The ABCDE Tax X-Ray — How UK Doctors Can Stop Leaking Tax & Keep More of What They Earn

One big factor when it comes to financial well-being is tax efficiency. You can be like a superstar investor, or you're very good in what you do. You may even have private practice, you're making a lot of money, but if you're leaking from— what I'll say, leaking from the back passage, so you're leaking taxes, then it's really, really hard to take things to the next level. And doctors, dentists, healthcare professionals, we're kind of like in a position where it's almost like a chokehold, um, because of the way our incomes come, and sometimes just because we don't know. If you don't know, Unfortunately, it's hard to do something about it. There are lots of available legit, legitimate tax efficiency moves you could do. But if you're not even aware of it, then you wouldn't even think about doing it. And most times we don't know what we don't know. The last session we had. the GP partner went back to their accountant and said, yeah, why haven't you told me about this? I can claim this and that. And the partner said, yeah, yeah, that's right. And then he came, came back again with another checklist because when we finish now, we're going to keep on talking in the group for the next 2 weeks. And then someone else said, yeah, you know, I actually contributed to my SIP and I was able to claim it. And he went back to the accountant and the accountant said, yeah, of course you can do that. Then he came back and had obviously buying a limited company, buying a car through a limited company, and a few other things. And they're kind of saying, oh yeah, of course you can do that. Then he was— he said something like, so why haven't you told me for this last 7 years? Okay, so that's what usually happens from this session. So, but that's fine. The most important thing that you find out and you do something about it. In some cases, we've had sessions where, okay, this was a masterclass, an investing masterclass, where a GP found out I was going to be liable for £24,000 in capital gains tax that could have been avoided because he was using the wrong account for investing. But we don't want to do it from a point where it's fragmented. That's why we're using a system, the ABCDE checklist. Okay. What's important here, when you hit £100K, like we've already mentioned, you can experience a different treatment than someone else. When you hit £60K, you experience a different treatment. So for someone who is at £60,000 of adjusted net income, you lose your child benefit. So you can lose your child benefit. Usually you could get like tax-free child benefit. You start losing it from £60,000 so that by the time you hit £80,000 in adjusted net income, you've lost the entire child benefit. You have to pay back. So it's a high-income child benefit charge. And it's one of those ridiculous scenarios. Painted in my book that if my next-door neighbor, lovely couple, if they were earning £59,000 apiece, so as a family they had a joint income of £118,000 adjusted net income now. And if I was earning £62,000 but my wife was earning £0, or my wife was earning £62,000 and I was earning £0 because I'm a stay-at-home dad, Um, what we're going to end up with will be a very funny situation where the law is an ass. It's very silly because why? Because me, a family income of £62K, we end up as high income, so we have to pay back some of those child benefits. Meanwhile, my neighbor who earns £118K doesn't have to pay anything. So that's £60K. It doesn't make any sense. Sometimes it's easier to just understand how the tax system works and just take advantage of it. in a legal way. Okay, I've had a one-to-one session today with a consultant, I think she's a gastroenterologist, where she's just finding that, okay, her adjusted net income is around £15,000, so £115,000, and she was about to put £15,000 into her ISA and she realizes, hang on a minute, instead of me to put £15,000 into my ISA, as my financial advisor, I And the random guy on YouTube said I should do, put in an ISA. She otherwise, or did she, on the other hand, what she did was to put it in her SIPP. So a SIPP is a Self-Invested Personal Pension. So in that case, she now uses her pension as her primary investing, you know, account. So for a high rate taxpayer, that does 2 things for her. She takes the £15K, puts it into her SIPP. That brings down her adjusted net income down to £100K. Automatically, she gets back all her personal allowance, £12,570. That's back. So she's no longer paying 60% on a portion of her income. That's number one. Now, when she puts in the same £15,000 into her pension, HMRC does something we call grossing up, G-R-O-S-S. So basically, they will refund her the tax that she's paid on that money because she's putting the money from money that's already been taxed. So basically, at the end of the day, she automatically will get 25% net. That's 20% of the money. So what that means is that for the £15K she's put into her SIP, she's going to get another £3,000 on top of it. That's 20%— sorry, 25%, not £3,000 this time. Basically 25% of the £15K, and then she goes ahead to get another 25% through self-assessment. If we use an easier number Which is quick to calculate. If you use ₦20,000, rather than maxing out her ISA with ₦20,000, she puts it in her pension. Now, when that ₦20,000 hits her personal pension, remember, it's an investing account. Even before she has invested a penny, before she has taken any risk at all with investing, she's going to get back 50% on that fund, which is amazing. I mean, Warren Buffett, who is one of the guys that influenced my investing journey, he's compounded 26% for many years and he's like a legend. So if you're getting 50% back just by being tax efficient, that's not too bad. And even if you then invest and make another 10%, I don't know how much you make when you invest, obviously depends on your investing approach and your style and skill. But let's say she's just done this 20K in her SIP, she gets another 10K back. Of course, 5,000 will happen automatically on the platform, she doesn't have to do anything to get it. The other 5,000 come through self-assessment. So by doing that, she's killed 3 birds. And again, I usually apologize if you love birds. I haven't found a better saying, but she's killed 3 birds with one stone. One, she's gotten back her entire adjusted net income. That's massive because basically she's dropped her tax level again from 60% down to around 40%. Secondly, she's contributed money to her SIP and gotten a refund for it. She's gotten a tax refund for it, and then she can still invest that money. So that's really one way to not be leaking money in that direction.

I'm running the Taxation Workshop this weekend. The link is in the description and pinned comments. Now, this is a structured workshop session, not a free webinar. We'll go through the ABCDE taxation framework step by step, and you understand how to apply it to your own situation. You leave with clarity on what you need to do immediately to plug any tax leaks. Look, there are just 30 places because we want to keep it very effective. As usual, and it is just for doctors. Look, if you want to join, check the link in the description and pinned comment, or just comment X-ray, and my team will send you the details. As usual, once we hit 30, we stop accepting any new registrations. And look, not everyone is going to get in. So if you don't manage to get a spot for this one, or you're not ready for the workshop yet, I've also created a free ABCDE tax. X-ray scorecard that you can take totally for free. It takes 3 to 5 minutes and helps you identify which areas of your tax planning may deserve a closer look.

Maybe one area where you're leaking.

I'll put that below as well. And of course, if this helps you at all, share it with one doctor, at least one doctor who feels like they're working harder but not getting ahead because they're leaking taxes. Because sometimes the biggest financial breakthrough is not anymore, it's Stopping the leak. I'm Dr. Andy Eguim from MoneywiseDoctor.com. Thank you for watching. I'll see you at the workshop or in the next video.

The seven-year rule: if you give out things outside your estate and die within seven years, HMRC sort of like brings those things back to your estate. That's the only way I can explain it simply, and I'll give you a practical example. Good friend of mine, GP, lovely GP. We're all down in Cornwall. And has, um, a fant— you know, had this— I don't know, I never got any of this, but has a grandfather who left the property for her in London and, um, is still alive basically, but decided to gift him the— gift her the property. I've been planning to do it for years, but now hit 90 years of age and decided, oh yeah, I'm going to give this property now. Happy at first, then read a draft of manuscript of my book and like Holy shit, what am I gonna do? Because she realized that if the grandfather dies within 7 years, then that house is now going to be counted as part of the grandfather's estate, and she has to pay tax on that benefit. So if she's gotten a house of £1 million, she's owing 40% of £1 million, you know. So basically, but if the grandfather lives on for the next 7 years There will be no tax. It's called PET, potentially exempt tax. Okay, now if grandfather— there's a whole table in my book, it is not as complicated as it sounds. If grandfather hands over the property, dies the next year, okay, she has to pay instead of 40% is 32%. If she— if he lives 2 years, instead of 32% is 24%, and so on. So if it's 3 years, 16%. So by the time they get to the 70s, down to zero. Okay, now HMRC allows you to give out something from your estate and it's not considered part of your inheritance tax even if the person passes on. Currently it's £3,000 gift you can give. So that's where most people confuse and think, oh, can that reduce my adjusted net income? Not in a significant way. So you can make gift to your child in the UK, you can release tax relief primarily in form of inheritance tax exemptions. So there's no strict limit on the amount you can give, but there, there's a whole limit— there's a limit on how much you can be gifted tax-free in any given tax year. If you don't use a limited company and you're wondering, they're getting all this benefit, can I use a limited company? So you just need to fall outside IRO 35. You need to meet the criteria, and in my book in chapter 5, I listed the criteria, but I'm just going to explain it to you in a nutshell. It's basically the government looking at you and thinking, hmm, is Rita a contractor? Is she really a contractor? Is she just a salaried person? Is she an employee disguising? And I like to use the— this plumber analogy. I've had to call out the plumber sometimes. My property in Cornwall or in Devon, if the plumber comes— and the plumbers are like what they are worth in gold down here, they are not cheap, okay? And the plumber comes and, um, For instance, the plumber I call lives in a very nice area of Truro. He shows up. If he doesn't show up, I don't pay him. The last time I called him, um, then my tenant sent me a message, so he doesn't need to come again, it's all sorted, we don't have to pay him. If he's unwell, I'm going to say, oh, I'm really sorry you're unwell, but I mean, I'm not going to send him a cheque to say, oh, you didn't show up, but I'm gonna pay anyway. But your job, if you don't show up, I get sick pay. If you don't show up, you're on the rota, I can't send anyone to replace you. You can't really say you're a contractor, right? Another thing that the government looks at, the HMS looks at, is mutuality of obligation. So if you do look somewhere and then you don't show up, okay, or they offer you a job, for instance, they could offer you to come do one week here. You can say no. You can say no, I'm not coming. And if you also write to them now, I'm talking to you, El Superior. If you also write to them and say, well, I'm available for one week, they can also say no. They don't have to offer you a job. There's that mutuality of obligation. It's very different for, let's say, um, Rita. She's a GP partner. She can't just decide, you know what, I'm taking off one week. It's got to be by agreement. She has to show up there and do some work. And if she shows up, even if there's no job to do, it's their problem. They have to either find her work to do. So there's that mutuality of obligation. So these are some of the factors you look at. To decide, to determine if you fall outside IR35. Every once a year they send me a form to fill out. Okay.

Okay. Thank you. Yeah, I am here. Yeah. Thank you. Just a question about these fees and all those stuff that you can claim back. What if you've got a limited company and you are paying for these fees directly as direct debit from the limited company? They are just going off the limited company directly as direct expenses or something. You understand what I'm saying? So I set up my GMC, RCG.

I understand you perfectly. So basically you're saying rather than paying from your pocket, you're paying through your limited company. Good. That's a nice segue to get into limited company. If you're paying through your limited company, it's considered as an expense, so that reduces your corporation tax. It's considered as the cost of doing business. So if your profit in a limited company— for ease of calculation, I'm going to say if your profit was £50,000 and you'd have had to pay— well, if your gross profit was £50,000 and you'd have had to pay 25% corporation tax, but you, you paid GMC, you did a lot of stuff, and that took you down from £50K to £45,000 after expenses and all the rest, then your net profit, finally you end up with £45K. Now you've put yourself in a totally new tax band because from a limited company, corporation tax is 25% if your profit is above 50K and it's 19% if your profit is below 50K. So you see where that really plays a role. So yes, you can pay through your limited company as well as any other expense that is, um, allowable through your limited company.

Hmm.

It goes to reduce what eventually ends up as your gross profit and what you have to pay corporation tax on.

Follow-up question. Follow-up would be a quick one. Do you go back to do a— do you now go back to claim tax back after you've paid it through the limited company? Does it make sense? No, it doesn't make sense.

Yeah, yeah, because you can't get the tax relief on both sides, right?

Yeah, I just wanted to be sure. Yeah, as far as—

very fair question, and this is the place to ask those questions. Yeah, but yeah, HMRC is not going to give it. Actually, I'll even give you a follow-up question. We also get people, as they said What if my trust has paid me for the mileage or if they've paid for my GMC? Can I claim tax relief? No, you can't, because there's no— I mean, you know, you're not going to claim what you haven't spent.

Yeah.

Another question. Let me just flesh out the follow-up questions. One of the questions people ask is, I run a limited company, I also do a salary. Should I pay this GMC and expenses through my personal income or should I pay through my limited company? 2 things. If you're a higher rate taxpayer or additional rate taxpayer, mathematically it makes more sense to claim it through your personal tax because you're getting tax relief at your marginal rate. So if you're a 45% taxpayer, you're getting 45% tax relief on that. If you claim it through your corporation tax, even if your profit in your corporation was above ₦50K, the maximum tax relief you're getting is 25%. So that's a big difference. However, if you claim it through your limited company, you have total control over it. You just pay through your limited company credit card and that's that. You don't have to then ask Ketchum House to pay you back. So some people might think, well, I don't want to bother about it, I'm going to pay through my limited company. But if you are very close to one of these cliff edges— 60K, 100K, 260K— and you're looking for everything to bring you down Then you want to do it through your personal account so that it can even further reduce your adjusted net income. Because if you claim that tax relief, it could help reduce your adjusted net income.

I'm running the Doctor's Tax Action Workshop this weekend. The link is in the description and pinned comments. Now, this is a structured workshop session, not a free webinar. We'll go through the ABCDE tax action framework. Step by step, and you understand how to apply to your own situation. You leave with clarity on what you need to do immediately to plug any tax leaks. Look, there are just thirty places because we want to keep it very effective as usual, and it is just for doctors. Look, if you want to join, check the link in the description and pinned comments, or just comment X-ray, and my team will send you the details. La session. Once we hit 30, we'll stop accepting any new registrations. And look, not everyone's gonna get in. So if you don't manage to get a spot for this one, or you're not ready for the workshop yet, I've also created a free ABCDE Tax X-Ray scorecard that you can take totally for free. It takes 3 to 5 minutes and helps you identify which areas of your tax planning may deserve a closer look.

Maybe one area where you're leaking, I'll put that below as well.

And of course, if this helps you at all, share it with one doctor, at least one doctor who feels like they're working harder but not getting ahead because they're leaking taxes. Because sometimes the biggest financial breakthrough is not anymore, it's stopping the leak. I'm Dr. Andy Egwim from moneywise doctor.com. Thank you for watching. I'll see you at the workshop or in the next video.