Best tax-optimising tips for pathologists working in a public and/or private sector

Almost any cost that relates to your role as a ‘business’ should be scrutinised for potential tax relief. This means you’ll need to talk to us (or your accountant, if you already have one) about which expenses qualify, or carefully review your outgoings yourself if you’re handling your tax return on your own. Below, we’ve put together a list of costs you might not have realised were tax-deductible expenses — from travel to equipment, training, and more. Think about it: the money you save on taxes could be invested in your next microscope or course… You can thank us later.

GETTING STARTED AS A PATHOLOGIST WORKING IN A PUBLIC AND/OR PRIVATE SECTOR

First off all, well done on becoming your own boss. Doing your own accounting might not be the most thrilling part of working as a pathologist, but now that you’ve started earning an extra income from your expertise, it’s definitely time to get organised about it. This is important to avoid any issues with the taxman and to save as much as you can.

As we mentioned earlier, if you incur a cost related to your pathology work — whether it’s for diagnosing, reporting, researching, or teaching it — you should definitely consider adding it to your expenses. However, this doesn’t mean that all costs qualify, nor can personal expenses always be turned into deductions. Another mistake is to think that taxes only matter in profitable years. This is not true; you can carry forward losses, which is why being organised and keeping good records of everything is really important.

HOW TO REGISTER AS A SELF-EMPLOYED PATHOLOGIST IN THE UK

This is step one in the admin. As soon as you start earning over £1k, you legally have to register as a ‘sole trader’, which is actually quite simple.

• Check your eligibility.

• Collect necessary documents — ID, proof of address, etc.

• Register online with HMRC.

• Understand your National Insurance contributions to know what tax threshold you’re at and what you’ll pay.

One of the biggest advantages for private pathologist practitioners working through limited company is they can choose the favourable tax-efficient time for extracting funds from the limited company. For more details on how to register as self employed or limited company, and more accounting and tax-saving tips for private pathologists practitioners, check Cannon Accountants' website at www.cannonaccountants.co.uk

CLAIMING BUSINESS EXPENSES

In accordance to HMRC rules, allowable business expense should be incurred "wholly and exclusively" for the purposes of the trade/profession. In order to claim expenses, you need to have proof of transactions to show that what you’re claiming qualifies as a viable cost to your ‘business’. In the past this would have been a nightmare. But thanks to the wonder of modern technology, this is a lot easier and faster. At the very least, you can set up a spreadsheet and document everything monthly. But there’s also plenty of basic accounting software available to help you keep track of everything, categorise it — all automatically integrated with your bank account. So take a look at the likes of QuickBooks and Xero.

STRATEGIES TO PAY LESS TAX

The most common error is to mix personal and business expenses, not carrying forward losses from the previous year, and simply missing out on eligible deductions because of poor bookkeeping. Therefore, being organised and having a regular routine will really help.

RECORD-KEEPING FOR ALLOWABLE EXPENSES

Every business develops its own system for keeping track of expenses, so find a method that suits you best. If you’re the type of person who needs to handle things right away before you forget, consider setting up a folder for receipts. Every time you make a payment, snap a picture of the receipt and put it in this folder, then write it down in your spreadsheet. Or, you might like to sit down once a month and sort out your payments. Either way, dedicated accounting software can make this process easier and faster. You can even set up rules that partly automate this process.

DO YOU NEED A DEDICATED ACCOUNTANT?

When things start to get complicated, a dedicated accountant can be a lifesaver. If you’re managing to consult during most of your available time, it’s definitely worth thinking about taking the burden off your shoulders so you can concentrate on the pathology. Sadly, you’ll never be totally free of financial admin, but a good accountant will make sure you’re saving where possible and deal with most of the dull stuff for you.

ULTIMATE CHECKLIST OF TAX-DEDUCTIBLE EXPENSES FOR UK PATHOLOGISTS

Below is a list of a range of common expenses — it’s not comprehensive, and there are often rules like ‘if x is used for x’ then it’s deductible/not deductible. For example, many think that meals out count as tax-deductible — but there are rules to stop people from just eating out and claiming it, such as only counting as a personal expense when travelling (in a different city from your place of residence). So, be cautious. Buying a meal for a client, for example, is disallowed expense as this falls under ‘entertainment’. If you’re ever unsure, ask your accountant. A bit more on some common categories below.

TAX DEDUCTION ON TRAVEL EXPENSES FOR UK PATHOLOGISTS

Travel is definitely an area where you can save a lot. Any form of travel that relates to your work counts — whether you’re visiting hospitals or clinics locally or internationally, getting to a city for a meeting with your colleagues, a training session at a university, or even travelling to your home office. Train tickets, airfare, and even taxis to the site count, but remember, you’ll need to show it’s strictly for your pathology consulting business. If you have to transport your equipment separately, that counts too.

UNDERSTANDING EQUIPMENT TAX CLAIMS: A GUIDE FOR UK PATHOLOGY PROFESSIONALS

Your equipment is essential for doing and reporting pathology, and hardware especially wears out over time. So, you’ll need to keep track of maintenance costs (deductible), like some new slides or a lens for your microscope/getting your computer fixed. On top of this, you’ll need to keep track of each item’s value — as they fall under the category of capital items. Motor cars (such as a car for visiting sites, if that’s your job), computers, and laboratory equipment all count too. Although, rules for cars have their own category and are worth checking out separately if this applies to you.

TAX-DEDUCTIBLE EDUCATION AND PROFESSIONAL DEVELOPMENT FOR UK PATHOLOGISTS

Personal growth matters too! Whether you’re going to a conference in person or taking an online course, these educational expenses can be deductible. So, think about improving your skills as one of the necessary aspects of your ‘business’. This also applies to professional journals, books, or subscriptions that contribute to learning or research.

WORK-RELATED EXPENSES FOR PATHOLOGISTS IN THE UK

The rules are actually quite strict on professional clothing. Your work attire might be tax-deductible, but your everyday clothes aren’t. The rule of thumb? If it’s a uniform or specific outfit for work, you’re likely in the clear. Jeans and a tee? Not likely to work — overcoats; underwear; hosiery; and most footwear cannot be claimed. Lab coats/scrubs for clinical pathologists are allowed, so think about having a clean and tidy appearance. Dry cleaning and laundry are also allowed. Haircuts, however, being considered part of day-to-day living costs..

TAX DEDUCTIONS ON HEALTH, FITNESS, AND HOME OFFICE FOR UK PATHOLOGISTS

Let’s go through them one by one…

Health and Fitness

Did you know some fitness expenses might be deductible if they’re clearly for improving your work performance? Not your gym membership or most ‘NHS-available’ treatments, but physiotherapy or stress management courses might be if they relate ‘entirely and solely’ to business purposes.

Medical Expenses

Eye tests or dental check-ups could be deductible. Definitely, protective equipment can, so opt for a premium custom option if you’re working with hazardous materials a lot.

Tips

Technically you do need to report all cash earnings too. Though the tips you receive may count as ‘casual earnings’, for which you are allowed up to a £1k allowance.

Union Fees

Membership fees for pathology unions or associations almost always count.

Home Office Expenses

If you’ve got a dedicated space for your consulting work at home, parts of its maintenance could be deductible.

A FINAL, QUICK NOTE ON TAX AND VAT

It’s compulsory to register for VAT if your turnover exceeds the current VAT threshold over a 12-month period, which at the time of writing is set at £85,000. However, you can also register voluntarily if it helps you, such as allowing you to reclaim VAT on purchases.

Being VAT registered requires you to charge this tax on most ‘taxable supplies’. In return, you can reclaim VAT on your purchases. Many things you buy probably include VAT, from equipment, laboratory hire, and other expenses.

VAT returns do make the books a bit more complex and require filing quarterly, so do make sure you get advice if you need to or are thinking about registering.

So there you have it, this list is your starting point, but be aware that the tax landscape can change — for better or worse, so it’s important to keep up to date with developments to ensure you’re always giving yourself maximum benefits.

Regularly reviewing your expenses with a tax professional can help you fine-tune your deductions. Stay informed, stay organised, and get financially smart so you can invest more time and money into your pathology. And yes, don’t forget to keep receipts.