountants and even my
own personal zero account, I'msure there's things I could
brush up on in there, but a lotof the time when people set it
up on their own, they don't setit up properly.
Would you say that that I'veI've heard accountants say that?
Would you agree?
What are your thoughts on that?
David (32:35):
For for bigger businesses, yes, if there's
multiple bank accounts involved.
Um, if it's for an associatewith 12 pays coming in, I think
the common thing that people getwrong is the start date,
because you have to choose adate when the software
activates.
And if you're using a bankfeed, you've got to get that
date right, otherwise it willmiss transactions, which is
(32:57):
probably the biggest common ummistake we see we see.
It's entirely fixable.
So let's say you, you know, youdo this, you set your bank, you
set uh zero free up in June andyou connect it and so it, but
you choose June as your startdate.
So it didn't download April,May, or June, but then the first
of the first part of June, thatwould be missing from the
(33:17):
software.
So if that was us, we wouldtake a look and see, oh, well,
just to let you know it's notconnected from that day.
Please give us thosetransactions manually via an
Excel, you know, download fromyour bank statement, and we can
upload it to plug the gap.
But that's that's probably themost common setup error, is just
getting the dates wrong.
Dr James (33:36):
Nice.
Okay, because that is I've hadit before where the balance is
just completely wrong in there.
It's like way higher, way lowerthan it should be.
So it sounds it sounds likethat probably, and then my my
accountant fixed it, so itsounds like that was what
happened there, really.
David (33:52):
So that's the setup side.
Um, these softwares use what'scalled a screen scraping
technology.
So there's very like strictrules on what communication can
happen between your bank and thesoftware from a fraud
pretension protect perspective.
The banks don't want thesoftware to talk to the bank
because you know the banks haveto deal with fraud, so it's only
(34:14):
really one way one-waycommunication of data coming out
of the bank, not the softwaretelling the banks to make
payments.
So that's really one aspect toit.
But because it's a screenscraping technology, um, it's a
different level of accuracy andit it does miss transactions, so
it can like miss a few things,and then then you look at it and
(34:35):
you go, Oh, it's out by 10grand because it's missed a
transaction, and then what theteam do we say, oh, we can see
it's owl, let's uh get a naturalcopy of your bank statements in
it.
Excel, and we find out what'sbeen missed, and we manually add
it.
So that's that that is aprocess that we have to deal
with.
So they're not perfect.
Dr James (34:50):
Cool.
Anyway, not to digress, becausethere's two really big things
I'd love to cover before we wrapup this podcast.
So the first thing isaccountancy fees and how
accountants have adapted tomaking tax digital.
Is now a good time to move onto that, or is there anything
more you wanted to say on makingtax digital?
No, no, that's absolutely fine.
Yeah, we've we've covered mostof it there.
(35:10):
And um because just to share onthat one, I've seen you see
Pete posts on forums all thetime, and Dennis are like, my
accountant wants to charge me1,500 now, and previously they
were charging me 500 a year.
Uh, is this correct?
Is this right?
What to do?
What are your thoughts on that,David?
Or how have accountants adaptedto this change?
David (35:32):
So to be fair to us all, it is um four times the work
because it's four times thereturns we have to do.
So I think it's understandablethat um accounts are putting the
fees up to deal with it.
Um, it is also worth sayingthat you can do it yourself.
You you don't have to have anaccountant to do it.
So we we also give our clientsthe option that if you want to
(35:53):
do it yourself, you can do it,but obviously if we're doing it,
it's more work.
Um we've tried to staycompetitive, and I and I've seen
the variety of quotes that youknow people see on the forums as
well.
Um, but kind of our side, we'veput it to a flat fee of £75
plus VAT per month.
Um, so you know, 900 quid um ayear plus the VAT.
(36:15):
And that's I think where we'vetried to be fair to people and
that like it's not an addedvalue to you.
You can use our bridgingsoftware, which is free as well.
So we've tried to keep it ascompetitive as possible, but
also then just making sureyou're compliant with that.
Includes us registering you tostart with, our bridging
software if you want to usethat.
Um if you want to use asoftware, that's absolutely
(36:36):
fine, and we'll give you time toset that up.
That's also included in that.
But then, as I say, it's thatflat fee of £75 plus far per
month going forward.
Dr James (36:45):
Cool.
All right, well, that certainlyseems I mean, I've seen over a
thousand quoted for this.
Uh and um question for aquestion on your behalf, because
what I've seen or what I'veheard from murmurs of
accountants saying is that theones that have managed to keep
the fee more equitable, shall wesay, uh, have leveraged
(37:06):
slightly outside of the boxsolutions like AI and everything
along those lines.
Is that part of your workflow?
David (37:12):
No, no, we're not using AI.
We've we've um I think for us,we are so we're a national firm.
We've got a lot of clientsthroughout the UK, you know, as
far as top of Scotland toLondon.
Um but I think that we're asmaller firm, so we're a smaller
independent practice, thatwe've not got massive overheads
and multiple offices.
Um, so you know, and I think wewe we I think that just feels
(37:36):
right to us when we look at it.
We just kind of go, what's thework involved?
What's the value being addedhere as well?
And we didn't want to tryquadruple our fees, but we
thought that's a modest increasethat recognises more work for
us, and it it kind of gets thejob done for everybody, and you
know, but it's all it is achoice whether you you can do it
yourself.
And um, I don't think we've hadanybody say they're doing it
(37:58):
themselves yet.
We have had some people who arestill not responding to us, and
we say, look, you need to dealwith this, it's coming up, and
that's kind of a bit more workout our side of telling and
getting the message across,which is why it's really helpful
to have these podcasts and getit out to people because a lot
of people are unsure.
Like, what is it, what does itmean, what do I have to do?
It's it's very confusing forpeople.
Dr James (38:18):
Boom.
Okay, thank you for that.
And then one final thing justto wrap up, because we did
promise this at the very start.
David, if we had some sort ofactionable to-do list that
basically summarizes thispodcast, and then a dentist
could just play back wheneverthey want to themselves and be
like, right, I need to do this,this, this, this, and this, or
even write it down if theywanted to.
(38:40):
If we could condense it down tomaybe three, four action
points, how would that look?
David (38:46):
Yeah, just so three three things.
First thing is make sure youregister for MTD before the 5th
of April.
Um, that'll save you onepenalty point, and then you
don't need to think about ituntil your first return.
So, first thing is register forMTD or tell your accountant to
do it for you.
Um, number one.
Second is make a decision on doyou want a software to set up
(39:07):
and manage, or do you want tojust give it to your accountant
for them to use their bridgingsoftware?
And if you are going with theuh I want a software, put some
time in the diary after, youknow, well, as soon as possible,
really.
So we're we're offering peoplefrom now to do that setup
because um it's a you know,usually March is a bit quiet for
us, so just being mindful ofwhen accounts are busy as well.
(39:28):
Um once you've done that, yournext kind of box to tick is
before the 7th of August, you'llhave to do your first return.
So get your data over to youraccountant before, well,
hopefully in July at some point,and then get into good habits
going forward of quarterly.
So from our side, the practiceuh manager will be you know
contacting people quarter tosay, Yeah, don't forget you need
(39:49):
to do return, these are thingswe need, and you know, get into
that habit going forward of oncea quarter, you have to do this
new return.
Dr James (39:56):
Thank you so much.
That is really useful.
It's just really crystallizeit.
Shout out to Mr.
David Hossein, who's been onthis podcast today.
David is, of course, availableon the Facebook community if
anybody's a member of that.
Uh, and David represents hisfirm or two or two accountants.
Thank you so much, as ever,David.
We'll see each other very soon.
Thanks, sounds good to catchup.
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