Dentists Who Invest Podcast

Here's What Making Tax Digital In 2026 Means For Dentists with Amman Sarkaria [CPD Available]

• Dr. James Martin • Season 3 • Episode 390

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Collect unlimited free verifiable CPD for UK Dentists here >>>  https://www.dentistswhoinvest.com/video/1

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Navigating the seismic shift in UK tax reporting that is about to impact dental professionals across the country. Making Tax Digital (MTD) represents one of the most significant changes to self-assessment in decades, yet many dentists remain unaware of what is coming or how it will affect their practice finances.

From April 2026, self-employed dental professionals with income exceeding £50,000 will need to abandon paper records and begin making quarterly digital submissions to HMRC through compatible software platforms. But the devil truly is in the details. While some practitioners will be immediately captured by these new requirements, those operating through limited companies may find themselves temporarily shielded, provided they do not have significant additional income streams.

We break down exactly who will be affected and when, explaining how the threshold will progressively decrease from £50,000 in 2026 to £30,000 in 2027 and eventually £20,000 in 2028. The distinction between different income sources proves critical, with dividends notably excluded from threshold calculations while property income must be counted alongside self-employed earnings. For those with multiple income streams, the administrative burden increases substantially, potentially requiring eight separate quarterly submissions annually rather than the current single return.

Practical preparation steps are essential, from establishing dedicated business bank accounts to exploring MTD compatible software solutions. Despite the challenges, there are potential benefits too, including more regular visibility of your financial position and tax liabilities throughout the year. Whether this affects you immediately or in subsequent years as thresholds decrease, understanding these changes now will prevent unnecessary stress as implementation deadlines approach.

Click the link in our description to access the free verifiable CPD associated with this episode. Complete the questionnaire, add your reflections, and we will email your certificate to contribute to your CPD hours for this learning cycle.

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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.

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Dr James:

We need to do a podcast on this topic because this is happening super soon and a lot of dentists A don't even know what it is because they haven't heard of it, or, b they know a little bit about it, but they could know more, so let's address that today. I'm also happy to share that there is free verifiable CPD associated with this podcast episode. Whenever you've finished the episode, all you have to do is click the link in the podcast description. It'll take you right through the dentistry invest website. You'll be able to complete a short questionnaire and, once passed, you fill in your reflections and we'll go ahead and email over to you your verifiable CPD certificate, which is entirely free. What that means is this podcast episode will be able to contribute towards your verifiable CPD hours during this learning cycle. Making tax digital. What is that, Amman?

Amman:

Yes. So essentially, James, it's a new structure to the self-assessment process. So the old structure was you would have your personal tax year between April to the end of March. You would then have 10 months for you or your accountant to submit your tax return. So obviously there's quite a chunky period of time there for you to kind of get your taxes in order and make that payment. Now it's changing completely. It's basically based on these three key principles. So firstly, it's been digitalized, so there's no more paper records. So each dentist will need to make sure that they have a software in place so that they can submit to HMRC. So that software needs to be compatible for making tax digital, which essentially means that you will connect your bank account to a software like accounting like zero, sorry and you will then need to start submitting on a more regular basis. So essentially, what hmrc want to do is they want you to start submitting on a quarterly basis instead of at the end of the year which is obviously quite a big change for self-employed individuals, right, I see.

Dr James:

So just to make this super duper clear, it's a little bit like zero, or we need some software that's similar-ish to zero and basically every dentist needs to have it that's right.

Amman:

Yeah, so it will be similar to zero. Zero will have their own product quickbooks will have their own product. There'll be a number of products on the, on the platform, on the on the market for you to purchase. Essentially, you can also do this on a spreadsheet too. However, you need to ensure you have some kind of bridging software so that you can make those quarterly submissions.

Dr James:

Understood and if I've gathered this correctly, you will have all the data at your side in your Xero or whichever software that you choose, but you still have to send them to your accountant as a middleman. Have I got that right?

Amman:

man, have I got that right? That's right. Ultimately, you can as with the current process, you can submit your own self-assessment, but obviously, if you want to make sure that you've got a chartered accountant looking across it and all the tax figures are correct and there's no additional expenses or taxes that you're missing out on, then it's always best to double check with an accountant.

Dr James:

I see. All right. Well, just to really spell this out in terms of who this affects it's not just dentists, is it all self-employed people? Is that how it works?

Amman:

Yes, so essentially, if you, it's based on thresholds. So this is going to be phased in from April 2026 and the first year will be based on whether you're self-employed and or property income will be over £50,000. To 2025 tax return, which is due at the end of this January, if that shows self-employed and or property income over 50,000, you will then have to comply with making tax additional from April 2026.

Dr James:

Right. This is so useful to know.

Amman:

Yes, so obviously most dentists who are self-employed will be impacted by this. That threshold is going to reduce year on year for the next, for the two years following 2026. So it will go down from 50k to 30k to 20k. So it's fair to say the majority of dentists will be impacted by this over the next one to two years.

Dr James:

So it is coming, it's happening and you know, when you said that 50k threshold just a second ago, does that mean that dentists who are trading as a limited company and keeping a lot of their earnings within the limited company but potentially taking out under 50k every single year, will they still be affected in the first year?

Amman:

Good question taking out under 50k every single year, will they still be affected in the first year? Good question. So actually, even if they were to be taking out more than 50k, dentists within limited companies are very unlikely, in this pure scenario, to be affected by this, because the 50 000 pound threshold doesn't include payroll dividends, pens, pensions, income bonuses. It only includes if you are almost working as a sole trader or if you have property income. So dividends from a limited company wouldn't go towards that threshold.

Dr James:

Oh right, wow, Okay. So just to make that super duper clear for the dentists out there that are taking 50K out of their limited company every year, but let's say they do their 12 and a half K personal allowance and then everything is dividends above that. Maybe there's okay, better example. They're taking out 60K every year, 12 and a half K personal allowance, and do the math, the rest of that in dividends, even though they're over the 50k threshold. Because that's constituted of dividends, they won't be affected in the first year at all.

Amman:

So even when the threshold goes down to 20k, it will still be based on self-employed income and not dividends. So any self-employed income is any income that you earn as an individual in your own name. If you've got a limited company, it will be your limited company that's earning that revenue and then you're just getting paid out as a director slash shareholder.

Dr James:

Well, by that token, it sounds like it's not going to affect a lot of dentists imminently. Have I got that right? Because a lot of them will be taking dividends out.

Amman:

Yes, so most dentists who are within a limited company structure, as long as they're not earning any additional income through properties et cetera, they won't be impacted. It will be more towards the dentists who are working under their own name or self-employed.

Dr James:

Yes, so sole traders or employed dentists? No, of course it can't be employed dentists, sole traders, right?

Amman:

Yeah, exactly that. Um, I think the thing to also think about here is that 50k threshold is a combination of self-employed and property income. So if you're if you're earning self-employed income of, say, 40k, but you've got a property that you let out for one grand a month, the revenue that you would have earned in the year would be 12k plus your 40k. You would be over the 50k threshold yeah, understand, yeah, 100.

Amman:

Good to reiterate the property side of it too and I guess a very key point here also is when you do these quarterly submissions you will have to submit based on separate businesses. So if you have a dental income of, say, 40k and you've got property income of, say 20k, you will need to do separate quarterly submissions for those two different businesses. Yeah, so just on that example of 40k as a dentist and say 12k through a buy-to-let income in your own name, that would firstly put you over the £50,000 threshold, so you would have to comply with making tax digital. But secondly, when you submit on a quarterly basis you will have to submit twice, firstly as a dentist and then secondly for your property business. So essentially we're saying for the full year you're going to have to do eight submissions in that scenario compared to just one.

Dr James:

Yikes. And then just to really spell that out because this is something that I find interesting, going off what you're saying, Amman, from your dentistry and self-employed income, or you solely had. You had no income from your dentistry but you had like 10 12k property income in your personal in that you were talking about a second ago. If in each one of those scenarios that was the only income that you were receiving respectively, you wouldn't have to worry about mtd. But it's the fact that them together cumulatively pushes you over that 50K threshold that now means that you have to do it twice each quarter, because it's two separate businesses.

Amman:

Exactly, yeah, you have to add the self-employed plus the property income together to assess whether you hit that threshold.

Dr James:

Nuts. That's crazy. There's layers to this right.

Amman:

Yes, it is. And also, for example, just to give you a specific scenario, we've not started this process yet. The process starts in April. So I'm sure more things will come from this. But if say, for example, a dentist does their foundation year and they join a practice as a self-employed individual on September the 1st, they are essentially joining seven months, five months into the year, with seven months to go up until the end of March. So in that period of time they may earn, say, 45k between September 1st to the 31st of March. However, okay, you're under the threshold. But in that scenario HMRC will want you to proportion your income on a monthly basis so you can see whether you would actually hit the 50K over a 12-month period.

Dr James:

That makes sense. It's like your payment on a coin right.

Amman:

No, not really so. With a payment on a coin, you're paying half your tax bill for the next period, whereas in this scenario, in order to assess yourself for the 50 000 pound, hmrc want you to proportion any income that you may have started part way through the year. So let's say you join a dental practice as a self-employed individual in March and you earn 5k in that one month.

Amman:

Now technically you're under the threshold because you've only earned £5,000 in that tax year from the income. But HMRC will say actually, if you spread that across a 12-month period, your income would have been 60,000. Therefore, you should actually be complying with making tax digital.

Dr James:

I see, yeah, okay, I'm with you Because, yeah, the payment on accounting where I was coming from was more, in that they project it forwards, but this is slightly different. Yes, more was more in that they project it forwards, but this is slightly different. Yes, this is, this is slightly different in that you may have a payment on account, but it's really determined, really, what they're interested in. You'll always have a payment on account. Well, you will, yeah, of course you will, but really, whether or not that in turn qualifies you for it to be MTD would be if your projected income is over the 50K going forwards effectively. Excellent, okay, cool. Well, listen, there's a lot to tune on and digest here. This is interesting stuff. Okay, cool, let's talk about. I know we mentioned when earlier, and obviously this is 6th of April, right, whenever this all kicks in the new tax year next year, and that's when it starts off at the 50K threshold. And you mentioned other thresholds and timeframes. Is it okay if we had a recap of those, because those would be really useful.

Amman:

Yeah, sure, so you're right, it starts on the 6th of April 2026. Now, whether you need to comply from the 6th of April 2026 will be based on your 2024 to 2025 tax return.

Amman:

So the personal tax year that's just gone up until the end of March. You now are in the period of submitting that tax return from April to the end of January. If, on that tax return, your income is over 50k for self-employed and or property, then you will need to comply from the 6th of April 2026. If it's lower than 50k, then you could continue as you are submitting once a year and essentially nothing really changes.

Amman:

However, from 2027, 6th of april, that threshold reduces from 50 000 down to 30 000 and then gain down from 30 to 20 000 in 2028 right yeah, um, just a quick thing to mention there as well as you can actually elect to work from the first of the month rather than six instead of the 6th of april to say the 5th of july. Being the first quarter, you can actually do the 1st of april to the end of June and work as per the year, essentially.

Dr James:

Cool, fair enough.

Amman:

And then.

Dr James:

key thing to emphasize, though, is just to reiterate what we're saying this is from income, not dividends, as, in income, what we were talking about earlier, plus property income as well, so, hypothetically, unless they bring in some sort of a new rule, there's still a lot of dentists that this may not affect, unless they bring dividends into the equation.

Amman:

Yes and no. I think there's still quite a few dentists who are self-employed, so it will impact, I would say, 95% of dentists who are starting for a program.

Dr James:

Yeah.

Amman:

Most of them will be earning more than 50,000. If you're a dentist and you're in a limited company, well then you probably won't be impacted, unless you have income elsewhere that you're earning more than you need.

Dr James:

Seems reasonable Any talk of them including dividends in the equation anytime soon.

Amman:

Not yet. I mean, things are always changing with HMRC and essentially, the reason they are doing this is because they want to reduce that. So any way they can do that, they will do that. So there's no reason why they won't start investing in 200,000 dividends as well.

Dr James:

All right, let's talk actionable next steps for the dentists who are out there. We mentioned PrEP in terms of looking into some software that's going to help us here. Anything else dentists can do?

Amman:

Yeah. So I guess one point to quickly touch on before we move on to that is you will have to submit on a quarterly basis, but also there will be a year-end declaration as well. Oh, you're essentially having to submit five times in the year, all quarters or each quarter, and then one at the end of the year, basically confirming all of the numbers are correct. But also that gives you an opportunity to add in any accounting or tax adjustments and also add in payroll pensions dividend, so that, hey, you must have a full picture of what your income was for that year good to know.

Dr James:

So we definitely got to do that. Any other considerations?

Amman:

yeah, the consideration would be. Lastly, I would say, try to understand if and when making tax digital applies to you. It might not be something that you need to worry about for April 2026. However, the threshold is continuing to decrease, so there's a good chance that if you are running and you come in your own name, you are going to have to start complying at some point. Another thing to think about is actually trying to get your business banks, your ducks, in a row for your businesses. So if you have self-employed business, you should already have a separate business bank account for that business. But if you don't't, now would be the time to try and get that set up so that when you do need to start integrating your business bank accounts with the softwares, you don't have personal transactions going through those yeah, because that's going to mess everything up, right that?

Amman:

other good habits would be, I would say. Actually, some of our clients are already on some of these softwares and even though they're not necessarily submitting on a quarterly basis, they're kind of forming that good habit of tracking their employment expenses to make sure they are kind of in the swing of things.

Dr James:

Absolutely Any more tips where those came from.

Amman:

Yeah, any other tips. I would say definitely. Speak to an accountant. Any more tips where those came from? Yeah, any other tips. I would say definitely, speak to an accountant. You should already be having these conversations with your accountant to make sure you are across the changes. And if you don't have that in place, then make sure you speak to your accountant. They should know exactly what's going on.

Dr James:

All right, you touched upon this just a second ago and you hinted at why HMRC are doing this. They're doing this from the point of view of running a tighter ship, which would hopefully generate more tax revenue, right.

Amman:

Yeah, that's right. So essentially, the reason they're doing this is to reduce the tax gap. They want to reduce the difference between the tax that's actually being collected versus what should be collected, between the tax that's actually being collected versus what should be collected. But also, I think it is good for business owners and dentists, because dentists will essentially now be able to see their profit and loss to some degree each quarter, so they will know what their tax liability might be at the end of the year by keeping them top of these submissions.

Amman:

There are definitely a few things that won't change, though, for dentists. So the actual payment deadlines at the moment are not changing, it's just the submissions. So each quarter you will be submitting. It will only be at the end of the year, when you do your final year-end declaration, that you will then be required to make a payment. It's also worth noting if, for whatever reason, a quarterly submission is incorrect, won't be fined by HMRC. They'll just expect you to update it in the following quarter. It's only when you do that declaration at the end of the year that you're basically complaining that all the numbers are correct.

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