Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
One of our goals as trusted financial advisors is to ensure that the financial plans we build for our clients are robust and take into consideration every facet of their personal and professional lives.
Of the utmost importance is helping you save as much of your money tax free over the course of your life so more of your hard earned money stays in your pocket.
Two great ways to store your money and earn interest or gain profits that are protected from HMRC are ISAs and pensions.
Which method of saving you choose depends on a few key factors like your age, your earnings, and when you’ll need to access your money again.
ISA Benefits
The biggest benefit of using an ISA is that you have full access to your money and can withdraw it at any time. Another benefit is that all withdrawals are tax free so you don’t have to worry about incurring any tax just to get to your own money.
In the event of your death, your ISA savings remain a part of your estate and are susceptible to Inheritance Tax (IHT) rules, but you can leave the money to your spouse or civil partner to avoid this. Plus, they’ll get a special one-time ISA allowance equalling what you had in your own ISA.
Pension details
While ISAs allow you to retrieve your money at any time, that fact is not so for pensions. You cannot access your pension before 55 years of age, however new pension freedom rules grant savers full access once that time comes. Additionally, when it does come time to withdraw your money, there are tax consequences.
The first quarter of your pension pot is eligible for withdrawal tax free, but the remaining 75% is subject to income tax rates, meaning the amount you take out is added to your yearly income, increasing the chances that you might get pushed into a higher tax bracket. This will warrant careful planning so you can avoid a massive tax bill.
There are however, tax benefits to pensions. Under current rules, the government will supplement your savings based on your income tax rate and if your scheme isn’t automatically set to provide this relief, you can claim it easily through a self-assessment form as part of your tax return.
Tax on your pension upon death depends on the age you die. These funds are not subject to IHT and if you pass before 75, no tax is due, but if your passing is after that age, the tax paid by the inheritor depends on their own tax situation.
Decisions… Decisions
Deciding where to store your money so you can save tax and as much money over the long run as possible is one of the most important financial decisions you can make.
We’re here to ensure you make the right decision for your financial future and will be with you throughout the whole endeavour. If you need assistance to find the right path or help with setting up your chosen method of savings, don’t hesitate to get in touch with our expert team.