Stephen Barry shares how you add value for employees to ensure you protect their families in a tax-efficient way.
We widely talk about making the move to private dentistry and how it offers a lot of opportunities from a personal perspective for principal dentists. You may also be able to have more control over your work-life balance, practise more of the dentistry you’d like to or strengthen your financial security to name a few.
What may be a lesser-known opportunity is the financial protection you can introduce to your staff.
For those looking to make a full conversion of their practice, your accountant may advise you to change the business’s legal structure to a limited company.
Whether the structure of your practice is a limited company or a partnership, something to consider is the ability to introduce Relevant Life Cover for your employees. This is essentially life insurance a company takes out on the life of an employee (a form of death in service benefit).
Principal dentists who are directors in their limited companies may also be able to use this type of plan themselves to provide life insurance for the benefit of their families (there are exceptions to who can apply for this kind of cover so it might be prudent to get specialist financial advice).
Who is life cover for?
Practices can offer the life cover to any member of staff such as the practice manager, receptionists, dental nurses, etc. It is not available to self-employed associates who work at the practice.
It is widely reported that there is a recruitment crisis in dentistry. Last year there was a 46% rise in vacancies and a whopping 72% increase in salaries for dental nurses. This is a tell-tale sign that there is more competition to procure staff to support dental businesses.
Of course, increased wages mean increased pressure on your bottom line. Private practices can share this burden or pass it on to the patients. For NHS practices, it’s a case of grin and bear it.
Regardless, wages are not the only factor when it comes to adding value to your employees.
Relevant Life Cover provides additional benefits for an employee as part of their total remuneration package. It can also assist with the business’s ability to recruit, retain and motivate staff.
The cover is for dental practices looking to provide a lump sum benefit for employees in a tax-efficient way. It is placed in a trust with the employee’s family and dependents as beneficiaries.
- Your staff don’t have to pay income tax on the benefits
- They’re not usually subject to inheritance tax when claiming the cover
- Unlike lump sums paid under a registered scheme, relevant life plan benefits don’t form part of an employee’s lifetime allowance for pensions
- The taxman doesn’t treat premiums paid by the employer as a P11D benefit. For a higher rate taxpayer in a small company, this can reduce costs
- Neither employee nor employer has to pay National Insurance on the premiums
- So long as the company’s accountant and the local inspector of taxes are happy that the premiums are ‘wholly and exclusively for the purpose of trade’ as part of the employee’s remuneration, they are a trading expense
- Premiums don’t count as part of the annual pension allowance for tax purposes.
How to introduce the plan
When it comes to introducing new insurance policies and thinking about areas you need to cover for your dental business, it can help to seek specialist advice from a financial adviser that understands the peculiarities of dentistry.
At Wesleyan Financial Services, we have a team of specialist dental financial advisers. They understand your career, the financial support, and the protection needed to help keep your finances stable during changes like moving from NHS to private. You can book a no-obligation financial review with us by visiting www.wesleyan.co.uk/dental or calling 0800 316 3784.
Please note: the Financial Conduct Authority does not regulate inheritance tax. Tax treatment depends upon individual circumstances and may be subject to change in the future.
Advice is provided by Wesleyan Financial Services Ltd.
‘Wesleyan’ is a trading name of the Wesleyan Group of companies.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority and is wholly owned by Wesleyan Assurance Society. Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Fax: 0121 200 2971. We may record calls to help us provide, monitor and improve our services to you.