Associates – Tax Year 2025/26
As we approach the end of the 2025/26 tax year, it is important to remember the best tax planning comes before the end of the tax year.
For associates there are things you can do before the end of the tax year to help reduce your tax. You should think about:
- Timing of equipment purchases – Any equipment that qualifies for capital allowances (loupes, laptops, mobile phones) needs to be purchased and in use by the business to qualify for capital allowances.
- Pensions – Have you made the most of the tax relief that is afforded by pension contributions?
Making Tax Digital for Income Tax
HMRC is bringing in Making Tax Digital for Income Tax (MTD) from April 2026. MTD will require taxpayers to submit quarterly returns to HMRC, via an approved software. This is a huge change for dentists as the majority are not VAT registered, and quarterly reporting is something that dentists will face for the first time.
The important thing to know is that the reports do not require quarterly payments of your tax. Whilst there is some suspicion that HMRC will look to move this way in the future, currently the personal tax payments are due in January and July each year.
Who is mandated to comply with Making Tax Digital
Making Tax Digital will affect those taxpayers who have a combined income from self-employment and rental income of more than £50,000. HMRC is using the figures reported on the 2024/25 tax return to issue letters to those who will be affected.
The key part of HMRC’s criteria is that the £50,000 threshold is based on income and not profit levels. You will not need to comply with MTD if your income is derived from dividends and employment income, which is the common withdrawal methods for incorporated associates.
Who will Making Tax Digital affect
As mentioned above, any sole trader associate dentists with turnover of more than £50,000 will need to comply with MTD from April 2026.
For those who have incorporated their private associate income but still have an NHS sole trade, you may still need to comply if the turnover of the NHS sole trade is higher than £50,000. The good news for these hybrid structures is that only the NHS sole trade would be mandated for MTD.
Who will be exempt from Making Tax Digital
For those who are fully incorporated dental associates and only take dividends and employment income from your company you would not need to worry about MTD. You may still have to comply if you have personal rental income that is over the £50,000 threshold.
The future of Making Tax Digital
From April 2026, those with qualifying income over £50,000 will need to comply with MTD. This threshold is reduced each year by HMRC:
- April 2027 – £30,000
- April 2028 – £20,000
What to do about Making Tax Digital
The most important thing you can do is to check with your accountant if you are mandated for Making Tax Digital.
Once you have established that you do need to comply with HMRC you need to make sure you have systems and processes in place to accurately record your bookkeeping for the quarterly returns. Here at PFM Dental, we have been working with our clients from 2021 to help move them towards Making Tax Digital compliant software, in anticipation of this change.
We would recommend having the conversations with your accountant as early as possible if you would like them to help complete the quarterly returns. They will be able to support you to make the submission yourself or inform you of the deadlines and any charges for making the submissions.
