What can doctors claim tax on?
This blog post is all about what doctors can claim tax back on and will include information on
- What you can claim
- How far back you can make your claim
And most importantly!
- How you can make that claim
Introduction to the UK tax system
Before we tell you what doctors can claim tax back on its important to understand how tax for doctors works. The first thing you need to know about the UK tax system is that it’s a little bit unique. Rather than being a calendar year, in the UK each tax year runs from 6th April in any given year to the following 5th April.
So why is it like this? Well, way back when, the tax year used to start on one of the country’s quarterly Saint Days on the 25th of March (you’ll be aware of a more famous quarter end – 25th December or Christmas Day). When we switched calendars over in the 1700’s, we had to add 11 days to the calendar, and then later on added an additional day to account for a Leap Year, which takes us to the 6th of April. So, in short:
The tax year runs from 6th April – 5th April.
The tax year at the time of the podcast, ran from 6th April 2021 to 5th April 2022. The current tax year runs from 6th April 2023 – 5th April 2024.
So, why do we need to keep all this in mind? Well, it matters for several reasons. Firstly, a huge one is that tax rates and allowances set by the government will be applied to a given tax year. The government will pass legislation, usually every year, which sets the rates of all taxes and levels of income to which they apply. His Majesty’s Revenue and Customs (HMRC) are then responsible for collecting these taxes.
What are the current rates?
The first thing to note about rates of taxes is that most people in the UK, including doctors, will receive a personal allowance each year. This is the amount of income that you can receive tax-free.
Currently, in the UK, the tax-free amount is £12,570.
Currently the personal allowance has been frozen by the Government until 6 April 2028. After this threshold is surpassed, you start to progress through the income tax rates which for employment income (aside from Scotland – see below) are set at 20%, then 40%, then 45%.
|Up to £12,570
|£12,570 to £50,270
|£50,271 to £125,140
Since you have to earn over £125,140 for the first 45% rate to apply, most doctors will pay tax on their salary at the basic rate of 20% for the first chunk of income above the personal allowance, and then 40% after that.
Things are slightly more complicated in Scotland, where there are more income tax rates and income tax brackets. There are five income tax rates after the personal allowance in Scotland: 19%, 20%, 21%, 42%, and 47% (48% from 6th April 2024. There will also be a new 45% rate.)
Most doctors in Scotland will be in the 42% income tax bracket while in the rest of the UK this is 40%. This means that most doctors can save up to 40% (or 42% for Scotland) of any expense that they are allowed to claim income tax back on. So a £100 expense could save a doctor £40 in tax back in England, or £42 in Scotland.
What, exactly, are employment expenses that doctors can claim against tax?
Expenses that are tax deductible against employment income, that is your salary as a doctor, fall into five main categories:
- Professional fees or subscriptions paid to an organisation approved by HMRC. This is the most important category for doctors (more later!)
- Certain travel expenses.
- Donations made to charity via your payroll.
- Any payment by an employee to an occupational pension scheme such as the NHS pension scheme.
- General rule (again more later!)
These are all big categories in their own right, and as such deserve a separate blog post, so in this post we’re only going to focus on the first one: professional expenses category.
What can a doctor claim against their employment income for tax purposes?
HMRC has a list of approved organisations called “List 3”, and if you pay a subscription fee to one of these you are entitled to a tax deduction against your employment earnings.
- Your GMC fee, including any CCT fees
- Your Royal College fees
- Your MDU or MPS fee
- Your BMA fee if you are a member
You can go to HMRC’s list and look up organisations. However, the list is not very well written. For example, the General Medical Council can be found under ‘M’ for Medical Council General. The list can be found here.
What about training costs?
This is more difficult. The fifth category, listed as the ‘general rule’, covers expenses that don’t fall into the other four categories.
In broad terms, the general rule allows a deduction for an employment expense if the amount is incurred “wholly, exclusively, and necessarily in the performance of the employee’s duties”. This is a very difficult test for employees to meet and so most expenses that employees try to claim are not tax deductible.
Training costs are a great example of this – HMRC argue that training activities are not “necessary” (!!) as they make you a better doctor but are 100% necessary and they also argue that they are not undertaken while you are performing your duties as a doctor’s. They argue this even if the training activities are compulsory and failure to complete them may lead to the employee losing their professional qualification or their job.
Another example is would be if you pay for an Advanced Life Support course yourself (or ATLS, NLS, PLS etc) – you aren’t allowed to claim a tax deduction against your employment income because HMRC argue that you aren’t doing this course at work or “in the performance of your duties.”
For the same reasons as above, HMRC always argued that exam fees weren’t tax deductible. However, in 2010 to great surprise, a specialist registrar in dermatology, Dr Bannerjee, took HMRC to court regarding her training costs and won.
So now, doctors can claim for their exams and also any resits.
In fact, thanks to that 2010 court decision, if you’re a junior doctor on a training contract and training is an intrinsic contractual duty then you should be able to claim a tax deduction against your employment income.
You may be able to claim for associated costs of the exam as well such as train fare to the exam or accommodation if necessary. Unfortunately revision courses are not allowable expenses.
Is there anything else you can’t usually claim?
Among other things, you can’t usually claim for:
- A tax deduction if you haven’t incurred the expense, for example if it is paid for you from a study budget.
- Any fees for diplomas taken by employees.
- Continuing Professional Development
- As above, ALS etc courses
How far can I go back when making a claim?
You can claim for the previous four tax years, as well as the current one. Currently we are in the 2023/24 tax year which means that expenses since 6 April 2019 can be claimed (note that when the tax year changes on 6 April 2024 you can claim for expenses from 6 April 2020). The total fees claimed back can be very significant, especially if you factor in examination fees.
Do I need receipts?
You don’t need receipts to claim as such if you know the amounts you paid, but HMRC may ask you for them if they query your claim.
How can doctors make claims to deduct their employment expenses against their employment income?
There are three main ways someone can do this themselves:
- You can, in theory, phone HMRC. But they don’t generally like this and it can involve a lot of waiting on the phone for the doctor.
- The main way used to be claiming by post on a form called P87, which you can find online and print off.
The quickest and easiest way is to claim online via something called the Personal Tax Account. Every taxpayer can set one of these up.
Here at Medics’ Money, we urge everyone to set up a Personal Tax Account, which also has a lot of useful information contained within it. For instance, it tells you what HMRC thinks your estimated income tax bill is and it tells you your tax code which is something we will cover in a future post.
For help with the Personal Tax Account, you can go to our website at https://www.medicsmoney.co.uk, and look for the link at the top that says “download guide”.
Once you have set up the Personal Tax Account, you can use the Medics’ Money free step-by-step guide to help you make your claim. It’s the quickest and easiest way to do this, and it’s completely free.
Are there any exceptions as to who can use the Personal Tax Account?
- Anyone who already has to complete a tax return should make their claim on their tax return rather than via the Personal Tax Account.
- Also, if you incur more than £2,500 of allowable expenses in any tax year, you will have to complete a tax return for that tax year. So if I claim for four tax years and in one of those I incur more than £2,500 of expenses I can use the Personal Tax Account for three years and complete a tax return for the tax year where the expenses exceed £2,500.
With this blog post, we are hoping to provide people with more knowledge and empower doctors to make a claim and save some money by lowering their tax bills. For the majority of doctors you don’t need an accountant to help with this.
Let’s give a quick summary of the key points, for those doctors who are running a little short on time:
- The tax year runs from the 6th of April of any given year, to the 5th of April of the following year.
- The current Personal Allowance (tax-free amount) is £12,570.
- Claiming back tax on professional fees and subscriptions is the focal point of this article.
- HMRC has a list of recognised organisations, found above.
- You can make tax claims for the current tax year and up to four years previously.
- Exams and resits can now be claimed against your employment income too.
- The easiest way to make a claim with your Personal Tax Account. You can download our free guide from the Medics’ Money website to help set this up.
- You can always engage with a professional accountant, which Medics’ Money can also help with, but a lot of doctors will not need one to claim a tax rebate.
Personal Tax Accounts:
Scotland Tax Rates:
Download our guide!
How much money could you get?
Download your guide here: