How Doctors Can Beat the 60% Tax Trap & Maximise Pensions

Doctors, healthcare professionals, a lot of times we find that we are on the back foot when it comes to things like managing our finances, taxes, investment. I'm not in the NHS pension, obviously, you lucky guys in the NHS pension, if you've got a salary job, you're in the NHS pension. Now, for some of you, you didn't even realize there was a 60% tax trap. For every 2 pounds above 100k, you lose 1 pound out of your tax allowance. You can imagine if you are paying more tax than you have to pay, it's hard for you to get ahead because basically, while you're paying more tax, use the extra money. I've got to invest while you pay taxes. Right? So thank you, thank you everyone for joining. We're recording now, so that should be. The recorded video should be available for you. First thing in the quiz is what the maximum amount you can contribute to your ISA in a taxi. Can anyone just tell me or type it in the chat box? What's the maximum amount you can put in your ISA? 20k to 20k. Easy question, easy question. All right, easy. All right, you guys, you know it too well. And what's the maximum amount you can put in your pension in a year? I mean, including your NNHS pension, your SIP. This is the second question. Some people are too fast. And I noticed some of the people in the Mastermind who are reading the Mastermind answer these questions too. Okay, I see 40k, Chidima, 60k, Adana Shago said 20k. Most who said 60 kilima said. All right, I applaud everyone who has given it a go. I've got the third question just to help me. Someone said, no idea. That's the best answer. All right. Okay. Now the third question on the Mentiq, which you can see was when you think about investing in one word, what do you feel like? What? What sort of feeling do you experience? I just want one word. Pipe it in the chatbot for me. Uncertainty. Thank you. Someone said excitement. Yeah, I, I'm, I like seeing that excitement. And I'm going to ask you a question. She. About our excitement. Ali says confused. Lloyd says concerned. She doesn't say great. Excitement, uncertainty, shall. I said 50. 50. And so I said money, money, money. Okay, lovely. All right, I'm just going to ask one last question before we delve in. When you think about taxes, I posted something today. In our private group, in our community, HMROC has hired 5,000. They're thinking of hiring 5,000 new staff to help collect taxes. And I was thinking okay. These taxes tend to squeeze people who are professionals, who you can easily tax because you can see how their money goes. I remember going to my baba today. I had to pay him cash. Obviously I don't know how much tax he pays. It's not my problem whether he pays tax or not. In fact, I tip in 25%. But. But HMRC is hard to track people like that and billionaires. But it's easy to track people like us, doctors, lawyers, accountants in the middle. So let me see your words. When you think about tax, you think about Alush putting an emoji. Okay, Said tax, bad limitation and the same putting more emojis. Why? Where were these emojis when I was talking about investment? 31.1 and then I said, not again. Alice says, shylock. She said, I know some frustration. So I said punishing. Yeah. And care said helping the masses. Okay. Yeah, of course, crippling, very much high. I think, I think I can say that in the UK the taxes can be quite high, especially for doctors. So thank you everyone for your participation. I think we are off to a banging start. So the first place I want to start is basically why are we having this session? We are doctors, healthcare professionals, medics. You probably saw some of my write ups on LinkedIn or you saw my YouTube video or maybe someone even just sent this to you. So and if somehow you stumbled into this session and you don't know me, I just want to make sure that we all on the same page. I'm Dr. Andy Grim. I'm the founder of moneywisedoctor.com it's a platform that has already helped thousands of healthcare professionals to make smarter financial decisions. So I used to be a salary GPA, former salary GP. I left the salary GP job two years ago. That was 2022 actually December, when I got to a level of financial flexibility and freedom that allowed me that opportunity not to have to work for anyone at all. Yeah. So I still hold my, my license as a doctor, but money wise doctor seems to be taking most of my time these days. Last year we published I think about 60 blogs. We created 300 videos, spoken about 14, 15 events, lots of webinars and all that kind of stuff. And of course we now have a mastermind which is like 20 doctors who I'm working with one on one for 12 months. And I think we did an investment masterclass last year that was four weeks, day one was five and a half hours. And I see she here who said whenever she thinks of investment she gets excited. She was part of that Mastermind master class on investing. So I'm not surprised it's no longer like a mystery for her. Right. So that's, that's it. But I get a lot of questions in my DMs. Like I saw somebody, Dr. Wolves, who said she found me on LinkedIn. Thank you. I get a lot of questions on my LinkedIn, in my Instagram places, but I'm not able to answer all of them at once. That is part of why I put on this session, so that we can get people to ask real questions, not just what you read on a blog. Sometimes you've got nuanced questions, issues you want to address. And again, some of you were also asking questions about the Mastermind, which is a 12 month program. We also answer that obviously for people who are interested. Right. So at this point I want to just get into the first. Doctors, healthcare professionals. A lot of times we find that we are on the back foot when it comes to things like managing our finances, taxes, investment. You can imagine if you're paying double the tax I'm paying, it's hard for you to get ahead. If you're paying more tax than you have to pay, it's hard for you to get ahead. Because basically while you're paying more tax, I can use the excess extra money I've got to invest while you pay taxes. Now, for some of you, you didn't even realize there was a 60% tax trap. You were just hearing about it for the first time when you read one of my articles or you've heard it from somewhere.

Here's how to avoid the 60% tax trap. As a doctor or healthcare professional, this could actually literally save you thousands of pounds because you could be unknowingly paying an effective tax rate of 60%. Now, many doctors think that most tax they pay is 45%, but that's not right. You may have fallen into the 60% tax trap due to a sneaky rule about personal tax allowances. Now let me tell you how it works. Everyone, especially in uk, Northern Ireland, England and Wales, has a personal tax free allowance of 12,570. Once you exceed 100k in income, you start to lose that tax allowance. And by the time you hit 125k, it's almost like you are punished with this sneaky 60% tax, which is because your effective tax rate becomes 60%, you've lost all your tax allowance. Now, I've done a guide that will tell you step by step how this works. A checklist to check if you're falling into it and how to avoid it. Thousands of medics have already used this guide to save thousands of pounds and secure their financial future. Don't miss out. Download the guide with the link in the description and I hope it helps. Let's jump right back to the episode.

So the 60 tax trap happens. When or if you find yourself you in above 100k, between 100k and 125k, you. You start to lose your allowance. So there's an allowance everyone gets, it's called the personal tax allowance and it's 12, 570 pounds annually. And when I say annually, I don't mean January to February, I mean like the taxi, which runs from April 6 to April 5. Now, everyone gets that tax allowance, meaning that if you make any amount up to 12, 570-you don't pay any tax on it. Right? I think that's clear to all of us. Now. What happens is that once you cross 100k, for every 2 pounds above 100k, you lose 1 pound out of the 60 out of, out of your, your 12, 570. So for every extra 2 pounds you make above 100k, you just keep losing. You just keep losing. And for those of you who want to play around with the figures, you can go to nhsssalarycalculator.com I think you do post it in the chat. We can also send it at the end of the event. That's just a calculator I built. We built it online to answer the questions because we had a lot of people asking, how do I know if I've hit the 60 tax job? How do I know at what point I can actually put more in my pension? How do I know how much more I can earn before I get there? So we build our calculator. Once you hit that number automatically, it will flash up and tell you you are beginning to lose your tax allowance. All right? But today is not about the NHS salary calculator, it's just to deal with specific issues. Now, if you earn above 100k, for every 2 pounds above 100k, you lose 1 pound out of your tax allowance. And by the time you hit 125,000 pounds, or if you want to be really specific, is 125, 140 pounds. Once you hit that amount, whether it's come from your salary or if you've come from rental property, or maybe you did some medical surveys, like some of us that follow my emails, you do medical surveys and you get paid. Once you hit that amount, then by that point you've lost the entire tax free allowance of 12, 5, 7 0. And at that point, what's going to happen? You just start paying 60 on anything above that amount. So it's. Your marginal tax rate is just unbelievable. A lot of doctors don't know about it, you've never heard about it. Just wonder why you're earning so much. But at the end of the day there's not a lot going home. Now, just to make sure we're all on the same page before, let's say when was the first time you heard about the 60 tax rate? If you can remember, if you tell me in the chat, did you just hear about it now or did you hear about it before or maybe heard about, you didn't know what to do about it. Can you tell me when you heard about it? Okay, so Cat says 2 years. 2 years ago last year, roughly. Okay, right. So sorry, I heard about it from my post. Okay, that's good. Was that, was that recently on LinkedIn or. Okay, on LinkedIn. Okay. A few months ago last year. All right, so you guys are all clued in. There's no one. I've just heard about it for the first time now. Oh yeah, me, Yeah. I said didn't know and got trapped. Yeah, I think I got a Message from a Dr. Scott on and she said she, she touched her chat GPT about the stuff and then charge you to send her my video. And she said, dude, you're on chat GPT is not recommending your videos. Right. Irrespective of when you heard about it. What's important is what can you do about it? And one of the biggest ways to deal with the 60% tax trap we've already talked about. There are many options, but the biggest option is through pension, say because everyone is allowed the £60,000 pension. I know you guys gave the answers. Yeah. The correct answer is £60,000 pension allowance. So those of you that got it, you can put your hands together for yourself. You're allowed every year in the UK. Every tax year you're allowed 60, 000 pounds. That's the maximum amount you can put in your pension. I know, I know, I know. If you're an ST one, you're thinking, well, I don't have that amount of money. Yeah, but it's good you know about it before you hit that amount. And I can see consultants and GPs, I can see some of you that already know that I've been in sessions, I can see you nodding your head because probably you already Affected. I think someone make that I mentioned here that she was affected. Excellent. Yeah. Sorry, ask, is that the NHS pension, that includes everything? Your NHS pension, if you've got a private pension, if you've got a salary sacrifice anything that you put into your pension, 60, 000 is the maximum you can put in a year. There are two problems here. Some people don't use all the allowance and then there are people who use less than the allowance and they, I mean, if you don't have the extra cash, yeah, that's fine. But some people have, but they don't know that they can actually use up the allowance. So one way to go about it could be contribute as much as you can to your NHS pension. If you're in the NHS pension. I'm not in the NHS pension, obviously, you lucky guys in the NHS pension, if you've got a salary job, you're in the NHS pension. So you can actually ring up your NHS pension administrator to ask them, oh, I want to add some more to my pension. And a lot of times they will tell you the amount you can put in not very much, especially if you're a consultant, most times you're already contributing as much. If you read my, my guide on the 60% tax trap, I put in the levels you can contribute for your pension. Again, I put in the exact number in my guide. So again, that doesn't bring you to that 60k. So now if you don't use up your 60k, that's fine, but that's one strategy. If you decide to put in as much as you can into that, that will automatically reduce the amount that is taxable because your pension is counted before your tax. Now, even if you end up not using up your whole nhs, if you don't use your whole allowance because the NHS pension was not enough to get there, you can still go ahead and use a private pension. So that's what the SIP private pension is. There are many options. There's self invested personal pension, which I prefer because you can manage it by yourself. You don't have to pay any crazy fees if you use the right platforms that charge little or no fees. And again there's sars, which is a bit more difficult to manage. About your private pension, you can decide to use it to get up to that amount. Again, for people who run limited companies like ADAI is here, I know a few other people. If you run a limited company for your local, it can actually pretty much pay directly from your personal, from your local account, you pay into your limited company pension or alternatively can pay into your personal account and pay into your pension is called Director's Pension. Director's Pension. So the director's pension. You are allowed as a director of a company to have a pension. So if you don't have the NHS pension, you can go ahead and pay into your personal pension. Your seat okay, so I'm going to pause here and look at our parking lot.

Well, I hope you found that helpful.

And more importantly, I hope it helped.

You to see investing in a new light. This is just a small section of what we cover in the full masterclass. If you like me to drop more of these clips, just let me know in the comments. Comment, invest and share this video as well with friends who may need to hear this. And if you are ready to stop winging it and guessing, guesswork is not good for investing. If you want to learn how to become a confident investor. To learn how to invest properly, check out our Investing Readiness Scorecard with the links in the description.

It will help you determine whether you're.

Really ready to start investing and what you need to do before you even start thinking about investing to reduce the chances of you losing money. And until then, see you soon.

Bye bye.