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Dental Tribune United Kingdom Edition | 5+6/2017 BUSINESS 7 What would Dr Mo Lar do? Part 4 How to legally reduce one’s tax bill not married and has no children, which means if he wanted to make some extra cash he could rent a room in his property. The Rent a Room relief would mean he could receive up to £ 7,500 in rent each year from a lodger, completely tax-free. When he does decide to marry, he could consider transfer- ring his investment assets to his spouse, if they are in a lower tax bracket. In the meantime, the best op- tion for Lar would be to mitigate tax through maximising his pen- sion and Independent Savings Ac- count (ISA) Annual Allowances (AA). For the tax year 2017/18, the pension AA is £ 40,000, so to get AD By Richard Lishman, UK Over the course of this series, the 4dentists group will explore ways to tackle a number of personal and professional challenges by provid- ing advice and guidance to fictional character Dr Mo Lar. In this article, the fourth in the series, we look at how he could legally reduce his tax bill. Lar operates as a sole trader. In other words, he is classed as the ex- clusive owner of his own business and is entitled to keep all profits af- ter tax and National Insurance. What he takes home will depend on which Income Tax bracket he falls into. Now that he has some experience as an associate, his earnings will be in the region of be- tween £ 60,000 and £ 100,000, which means he falls into the Higher Rate Threshold (HRT). Once he starts earning above £100,000, however, his Personal Allowance – the level at which Income Tax be- gins to be paid – will be reduced by £ 1 for every £ 2 of income above this limit. For the tax year 2017/18, the Personal Allowance is £11,500. As for National Insurance, Lar falls into the Class 4 category, which means he is required to pay 9 per cent on profits between £ 8,060 and £ 43,000. As from April 2018, this will rise to 10 per cent and again to 11 per cent in 2019. Any- thing above £ 43,000 will be taxed at 2 per cent. One way in which Lar can pay less tax and save money is to make sure he claims all of his tax-de- ductible expenses, such as sub- scriptions and technical journals, lab costs and hygienists fees, course costs, payments to charity, equipment, uniforms and ac- countancy and management con- sultancy fees. As a sole trader, Lar is also eligible to claim a percent- age of the running costs of a car as long as he keeps detailed mileage records. It is important to note, however, travel between home and the surgery is not classed as a business journey. that If Lar plays it smart with his tax payments, he could minimise his tax even further. Because he is self-employed he is able to select when his accounting year ends. Choosing a date early in the tax year would give him more time to prepare his accounts and longer to pay the amount of tax due. If in the event it looked like Lar would be earning less than the year before, he could apply to reduce any pay- ments on account due to HMRC – in other words, any advance pay- ments towards his tax bill. For the best results it is always best to uti- lise the services of a specialist den- tal accountant. There are a number of savings that can be made outside of work too. At this stage in his life, Lar is