Does your practice have too much money?
Does your practice have too much money?
Business is booming, money is flowing in, and there’s a healthy pool of cash sitting within your practice. So, what next?

There are various possible reasons for cash building up within your company. This could be because you have proceeds from selling assets, or because you have plans that you’re saving the money specifically for. Alternatively, you might be trading well but choosing not to pay yourself more in dividends for tax purposes. With the Government cutting some of the more adventurous tax saving opportunities that were available previously, increasing numbers of business owners are no longer taking their money out of their companies. In most instances, it makes better financial sense to leave your money where it is, and invest it within your practice.

Dentistry has done well over the last two years, with many dentists now reaping more profits than they actually need for day-to-day living. But if this is your situation, you might be wondering: what should I do with the extra money? This is where Hive can help.

Looking after your finances

Firstly, bravo. If you’re in the position of having extra cash within your business, it means that the business itself is in great shape. However, if you’re generating large profits, it’s even more important to have systems in place for keeping on top of your financials. And that’s because within a thriving business, there’s even more potential for unnecessary tax expenditure if you get it wrong. So, before you do anything else, it’s a good idea to have a chat with us about how we can help look after your finances.

Investment options

Investment is one way of using your money as part of a plan for the future. If this is a route you’d like to consider, we can help you to understand your options, the various types of investment, and their tax implications. We also have access to a network of professionals, who can provide advice on investment.

Extracting your cash

In most cases, it makes financial sense to have cash in your company account rather than your personal account, but what if you need it for a personal outlay such as a mortgage? If you’d like to access your money, we can help you to extract it in a way that keeps tax to a minimum.

Inheritance tax

Chances are, if you have a healthy surplus of cash, you probably also have assets that you’d like to shield for the next generation. We can assist with inheritance tax planning, in order to set out how your assets can be passed on in the most tax efficient way, while avoiding a hefty tax rate.

Pensions

It’s also worth considering a pension as a worthwhile outlay. Pension contributions can be either personal or made through your company, with those paid by a company attracting an extra tax saving. If you’re unsure which to choose, just ask – we can explain the difference and advise on the best route.

Group restructuring

Surprising as it may sound, having a lot of cash in a trading business isn’t always a good thing. You may need to reorganise to make investments separate to your trade, or to allow to you to divest of certain assets without affecting others. This can be a complicated process, but we’re here to assist, so just let us know if it’s something you’re interested in.

Buying another practice

With an already successful business generating healthy profits, you might feel the time is right to invest your surplus in a second or third practice. We have a dedicated team to assist with buying and selling, from making referrals to solicitors to helping with finance, accounting and bookkeeping. We also have strong relationships with brokers such as Christie & Co., meaning you can tap into our contacts.

Selling for the right price

On the other side of the coin, you might see this as an opportune moment to sell. For a thriving business in a healthy market, exit planning could be a natural next step. If this is the case, we can work with you to plan for the future, and – crucially – check if you’ll have a price you’re happy to exit at.

These are just eight of the key ways in which Hive can assist your practice, but with in-house experts in tax, accounting, management and marketing, as well as access to a network of third-party advisors, we’re here for every stage of your business journey. Just get in touch to find out more about how we can help.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Simon Vincent Senior Tax Accountant
If you have any questions or comments about this article, please get in touch.
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