The C+D Salary Survey 2011 reveals that three in 10 employee pharmacists and contractors, and half of locums, are dissatisfied with their incomes, with one in five employee pharmacists believing they should be paid over 20 per cent more than they currently receive. In the absence of that happening, finance expert Umesh Modi - a pharmacy specialist partner at accountancy firm Silver Levene - has some ideas to help you make the most of what you do earn.
For business income
Get budgeting
Record all of your income and expenses so that you can budget efficiently and see where savings can be made.
It is vital to ensure that you budget for your tax and VAT liabilities. Depending on your cash flow, it may be advisable to set aside a sum each month into a separate account, to ensure funds are available at the required time.
Income tax
Your tax and class 4 national insurance contributions (NIC) liabilities are due for payment in two instalments, on January 31 in the tax year and July 31 after the end of the tax year, with a potential final payment on January 31 after the end of the tax year.
PAYE
If you have a company, its PAYE liability is due on the 19th of each month; the year's liability must be settled in full by May 19 after the end of the tax year.
Corporation tax
A company's corporation tax is due for payment nine months after the end of the company's accounting period.
VAT
Payment of VAT is due on the same day as the VAT return is due, ie one month after the end of the VAT period, although where filing and payment are done online a slightly longer period is available.
If you are concerned about being able to meet your tax, NIC or VAT liabilities, HMRC's Business Payment Support Service (0845 302 1435) exists to enable taxpayers to arrange for additional time to pay, without incurring penalties and surcharges, although interest is charged.
Review your outgoings
Go over your direct debits to ensure that you are not paying for anything you no longer need, and review your contracts for utilities and services to see if there are better deals around.
Leaving funds in a company
If you have a company, you will either take funds from it in the form of salary, in which case the company will pay PAYE/NIC on it, or dividends, which are paid from corporation tax profits and on which additional income tax is payable if you are a higher or top rate taxpayer. With corporation tax rates reducing, therefore, it is advantageous to leave funds in the company, rather than taking salary or dividends, if at all possible, so that the profits suffer only corporation tax rather than income tax/NIC.
If you pay personal expenses out of company funds, the amount may be treated as a loan to you, which - as long as it is small (less than £5,000) and repaid within nine months of the company's year end - will not give rise to any additional tax liabilities.
If not treated as a loan, the expense will generally be deductible for the company (and any VAT may also be reclaimed) but the amount paid will be taxed on you - the exact treatment will depend on the circumstances, however. If the company pays a bill that is in your name, both employee's and employer's class 1 NIC will be payable; however, if the company contracts directly with the third party, then only employer's class 1A NIC is payable, on July 19 after the end of the tax year.
Incorporation
If you are a sole trader or in partnership, you are taxed on your profits as they arise; you may therefore wish to consider incorporating your business, so that, as above, you have the option to leave funds in the company where they will suffer only corporation tax, at relatively low rates.
Any tax saving will be offset to an extent by increased professional costs of statutory accounts and annual returns, so if you need to take all of the company's profits out to meet your personal expenses, incorporation is unlikely to be advantageous. But if your profits are greater than your personal expenditure, such that leaving funds in the company is an option, your accountant will be able to advise you whether incorporation is worth considering in your circumstances.
For personal income
Review your savings
If you have deposit accounts, check the interest rate remains competitive and shop around for the best accounts. Take out a cash ISA - income and capital gains are tax-free and the maximum amount that can be invested is £5,340 (or up to £10,680 can be invested in a stocks and shares ISA). Prospective savers should search for ISA accounts online to find the best deals on interest.
Invest in your pension
Although the retirement age is creeping up, the savings are worth the wait: there is a tax benefit when the money goes in and it's a good long-term investment plan.
Live with your parents (yes, really)
It might sound like a recipe for unmitigated disaster - but living with your parents is undoubtedly an effective saving technique. Stay with parents as long as practicable and save on rent; put the savings into higher fixed interest savings accounts with a view to building up enough deposit to buy a house or a pharmacy, if that's the future goal.