Dr Ndubuisi Egwim explains how UK doctors earning over £100,000 lose their personal allowance at 60p per pound earned, not the standard 40p tax rate. The trap hits NHS clinicians with side income or locum work hardest. Pension contributions and salary sacrifice can claw back the allowance.
£12,570
£100,000
£125,140
Up to 67.5%
£60,000
If you earn around 100,000 and still feel financially behind for your age, it's not your fault. You may have fallen into one of these hidden tax traps. And this video could save you tens of thousands of pounds. And with the latest tax changes, this matters more than ever, especially for Doctors in the UK. Hello, I'm Dr. Ande Egwim. I'm a former salaried NHS GP, Amazon best selling author of the Money Wise Doctor and I've been investing tax efficiently for over 21 years now. Understanding this exact tax trap was one of the reasons I was able to reach financial independence in my 30s and leave my salaried role three years ago. Now, since then, I've taught these same things to thousands of doctors, dentists and healthcare professionals through masterclasses, conferences and even in one to one sessions. And I see the same mistakes again and again repeating itself. Here's the uncomfortable truth and is everywhere. The biggest risk to your finances is not a sudden tax rise. It's quietly overpaying taxes because no one ever explained how the system actually works. Let me show you what I mean with some clear examples. Now, one of this is the 60% tax trap is one of the most expensive and misunderstood tax traps in the uk. It starts with something that sounds a bit generous. Really? In the uk everyone gets what we call a personal allowance. But so what that means is currently 12,570, which is tax free. Any income below that amount is not taxed. You don't have to pay any tax. But once your adjusted net income goes above 100k, something nasty starts to happen. Now, for every £2 you earn above 100k, you lose £1 of that tax free allowance. Now, this creates an effective marginal tax rate of 60%. Not nice. Not because HMRC announces a new tax ban. They don't even tell you, but because they quietly take back what you thought, what was yours. Now, if you look at, let me give you example, this 20 pound note, if you earn in this range, of course you earn more than that. It feels like you're keeping back eight pounds. Now let that sink in. By the time your adjusted net income reaches £125,140, your entire personal allowance is gone. And in places like Scotland, the effective rate can even be worse, reaching up to 67.5%. Now, why does this hit NHS professionals like doctors, dentists and other healthcare professionals hard? It disproportionately hits medics because of a few factors. One, pay rises can be irregular. You might do extra sessions locums which quietly push your income above the threshold without you knowing locum stacks on top of your paye income. If you're not using a limited company. Side hustles can also count 12 this adjusted net income even if you're a landlord taking your rent in medical and dental training. No one ever mentions this, but doctors and dentists get cut out. In fact, recently I spoke to a consultant in the Moneywise doctor community. She took on extra sessions and earned about extra 20k more that year, assuming it will help to ease the cost of living pressure. But when she ran the numbers properly after our tax hack X ray workshop, she saw that she was keeping less than half of the additional money she made. So she wasn't reckless, she wasn't greedy, she just did. You didn't know. And you know you don't know what you don't know. That's the danger here. And HMRC doesn't correct you, they just go ahead and collect the tax. His Majesty's Revenue. Now, some people hear this and say, well, I'll just end less. Is that really the right approach? And look, if your goal is to do fewer sessions, you want to have more time, you want to protect your energy, that can be a valid life choice. But if you want to earn more and if you're happy to work a little bit more, the solution is not to end less. The solution is to earn more, but in a tax efficient way. You want to do it in a tax efficient manner. Now this is where strategy beats effort. And just hustling.
You can't invest confidently if you are one emergency away from financial disaster. You need to build your financial foundations first. I've read over 250 books on personal finance and business. Not one of them explains specific big issues that affect medics like NHS pensions, financial anxiety, investing, student loans and much more. Hi, I'm Dr. Andy Egwim. I'm the founder of moneywisedoctor.com for over 21 years I've been investing and studying personal finance. In fact, three years ago I left my salaried NHS JP job after achieving financial independence. Since then, over 1,200 medics have joined our Tax Efficient Investing Master classes that are totally free. And much more than that. 10,000 doctors of the healthcare professionals have used my content to make smarter financial decisions and avoid costly mistakes. That's why I wrote the Money Wise Doctor. The Money Wise Doctor is a step by step guide. The book to simplify the path from confusion to clarity for medics and to help you make smarter financial decisions and avoid costly mistakes that can affect your future. We've already helped thousands of doctors learn how to save smarter, invest tax efficiently and finally find feel in control in charge of their financial future. Now, if you're ready to gain clarity, confidence and control with your money, the.
Money Wise Doctor book is now available. Click on the link below to order your copy now and start your journey to financial freedom.
So what actually helps for the 60% tax trap? Now here are some of the most powerful ways people legally manage the 60% tax trap and I've used them myself. Number one, pension contributions. You can increase your contributions to either the NHS pension or your personal pension like a sip. Now this reduces your adjusted net income, but you must keep an eye on the 60,000 pounds annual allowance for this tax year so that you don't exceed it to avoid penalties. Two, Salary sacrifice. I mean where is available especially is powerful for employed professionals. You can use that to reduce your taxable income before tax and national insurance are even calculated. And number three, of course, gift aid from charitable donations. So if you make charitable donations via gift aid, it can actually help you to reduce your adjusted net income. It's overlooked by surprisingly powerful. Look, if you are finding this video useful so far, I would like YouTube to send you more insightful content like this. Take a second to tap on the subscribe button. Let's take two seconds and do it together. Okay? Up. Good. All done. Of course if you change your mind, you can always unsubscribe. So you know, might as well just go ahead and subscribe now. Excellent. Now understanding adjusted net income is really quite key to this 60% tax trap. It's a real key. It's not your headline salary, it's not your take home pay. Basically, adjusted net income determines your tax rate, your personal allowance and whether you get child care benefits. And if you're unsure whether this trap hits you at all, I go in depth into this in chapter five of my best selling book, the Money Wise Doctor because misunderstanding this single concept can quietly drain six figures over a career. Now why does this really, really matter especially for you? Now there are frozen tax thresholds, there's ongoing fiscal drag, and there's higher effective tax rates for professionals. More people are drifting into this tax trap without even noticing. You often don't get a warning letter. You just feel like you are running harder on the spot, you're working harder for no reward, no progress, you're not moving forward. So let me ask you, have you ever earned more but felt worse financially? Felt like your take home had dropped. Now, if you're unsure whether you are caught in the 60% tax trap, check the link in the description. I've shared a free tax efficiency scorecard that will help you to spot it quickly. There's no jargon in it, there's no guesswork, and it's totally free. And then tell me in the comments, did you already know about the 60% tax trap? How did you find out? Or is this the first time you've seen it and seen how it works now? If this helped, you share it with a colleague who is doing extra sessions and wondering why it doesn't feel worth it, well, I'll see you in the next video. Alright then. Bye bye.
The Moneywise doctor Book is now available. Click on the link below to order your copy now and start your journey to financial freedom.
