By Ross Martin, Accountancy Director at Hive Business.
Being in business is akin to being on a conveyor belt that’s pulling you slowly but relentlessly backwards the whole time; standing still is not an option. Even PricewaterhouseCoopers can’t relax (and they manage to entice a steady stream of government and HMRC insiders on board to preempt new tax laws). The general rule is that if you get too comfortable with the status quo you die. For all you know the cost of doing business might spike in the next quarter due to unforeseen circumstances.
It certainly has done in dentistry recently — laboratory costs, for instance, are edging upwards following Brexit and with the weakened sterling. Last year it was estimated that compliance costs a singlehanded practitioner £15,150 and combined with the various mandatory registration and indemnity fees the figure reaches £21,875 a year. That’s a 1,086% rise since 2006 compared to 35% inflation over the same period. Factor tax into that and it’s even worse: if you earned £150k and ran a limited company before April 2016 you’d have got to keep £100k, now you’ll only see £90k thanks to dividend tax. You’re getting squeezed.
The UK has the longest tax code on Earth, designed to take more money out of your pocket all the time without you realising. If that wasn’t enough, barely understood processes like fiscal drag are putting the boot into your wallet incrementally, and invisibly. Fiscal drag is a fancy term for saying thresholds don’t rise with inflation like they should, so to earn what you’re on now in 10 years in real terms might cost you a lot more in tax. The government and HMRC know about this and could very easily adjust tax thresholds in line with inflation every year but they don’t because they don’t want to. Not really fair is it?
And if you think you can rely on what the people in charge of the economy tell you is going to happen (as if you needed reminding), you can’t. It seems like every time Bank of England governor Mark Carney has said anything significant he’s been wrong: in 2013 he said he’d raise interest rates when employment fell below 7% — it did, he didn’t; in 2014 he said he’d raise them when real wages rose — they did, he didn’t; in 2015 he said the beginning of 2016 would probably be the right time — it wasn’t; at a press conference last August he said Brexit could make unemployment rise by 250,000 — there’s been no rise yet so all this has done so far is help weaken the pound.
The general direction of travel we’re seeing in dentistry is more regulation and more competition from corporates with scaled-up operations, combined with a curious cultural shift in the mainstream media that says it’s morally dubious to approach your tax liability strategically. The combined effect is like being a frog in a pan of water that’s slowly heating up: the status quo is not going to end well for you. The backwards conveyor belt, like I said, is an avoidable cost of doing business. If I were you I’d (rather urgently) want to find out exactly how quickly the conveyor belt was moving and how fast I need to move forwards to avoid falling off the back. This realisation will enable you to design a future-proofed business, and if you need help with that, get in touch on 01872 300232 or email us at hello@hivebusiness.co.uk.
