Master UK ISA, Pension & Tax Rules for Doctors

You would end up with less money that you've put in in the lifetime isa. If you have a lifetime isa, if you leave the uk, you can't contribute more money to the lifetime isa, but it's still yours. Technically I can assess it at 60 years. Tax efficiency will reduce the need for you to take more risk with your investment. Imagine that I put in like 20k into my seat and let's say I'm a higher rate taxpayer and I immediately get 40% tax relief, meaning the government has 20% of the money I've put in and, and I claim 20% through self assessment. I'm already 40% ahead before I've taken any risk. Imagine you put money your lifetime ISA stock and shares and you get 25% already credited as £1,000. You already ahead before you started investing.

Thank you Andy. Thank you for the great work you're doing. I just want to know, say one does a lifetime Iceland have to leave the uk, is there anything one can do about it? Can that be converted to lifetime stock and shares? What, what are the options? Say knocking on maybe like a mortgage first time and all those things and you just want to do it lifetime and then maybe jackpot 2.0. Is there anything one can do in that sense?

If you've got a lifetime ISA but you decide to leave the UK now this rule applies to the ISAs if you're not tax resident because we've got a lot of doctors now so you know I just concluded four weeks investment academy. We had a doctor join from Manitoba and I, I know like he got up by 5:30, he joined, he's very serious. He's actually one of the best students in the class now he's is found the lessons, he's applying them in Canada and the other one is based in Ontario and one of the challenges they had to deal with was what happens to my isa? Okay, if you're no longer tax resident in the uk, you can't contribute to your isa, but your funds and your eyes are still your funds. For instance, one of the doctors is operating in a system where he's resident in Canada and the wife is tax resident in the UK so they've got property in the UK. He's got his wife's ISA, his children's ISA and he invests through those ISAs and then in Canada I want one thing he said to me is because he's not, he was very financially literate. After passing through the training, he's in our six months coaching that he was being approached by everyone. Oh, I want to sell you investment insurance and everything. It turns out that is a very popular thing in Canada. Doctors have a bit of money, so insurance investment advisors seem to be rushing them and a lot of them are in need to get massive fees. A lot of them are not in need to actually make you money. You end up with less money. Some of them, that's a whole different discussion altogether. So what you could do is if you have a lifetime isa, if you leave the uk, you can contribute more money to the lifetime isa, but it's still yours. Technically I can assess it as 60 years. Okay. If you decide need the money straight away, you can close lifetime isa, but it's going to cost you money. You're going to lose government contribution. The 25% they've been adding to the Lifetime ISA and some platforms will also charge a fee. You would end up with less money that you've put in in the lifetime isa. The way I look at it, even if you leave the uk, you think, well, it's just an extra. An extra money that I can assess later in life at 60 years is still mine. And some people say 60 is a long time to come. And I say, well, are you not planning to be around us? 60 life expectancy 79. So where I feel there's a disadvantage is if the lifetime ISI is in cash, if the life of our size is exposed to inflation, it's not going to do that well, but if the lifetime ISI is invested in this market, then it's just growing just like any other investment. The same with other ISAs as well.

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 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.

Did that help? Did that answer your question?

Yes, that was very helpful. So can we move from the cash ISA to the stock exchange isa?

No, there are different ports. Right, okay. If you want to move from cash ISA to stock and shares isa.

No, the lifetime. The lifetime.

Oh, yeah, of course, of course. Absolutely. You can move from lifetime. So I didn't understand your question. If you want to move from Liza cash. You see, there are many technologies, so we're talking about the same thing. Lifetime isa. Lisa?

Yeah.

There's lifetime Isaac cash and there's lifetime ISA stock and shares. So your question is lifetime ISA cash to lifetime stocker shares. Yeah, you can do that. And I've done that. And many of the people in investment academy also did.

Okay.

You cannot go the other direction. Yeah.

But in that case, do you still keep your £1,000 bonus?

Absolutely. I get my £1,000 bonus and I'm enjoying it and I can invest that as well.

That sounds good.

It's amazing. Guys, this is it. This is the business. We just scratched the surface here. Tax efficiency will reduce the need for you to take more risk with your investment. Imagine that I put in like 20k into my sip and let's say I'm a higher rate taxpayer and I immediately get 40% tax relief, meaning the government has 20% of the money I've put in and I claim 20% through self assessment. I'm already 40% ahead before I've taken any risk. Imagine you put money, your lifetime ISR stock and shares and you get 25% already credited as £1,000. You put in 4,000, you get £1,000. You're already ahead before you started investing. Okay, but a note to understand, after 50 years, you can't put in more money in your lifetime Isaac. Now this is for those of you who have hung around to this point. After 50 years, you can put in more money to your lifetime ISA, but you then have to wait till 60 years. That's why it makes no sense to me from mathematical point of view to have my lifetime ISA in cash. I rather have it in stock and shares. Because if at 50, I don't put any more money in the lifetime Isaac. Boys in stock and shares, guess what it's doing is in the Market, it's compounding, it's working. But if it's in cash, then it has to sit around, wait for inflation to deal with it, wait another 10 years. 10 years that I'm not getting any government relief because I'm not putting any money until 60 years. Does that help to drive the point home for you?

Yes, it does, absolutely. Thank you so much.

Excellent.

I just have a query about the sip, actually, which you're going to talk about. I just want to know how you calculate the allowance that is left over from your TRs. What are the major things you have to look out for to avoid overshooting it?

Oh, excellent, excellent question. If I didn't know already, I would have guessed that you were a consultant, because this is kind of like consultant and senior registrar.

I'm an associate specialist.

Yeah, not such a specialist. So I put it in the same class. I'll say senior doctor. Right. Okay. So basically the first thing is to understand what your annual allowance is. Your annual allowance has already determined. Is £60,000, right? Yes, £60,000. Good. Now the next thing after your annual allowance will be how much has your employer and yourself contributed to the pension port? How to get that? You already know how to get that. It's from your, your, your TRs, your TERs, that's total TRs, total reward statement.

Yes.

What that will give you, you want to get what we call pension growth. So like define benefit pension. And for the rest of you who are not there, I understand if this might be a bit confusing. For defined benefit pension is not as simple as defined contribution, because defined contribution pension, like bankers pension or general regular index industry pensions are not as good as defined benefits. What you just do is your employer contributes, let's say, let's say 20% and then you contribute 20% and then let's say your salary was 100,000. So 20% of 100,000 is 20K. Right. 20% of 100,000 from yourself is 20K. 20% from your employer is 20K. So you now know that you've put in 40K, so your allowance will be 60,000 minus 40,000. That's the extra you can put in your SIP. That bit is clear. But that's a defined contribution for the nhs. Pension is a little bit different. They look at what we call pension grids, pension growth, pen. Pension growth is basically looking at how much has your pension grown. So how much the difference between the beginning of the tax year and the end of tax year, what has changed in your pension and usually how it's Worked out to be B minus A, where B is your closing value, the closing value of your pension. So let's say you are looking at 2025, 2024 to 2025. So at the end of the tax year, what, how much is your pension port? Now that's the closing value and they multiply it by 16. So 16 is the number for defined benefit. So. So they're going to take that closing value multiplied by 16 and then minus the opening value, what it was at the beginning of the taxi, multiplied. So Basically think of two brackets. The first bracket is B is the closing value multiplied by 16 minus the other bracket. The other bracket is A, which will now be the opening value multiplied by 16 + plus CPI. CPI is consumer pricing as inflation. So they are wanting to calculate how much has your pension grown. So once you work that out, you can calculate your pension growth. If your pension growth is £40,000, then you have an extra £20,000 that you can put in your sip. Of course you have to factor in tax relief because if you are going to get 20% tax relief or 40% tax relief, you have to deduct it from the money you are putting into the SIP so that you don't exceed it. The HMS is quite US when he exited, there's a penalty and I've seen that happen to a lot of senior doctors and I say I'd rather get to 57k or 58k than trying to get the 60k and then exceed it.

Yeah.

So I hope that helped.

This closing value and opening value, is it a bit complicated to work out from the trs, you have to get your statement from nhbsa.

Is it?

You can get the statement from NHBSA or you can get it from your. Is that. Was that. I keep forgetting electronic records.

Yes.

So yeah, because I work through this step with many consultants. So the esr, you can walk through it to download your total reward statement. Then you see your pension contributions, you see what was your pension benefits. Under the pension benefits you can see the closing, you can see what your pension was, the pension benefit for that taxi and then get that from a previous year so that I can then have the opening value and the closing value or the pension period they are looking at. But don't Forget you have 60,000 times 3. If you've not used up the previous taxes, you have more allowance that you can actually go back to. It's not the job of HMRC to help you to be tax efficient. Their job to collect is Her Majesty's Revenue you know, their basic, their basic job is to collect revenue. So, no, HMRC is not going to tell you, but they will tell you if you have gone over your allowance.

Okay.

They will tell you if you have not paid enough tax. I've logged into my HMRC account. I realized, oh, I have £4,000 tax I could actually get back. And no one has written to me, so I just apply and pull it out immediately. Yeah. So it's really important to understand this whole tax business that helps your investing journey to be a bit simpler.

Something special is coming. Stay tuned.