The Secret To Tax Free Investing Revealed! (NHS Pension, SIPP, Salary Sacrifice)

There's something called capital gains tax. If you invest money in the stock market, if you make any money, the government owns a percentage of that. Now, with an ISA account, if you make a profit or not, I mean, if you make a capital gains, you don't pay any tax on it. So any money you put in through that ISA is tax free. If you invest through your sip, as if the government is contributing money for you to invest with, because they would have taken out that money from your taxes as taxes, but they didn't take out that money. If you're not in the NHS pension, you are paying more tax because more of your money is coming to you. And guess what? That gives HMRC more access to taxi, a bit more. But if some of your money has gone to NHS pension, then that's not accessible to HMRC money and tax. Like a fish, a fish in the water that is below surface is a bit harder to shoot or to get or to hook. Once it comes up, it's easier to cut the same with money. If your money has gone from your employer to your NHS pension or salary sacrifice, it's not yet come to the surface, you cannot be taxed.

Foreign.

What's the difference between stock, ISA and sip? That's a very useful question. I'm glad you guys are answering some of these questions because we did some of the things we're going to have to deal with later. So can you. The difference in stock, ISA and SIP is quite a lot. Basically, remember your stock, your Stock and shares Isa, you've got £20,000 allowance, that the maximum you can put in all your ISAs for the year is £20,000. Is that. Is that clear now? Okay, thank you. So that includes all your ISOs. If you've got like Lifetime ISA, if you've got like token shares, cash, ISA, then all of it. The maximum you can put in a tax here is 20,000. Is that clear? That bit is clear right now. The sip, on the other hand, is your pension. The maximum you can put in your pension, all your pension, including your NHS pension, salary sacrifice or even if you work elsewhere, the total you can put in is 20, 000 pounds. So there's a difference in amount. Now there's a difference in your style of when you can assess the money, your stock and shares. I say you can decide to close it now and take out all your money, just sell the shares and that's it. Your SIP you cannot assess because it's pension, you cannot get it till you're 50. What age are you getting your sip. 57, I think. 57. Okay. Well, used to be from four years time. Okay. Ruben is the future. Thank you. It's. Thank you, Ruben and Ada. So it's still 55. Oh is it? Okay, it's still 55, but I think you're correct because before any of us get to 57, I don't think anyone here is 57. And if you are 57, I on this call, you are looking really good. You share with me your secret to youth. But 57 is the new. They will change it in 2028 to 57 years. Yeah, but for now it's 55, so that's hopefully seven. Hopefully remain at 57 by the time we reach that time. Fingers crossed. Right? Fingers crossed. They may still increase it. They might increase it, to be honest, that's the thing. But they are less likely to increase it like the NHS pension. So the energy expansion for you and for me is 68 years. That's when you can get it. Eight years is 55 or 57 later on. State pension I think is 60 years. So these are some of the differences with stock and shares isa, you can get it anytime you want, you're totally in charge of it. But the maximum you can put in is 20k. Now the other difference between stock and shares ISA and seed in stock and shares ISA, remember you are paying into your stock and shares ISA with your money that has already been taxed. There's no tax relief on it. Something special is coming. It's the money wise doctor book a medic roadmap to financial freedom. You've already paid tax on it and that money has already been taxed. Then you invest. So you're not getting. The government is not being your daddy. In that case the government is not doing anything for you. However, any money invest through the stock and share licer, no matter the returns you get on it, there's no tax on it. Does that make sense? So if you invest money with your stock and share Isa, even if you turn out, let's say you invested 20k and then over 20 years it grows to be 400k. Normally you should have been paying tax on it. It's called capital gains tax. So if you invest in the stock market and some of you who read my, who read my previous email just before the Halloween budget, you know that I said I was selling all my shares. That was not an isa. That was because they were about to raise the tax and I sold all those shares. The next two days they increased the taxes. So there's something called capital gains tax. If you invest money in the stock market, if you make any money, the government owns a percentage of that. So these are taxes that you pay if you make a profit. Now, with an ISA account, if you make a profit or not, I mean if you make a capital gains, you don't pay any tax on it. So any money you put in through that ISA is tax free. So that's why I say before you start investing, don't just invest in a regular account, invest through an ISA until you've exhausted your ISA allowance, which is what amount? Can somebody help me? How much did I say allowance?

20,000.

Lillian, what a superstar. You just joined and you're already giving us great responses. Yeah, thank you. Now, basically, capital gains tax will not apply on whatever is in your isa, but in your SIP is all together different. You're already getting the pension tax relief because you're allowed to put up to 60,000 in a year, tax free. So if you put in money that's including your workplace pension, if you invest through your sip, as if the government is contributing money for you to invest with because they would have taken out that money from your taxes as taxes, but they didn't take out that money either through your workplace pension or you claim it back to your self assessment. So as I see, the government actually contributed to your investment port. So does that make it clear in terms of SIP versus isa? Lovely.

Now that you you mentioned, you say let's say if someone get above 100k, let's say 105k, you can put, you don't have NHS pension, you can put that 5k extra into your sip and then in your self assessment return, you, you explain. Oh, I have, I have put like this 5k as part of my on my sip, isn't it?

And that worse, that is bang on. Exactly. I think you've gotten it now. So they're going to give you relief like they're going to give you relief at the marginal rate. So that extra money you put into your pension, you get tax relief on it. It's even different. Midalia, if you're like Adahia, if you've got a limited company like me as well, you can just pay directly from your limited company and pay into your pension or you can pay from your limited company into your personal account and then pay from your personal account into your sip.

Yeah.

Remember with limited company you spend money first and then you pay taxes, so that will be counted as an expense.

Fair enough. No, like the reason I, I gave up on The NHS is just because I'm not considering to stay in the UK forever. And then I say, okay, what is the point of being on the nhs? I may need to go back because, you know, you know, it's just like, otherwise you get tax, you know, more.

Yeah. So basically, NHS pension, that's a different discussion. Because some people say they pull out of the NHS pension because they're not sure they're going to leave uk. I'm like, but you haven't left. Right. So if you're a salaried person, are you in a salary job? Are you in a salary job?

Yes, job. I work as a senior. Rash. Yeah. In neurosurgeries.

Yeah. What it means, me, Dalia, is that your. Your employer is not contributing to your pension, so you are the only one who is actually contributing to your pension. So if you're in the nhs, and of course, I'm not making a case for staying in the NHS pension, but I'm just telling you what you miss out. Basically, you find one of those my videos, NHS pension, what you should do, what you should consider before you leave. So your employer is supposed to be paying you some more money and they're paying you now. And they should pay you for your future. So they only pay you now, they're not paying for your future, they're supposed to be contributing to your NHS pension.

Yeah.

Secondly, if you're not in the NHS pension, you are paying more tax because more of your money is coming to you. And guess what? That gives HMRC more access to taxi. A bit more. But if some of your money has gone to NHS pension, then that's not accessible to hmrc.

Yeah.

Tax a bit like. It's like money and tax. Like a fish. A fish in the water, like below surface is a bit harder to shoot or to get or to hook or whatever. Once it comes up, it's easier to cut the same with money. If your money has gone from your employer to your NHS pension or salary sacrifice, it's not your comp to the surface. You cannot be taxed the same thing. If you run a limited company, you're running some expenses. I'll give you an example. You run a limited company, you claim your gmc, you claim, maybe your company needs an electric car. I'm sure some of you already know this. You can buy an electric car for your company as long as your company needs it and you can show it, you pay through that. It's still expensive. There's no tax on that. Let's say you hire an Admin. Like you need an admin to help you for your work, you pay them cash. It's still expenses is when you make a dividend, it comes to the surface. That's what you get taxed on. The same thing with you. So I think you should really think carefully about this NHS pension thing, because in addition, there's also debt in service benefits and also things like a disability allowance. I'm not saying that NHS pension is perfect, but I'm like, if I was a salary doctor, I'll be in NHS pension, basically, because I want them to be paying me both ways. Have a think about it. I can see UD has kindly posted that video. Should I leave the NHS pension or should I opt out? Have a read about it. And of course, if there's something you're not sure, even if it's not answered in this session, if you put it in the parking lot and you can ask directly under the video or blog or wherever you read it. Yeah, sorry, see, you're saying.

Yeah, I said, can I say something to Mitali regarding NHS pension?

Yeah, of course.

Even if you're not going to be here in the uk, you know, later on, any money you've paid into your NHS pension, when you get to the age, pensionable age, you're still able to claim that money going forward. So you can also look at it as money you've put in a bank somewhere that you cannot touch until you get to pension age. So it's actually still not a waste, you can claim it going forward. That's what I wanted to say. So I do. I think it's just so long as NHS pension still is viable at that time and they've not changed things or changed the goal post, I think it's still worth doing it. That's my own take on it.

You can see me being in pride. Yes. Actually, that's just the fact. Right. She's a consultant here in the NHS and she's also been through our master class. So basically. Also, even if you move to another country, how many of us know somebody in another country that is getting money from their pension in Ukraine?

Just me.

Every one of us. I know. I know people who are actually getting money. They paid, they've actually left the energy and they're still getting money. Yeah, Yeah.

I just wanted to ask, like, when you're collecting the pension at the end, whether the NNHS pension or SIP, it will be taxed, I'm. I suppose, isn't it? Yeah. So even though you are saving, you're not being taxed now, but at the end it will still be taxed.

That is very important question and I answer our definitely in two ways. One, do you want to be taxed now or do you want to be taxed in the future? In the future. In the future. Why? Just tell me why. Why would you want to be passing now?

Well, hopefully I need. I need more money now. Like by then I have less expenses, I guess so.

That's brilliant. Okay, why else? Adana hinted at something some around the time. There's one word she said she was referring to something that she was trying to please. The compounding interest. That's fantastic. So, so compounding can work against you. Can work for you. Like your now your company is working against you at Dana because you are being charged fees and it's compounding against you. But the same thing if you are delaying charging me pension. What's happening? Instead of the nhs, instead of the HMRC to take out that tax, let's say the tax you're going to be taxed is 40 or whatever. And someone mentioned want to be paid in the future so that you can. She can avoid the 60 tax trap. So that is also a brilliant reason, Stephanie. Thank you for mentioning it. But one big reason is compounding. Let's say that you've got like 40 coming out every year now that 40 that is not being taken. Or let's say 20 that the HMRC is giving you a different. What is it doing? It's going back into your investment, it's compounding into your future. It's going back into your investment, it's compounding into your future. I'll give you some numbers. Let's say chi, you're getting like 100k in a year, HMRC charges you 40%. And then maybe the. On the other hand, someone else is not getting that same tax. So you have 60,000 left. At the end of the year, the other person has a hundred thousand. Next year you are investing your 60,000. Assuming you didn't take out any money. Next year invest 60,000. Guess what? I'm investing. Hundred thousand. Let's say the next year again, let's say our hundred thousand. Let's just assume that we are both of equal ability and we are lucky and the money doubles. Your money goes from 60,000 to 120,000. Mine goes from 100,000 to 200,000. Guess what, your money is 120,000. Guess who wants 40%, the tax man. And you're able to get 40% of 120,000 out. I don't Want to do public math, but I believe that should be about 48,000. Is that correct? 48,000, that's 40% they're taking out, that's 12 by 4. 40% goes out again. So you're ending up with 120,000, minus 48,000, whatever that amount is. And that's the amount you've got to invest for the next year. Meanwhile, what do I have? I have my whole 200,000. So it's like you're on the back foot all the time. Let's do that. Over 20 years, you're going to be far away from where I am. Compounding is hard for the human brain to comprehend. That's why calculators are good. So that's why I want to pay my tax in the future. Not just because I need the money now, but I want to pay this tax if possible. If somebody says, let me pay tax in the future. Even in the us they've got a special tax in real estate, they call it them the 1035 exchange. So you can buy a house rather. When you sell a house, rather than pay tax on it, you just use all the money from that house, buy a bigger house and then you don't pay any tax, you just keep deferring the tax. Maybe before you die, you might not have like an estate and then that's where you want to pay tax on it. That's when people then donate it to a trust and then never pay tax on it. But let's, let's just keep it simple. If you pay tax in the future, that means the government is your daddy. The government is giving you part of the task they should have collected from now, giving it to you to invest for your future. That's why we want to pay. Even the expansion, you can pay in the end. Now the big question is, do you really pay that tax in the end? I think Emeka and I chatted about this. Emeka is in the mastermind, the gp. Many people who actually structure their finances very well because in the UK it's information, they eventually don't pay a lot of that tax. Why? Because when you withdraw your pension at the end 25%, you can withdraw tax free again. This is going a bit deeper into things, but most people get something called a lump sum. And if you withdraw 25, imagine that at the end your SIP payout is one million pounds, or let's just say 400000 pounds, you can take out a hundred thousand tax free. And then the next year, if you want to withdraw you're going to be now taxed as if that's your income. So any money are withdrawing after that is like your income. Guess what? Some people will be withdrawing 12, 570 pounds, basically. So some other people withdraw 50k to keep their taxes at 20%. Some people might not need to withdraw more than 12, 570 because guess what, just because you are 57 doesn't mean you don't have other income. You might still have income coming in from your other investments or from work, if you're still working. But again, that's where tax planning comes in. So I rather discuss about paying those taxes in the future. That's one advantage of sip. I, I hope that makes sense.

Yes, thank you very much.

Lovely. And you had a question, Casey, did you still have a question or. It's been answered along the line, so that's lovely. Thank you so much. So that's a lot on SIP already, believe you me. There's so much more we could deal with on sip, but just because we've got limited time, if you read the guide, if you're not clear on any questions, email me or write on the blog or YouTube video or if you're in the community, obviously we have the master class. You can always ask questions in your one on one session or in the group sessions. Right. So that's on seed. Something special is coming. The Money Wise doctor book Practical step.

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