The Smart Way to Pass on Wealth Tax-Free in the UK

If someone passes on and their life insurance policies in a trust, that means your family moans you, but they're not gonna feel like dejected or suddenly have so many debts to pay. The government wants people to save money. Why is. Because if you just put your money inside the bank and you're not investing it, basically the money is not out stimulating the economy. But even worse, if you don't save money and you end up being homeless or broke or. Course, I don't think any of us here is going to be homeless or broke, but for people who have absolutely no savings and have no pension. Look, if you're not putting aside money for your pension, that means you're applying to work. I mean, to your last day on it, right? So the government wants to encourage you to save money and invest money. Hi, Sim. Sim.

All right, thank you very much, Simon. So my question is, if I were to believe in the nhs, can I retrospectively, like, top up my pension?

I've checked that one before. Same as far as I know. Unfortunately, you cannot. But I've got some good news for you. If you leave the nhs, whatever you've contributed in the NHS pension is still there for you. But that's not the good news. The good news is that it's still index linked. Let's say when you left your pension port was £20,000. If you're collecting the pension at 65 or whatever, the NHS pension is like defined benefit. The age is going to keep rising. Why? Because there's no money in the port. People are putting in money, people take it. There's no money waiting anywhere. People are paying the future. But let's say you're collecting it at 65 or 68, you are not going to collect £20,000. You're going to collect £20,000 adjusted for inflation at that point. What's the current inflation rate in UK CPI, I use CPI. So CPI is 3.8%. What that means, and I'm sure you understand same, but for someone who's wondering, what is it talking about? What's inflation? Is that £100 in 2015 when I first came to the UK, is no longer the same as a hundred pounds in 2015. You now need 136 pounds to buy the same thing that 100 pounds could buy in 2015. I don't need any economist to explain this to you. If you've gone to shop in Waitrose, if you're a Waitrose kind of person, you know, posh, or if you're shopping in Lidl, if you're a Lidl type of person well I want to save a bit of money. If you've gone to shop there recently, you've known that the price of what you used to buy three years ago is not the same. So CPI is just Consumer Price Index is a more realistic way to check inflation is a basket of goods like if there was a bar of soup, a milk bottle, a loaf of bread. The price that helps us to give us a realistic inflation the other inflation measures. So your NHS pension is adjusted for inflation so it's rising with inflation so that when you collect it eventually it's not going to be the same amount that you put in. I hope that cheers you up a little bit but you can't go back and put in more money. Unfortunately if it weren't possible will all do it. Did I answer your question? A trust is basically a legal entity that is separate from you that can hold something for you in trust and we don't have enough time. I could do a whole masterclass on trust. But you've heard about the Gross Venus. The Gross Venus are like the landlords of London. If you've gone to recently I was in Mayfair, we've gone to Mayfair in London. All those sort of like expensive area where embassies so they own all those lands and they've only for six generations and the current Duke of Grossman I think is just in his 30s, he's a multi billionaire. But those it cannot be taxed directly. They do pay tax but because the trust holds it the tax rules are different. So a trust is basically a legal entity, not illegal. We're not talking onshore, offshore anything here. Legal entity that you can actually put in your asset to hold it and it could be for tax planning for some other people use it for, you know, protecting their assets. I'll give you a quick example. Some people might want to pass on something to their daughter but they don't know who their daughter is going to marry. So they use a trust to set it up in a way that okay, if the other marries this person the person turns out to be like a coconut head. The the property doesn't pass on to that person passes on to the daughter and the daughters, you know, sort of descendants or whoever. So that's a trust. But basically the simplest trust I'm talking about the life insurance policy can be inside a trust and it doesn't have to cost you an extra pound.

Now this is very crucial topic. Have you secured your family's financial future? Many times you're busy as Doctors and healthcare professional, that's fine. But if we overlook our life insurance and income protection until it's too late, you're taking a bit of a risk here. I mean nobody can predict the future. You need to protect what matters most. Think about life insurance and income protection. This is really quite important to protect your most valuable assets. Now if you're not sure about what you need or how to go about it, check the link in the description. I have a free guide that can help you step by step. Let's get back to the episode because.

When you're setting it up, if you remember to notify your insurance advisor and if they are good in their job, if they are one of the ones that we are vetted in money wise Dr. This is sort of like ABCD. They should be saying, oh Evelyn, we should put your life insurance policy because it's massive. If your life insurance policy is 500k and your house is 400,000, that means one of your biggest assets is your life insurance policy. So want to put it in a trust so that the government doesn't get to tax 40% of it. If unfortunately you do pass on during the term of the life insurance, I look at it as a way of preventing generational poverty. If someone passes on and their life insurance policies in the trust, that means your family moans you but they're not going to feel like dejected or suddenly have so many debts to pay or. One of the saddest scenarios I've seen is someone dies, they have money in the bank, they have a life insurance policy that is not in a trust, they have assets that are just hanging around and the family wants to do funeral and all that kind of stuff. But probate has not been done. That means HMRC has not said you've paid your inheritance tax because they have to look at everything and tell you how pay. It could take months and months and months and the family just doesn't have the money. And eventually when they want to sell this house, the house might be in disrepair, you know, and they may have to sell it at, you know, whatever price they can get to be able to pay inheritance tax. It's a big issue and most people wake up to it too late. I remember a story Rosemary shared in the community was it last year about this amazing consultant, did very well with her money, followed all the 10 money wise rules that we mentioned and invested over her lifetime. Worked hard, had property in London, did so well, left off our family but did not do the last bit, did not have things in church did not have her will, did not have things all sorted out. And eventually what, what happened? Did they have to pay an inheritance tax or something massive like that? Yes. So that's what happened. And I think you just have to be tax conscious, tax efficient. It doesn't mean that every day you wake up, you're thinking of tax. The same way you don't have to think about direct debits for your electricity bills. If you have the system in place, including your saving and investing, you don't have to think about it too much. Did that help? Did that answer the question?

Yeah, that's. That answers the question.

Okay. All right. So the good thing is we've covered the seven steps to investing. But like I said, I hang around, I ask a question, I will go a little bit deeper, we can cover a little bit more. Rosemary, what do you think? Do you think can take one more question before we look at SIP and.

All that stuff and God is asking about the best platforms to invest in? I think we can.

Yeah. Yeah. Someone from my team could share basically what, what we look at is we are looking for the lowest possible fees. So check a reputable platform, check a platform, hopefully that is vetted, check that they are FCA registered, they have all the necessary stuff. And also the next thing is check fees. The fees really matter. If you're ending up with a lot of fees that could actually delay your investment groups, you could end up paying a lot. That's why it's very funny when you say a financial advisor says, oh, it's free. You don't have to pay me anything, but there's 3%. You don't pay me any fee, but there's 3% fees on your funds. That 3%, if you check it in, compounding over the next 10 to 15 years, it could actually mean tens of thousands of pounds. That could actually mean that you could have retired a little bit earlier if only you paid attention to things and learn how to do a few things yourself. I'm not saying it's wrong to get financial advice. For instance, you might have complex finances. You might need to set up a trust. You might need to. You might have a child that has additional needs and you want, I'll cover them. And you might just, you know, have a bit more complex finance. You have money from your income, from your business. You're a consultant, you do private practice. I might need them. An advice about just the same way is really important when you're going to your doctor to know your symptoms, know where you need help, if you know a little bit about where you need help. You're less likely to get a bad financial advisor. You're less likely to. To act on advice that is not in alignment with your goals. Okay, all right. Okay. So that's it. So let's look at ISAs. Basically, because we're talking about tax efficiency, ISAs is a very important step. We have to think. So if you're looking at ISAs, basically, there are four types of ISAs, but we tend to use three heavily. And those three, basically, you can talk about the cash ISA, the stock and shares ISA, and of course, the lifetime ISA. Basically, the lifetime ISA is an account you can open between 18 to 39 and the maximum you can put inside it in a taxi is £4,000. I can't tell you the number of times I see people say, oh, doctor, I'm turning 40, I'm 39 now, and I don't have a lifetime. I said, I need to open it now before the tax year ends. The taxi is ending April 5th. Is ending April 5th. So if you don't open it and the tax year passes, you lose that allowance. So usually if you put £4,000 in your lifetime ISA, you can get up to a thousand pounds. And even if you're a couple, you can do 4,000 each, and you end up with a thousand pounds each. Patak say, I've seen couples who've used it to get as much as £10,000. It's like free government money. But remember, I can only use it for two things. For buying your first house, or for retirement. That is a lifetime isa. So your lifetime ISAAC could be lifetime ISA cash. It could be lifetime ISA stock and shares. So you can invest your lifetime ISA. Okay, that's one of the ISAs. Of course, there's a cash ISAAC, which is my favorite ISA for savings. If you're just saving money for your emergency fund. Some people's emergency fund is 20,000. If you just put it right in a regular savings account, you are going to exceed your personal savings allowance, and that will create a tax for you. You want to avoid that. Any money you put in a cash ISA is defended from tax. ISAs are basically tax wrappers. They are tax defenders. And then we'll go to number three. My favorite ISAs is the stock and shares Isaac. So for the stock and shares ISA, basically any money I invest in the stock and shares isa, any growth I get on it. So capital gains. If I invest money, for instance, I gave example with Facebook, I think I bought at 80 pounds, $80 up to about $200 and currently Facebook is about 700 and something dollars. So that capital group that it has almost tripled. I don't have to pay tax on it when I sell it if it's in stock and shares. Isaac. If I invested it in a general investment account, then I have to pay tax on it. The same applies for those of you in Canada. You also have your own accounts. Basically there's quite a few of them. The problem is that I think for Canada, your allowance is a little bit less than ISAs, and we'll look at it in a minute as well. So understanding where you are, your country, your context, and how tax efficient you can be is really, really important before you even start investing. Being tax efficient. Now, ISAs are only one side of it. SIP is another powerful way. Your pension is another powerful way to invest tax efficiently. But I'm going to pause here just in case anyone has any questions around ISA or whatever I've said so far. Okay, so Rosemary, back to you.

Two questions just popped up. He's asking what's in it for the government with SIPs and ISIS because it's sounding too good to be true.

I suppose that's a fair question. Okay, so what's in it for the government with super nicers, I think I'll start with ISAs. Basically, the government wants people to save money. The government wants people to save money. Why? Is because if you just put your money inside the bank and you're not investing it, basically the money is not out there stimulating the economy. But even worse, if you don't save money and you end up being homeless or broke or of course, I don't think any of us here is going to be homeless or broke. But for people who have absolutely no savings and have no pension, look, if you're not putting aside money for your pension, that means you're applying to work. I mean, to your last day on it, right? So the government is going to have to take care of you. You're going to end up on benefits. So the government wants to encourage you to save money and invest money. Believe it or not, what I've learned, having invested in Nigeria, China, us, uk, one thing I've learned is that find out what the government policies, what they're incentivizing, don't go the other direction. You're going to lose. If it's not against your moral principles, go in that direction. The government is happy for you to put money in your pension and they will give you tax relief. That means if you're a 40% taxpayer and you put money in your pension, the government will give you 40% tax relief using your NHS pension. You already get the tax relief before you get your salary, so there's no tax on it. The money is going to your pension. If it's your SIP, the government turns around, that's HMRC, they say, oh, you put 20,000 in your SIP. Sorry. Because that 20,000 is money that's already been taxed. It's coming from your pocket. We didn't realize this was pension money. So take your 20% back or take your 40% back. And for those of you who are, who have been through the investment academy and you followed the steps and done it, I think someone saved about 13,000 pounds. She was falling into the 60% tax trap. So she did this, increased her NHS pension, put money in her SIP, got 20% automatically in her SIP. So she put in like, let's say put in 20K and you get 20%. That's 44,000, 4,000 pounds. That's 20%. And then she claimed the other 20 through self assessment because she's a higher rate taxpayer. So she got the other 4,000, so 8,000 as a whole, and it dropped her taxable income and saved her as much as 13,000. And by the time she looked at things like claiming tax relief or her professional expenses, she's a consultant in NHS, she saved 13,000. How do I know? She shared it in the community group and she sent a testimonial, some of which you can see on the link on Senya. Okay, so that's what I think, the government benefits. What if everyone doesn't have a pension? What do you think will happen? You have an aging population, they have no investment, they have no pension. You think, well, they are going to live on benefits. And that's now the government problem for you. I know that you don't plan to live on government benefits. You want to enjoy your retirement. You want to have fun, you want to be the one traveling around, you want to be the one investing in your children or grandchildren's ideas, if that's something you're looking for. You want to enjoy your life, basically. It doesn't have to take forever. But from my point of view, I think this is why the government incentivizes you to save and invest. Okay. Right, okay. We'll take one more question around ISAs. Rosemary, if you sort of like get a question, call the person to call out the question.

Okay?

We can go from there.

All right, Evelyn. Okay. I was just asking. You mentioned three ISAs. The lifetime ISA cash has. And second shift. I would just ask if. Why come. Can one invest in these three ISAs?

Absolutely. So you can invest in the three ISAs. How that works is basically is allocation, how you allocate it. If you have a clear financial goal, then you can sit down and work out how much goes into the ISAs. How much is the maximum you can put in all the ISAs? Evelyn, do you know all the ISAs? In a taxi, what are you allowed to put in?

I only know for the lifetime.

Okay, 4K. That's good. At least you know. And then 20, 000. Brilliant. So 20,000. Okay. So that's how much you can put in. Okay. Now, if you can put in 20, 000 pounds, that means for the lifetime ISA, if you put in 4,000 pounds, how much do you have left that you can put in? 16k. Lovely. Now, let's assume that you're saving your emergency fund and your monthly expense. I'm just going to use £3,000. Okay. Is that closer to your monthly expense, Evelyn? £3,000 monthly, okay? Yeah. Is it much more? Okay. Is it closer? Let's. Let's say 3,000. And you want to put aside three months worth of living expense. So thousand times three will be what? How much?

9,000.

9,000. So you've put 4,000 in your lifetime ISA. You've put 9,000 in your cash ISA, your emergency fund. So emergency fund should not be in an investment. You shouldn't be giving it to your uncle or cousin who does crypto, or to give it to somebody who you don't know. Your emergency fund is saved and you can call upon it when you want it. So you put 4,000 in lifetime. Isaac. 9,000 in your cash Isa. How much is left out of the 20?

That should be seven.

So you can decide to use the £7,000 to put in your stock and shares Isa. Now you have to do that because you can have a different goal. For my. For instance, for myself, I'm not putting any money in my cash isa, because I have an emergency fund that I haven't used. I don't need to use it yet. Okay? So I don't need to put anything in my cash ISA, but I might decide to put 4000 in my lifetime ISA, because I can take the lifetime ISA, and invest it in the stock market. Okay? Because I'm not buying my first house or my second house. I already done all that. So I might put 4,000 in my lifetime ISA, zero in my cash. ISA. And 16,000 in my stock and shares. ISA. So I've used my allowance. Okay. I also decide to use 20,000 in my stock and shares. I have used my allowance for some other person. They can decide to put 20,000 in there. Maybe this. Maybe the person is above 40 and never got the chance to open the Lifetime ISA. So cannot get the £1,000. But they can decide to put £20,000 in their cash ISA to build the emergency fund. So it all depends on your personal financial goals, your personal investment playbook, your. Basically this is week four in the investment academy. That's one of the things we address. Designing a personal investment strategy that works for you long term. Okay. I hope that answers your question.

Yes, there's a follow up question. Now in this, this 20,000. Now that is the maximum you put in all of these ISAs.

Yes.

Is this something you can repeat the following year?

Absolutely. Key question. You can repeat it the following tax year, not the following calendar year.

April five.

Excellent. So the taxes starts April 6th. So from April 6th to April 5th, the next tax year, you can repeat it. You have a new £20,000 allowance. Okay. Now if you miss it, that taxi is gone. If it's gone, it's gone. So you can repeat it. Does that make sense?

Yes. Yes. Thank you.

Now I've got a question for you to find out if you understood it. Don't worry, we'll help you if you don't get it.

No problem.

Is there any scenario? Let's say you're in a family setting. What can you do to be able to increase your ICE allowance? Let's assume evening, you're a doctor. You're a Charles grade doctor. And you have a spouse or a partner who has a nicer. You have a joint setting or whatever. What could you do to increase your ISA allowance as a family?

Well, my partner would also have one.

Your partner will have one. So that creates an extra £20,000. Okay, let's assume you have a child as well and you had some extra money, two children. What could you do to increase your family's ISA allowance? Or tax efficiency in that regard?

Well, I'm not sure, but I think the children also have an ISA account too.

You are thinking in the right direction, Evelyn. So there's a Junior ISA. Unfortunately we try to do these things within 90 minutes, but you know, master classes. We can only do as much as we can. I can't get into Junior ISA and junior sips. But for those of you who follow my weekly newsletter, you must have read about last two months. I wrote how to create a £1 million investment account for your child through using the Junior ISAs through compounding, basically. So Evelyn. Yes, children have a Junior ISA account. They can put up to £9,000 per taxi in the Junior ISA. When they turn 18, the ISA comes under their control and becomes an adult ISA. And hopefully at 18 they are very sensible. They're not going to use it to buy a Ferrari or, or splash it on a big party because if you've been putting money inside there 9,000 for let's say 10, 10 years, you have £90,000 and if it's being invested, you should have much more than 90,000 pounds. Obviously investments in stock market can go up, it can go down, but over a long period of time we've seen that it actually does better and than just saving money in cash. Does that answer your question, Evelyn?

Yes, very much. Thank you.

We take a short break. If you come back after the break, I know that you really want to go deep. You can look at SIP and look at a few other things.

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 it 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 naked 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 are 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.

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.