Your Biggest Money Mistake - Tax Efficiency

Most people think their biggest money mistake is buying too many ‘little treats’, splurging on gadgets, or not having a budget or investment plan. It is not.

The real leak in your finances is usually tax: not knowing the rules, not claiming what you are entitled to, and leaving government money and potential investment growth, of that money, on the table!

The mistake hiding in plain sight

You already work hard.

You already feel tired.

So when money feels tight, it is easy to blame:

• Takeaways and Costas

• Impulse buys

• ‘I’m just not disciplined or motivated enough’

• ‘I am not getting my overdue pay rise, let’s strike!’

But there is a quieter problem: you are probably paying more tax than you need to, and missing free money from the government. No one advertises about it. No schools will teach about this.

This is not some money scam, this is legally you rightful money the government put in place to incentivize you to invest in your future. Trust me, as you are working in the wards, you would totally understand what I mean when I say that it is in the government’s best interest if you could afford your own retirement or elderly care. Remember 'Mr Smith' who has been MFFD (Medically Fit For Discharge) or MOFD (Medically Optimized for Discharge) for 2 weeks waiting for a chair lift delivery?

Expose Your Financial Potholes Now!

We are not talking about copying celebrities re-routing their assets to offshore accounts ‘hiding’ from the UK tax system. We are talking about what is rightfully yours, whilst working in the UK as a tax-paying citizen!

This is not even about taking on risks like storing your wealth in cash (inflation risk) or in stocks (market downturn risk). This is literally money that is rightfully yours, only if you know how to claim it back. Risk-free!

Unclaimed tax relief for NHS staff

If you are NHS staff, there is a good chance you are not claiming all the tax relief you can.

The latest NMC survey suggests that less than 30% of nurses and midwives claim tax relief annually on professional costs and registration fees. I would not be too surprised if the data for doctors and surgeons are similar.

For NHS nursing staff, typical things you can often claim tax relief on include:

• Uniform cleaning allowance

• Shoes and tights/socks (for certain roles)

• Professional registration (GMC, NMC, HCPC)

• A chunk of union membership fees

• Courses fees

For NHS doctors, typical things you can claim tax relief on include:

• GMC fees

• BMA fees

• Royal College fees

• Medical defence fees (MPS, MDU etc)

• Exam fees

• Courses fees

• Uniform costs

• Travelling costs

I will publish a separate list for nurses and doctors as a guide to what you should look into claiming back for your expenses.

If your allowable expenses total in a year are £800 and you are a basic-rate taxpayer (20% tax rate), that is £160 less tax you pay the following tax year. For a higher-rate taxpayer (40% tax rate), the same £800 work related costs could be £320 less tax you have to pay the following year. That is a week’s food shop, or a couple of tank-fuls of petrol, every single year for doing a short online form!

Most of the nursing/doctor colleagues I know over the years would have similar claim amounts as above and most of whom don't do it on an annual basis! That's free money down the drain!

Now imagine you have been working 10 years and never claimed. Even at just £200 a year in unclaimed tax relief, that is £2,000 of your money drifting around the system, helping nobody but the Treasury. Now tell me, when did the Treasury or the HMRC last helped you out in return!

'Free' government money: LISA and SIPP

Here is where it gets more painful (and more exciting). The UK government literally offers to boost some of your savings and investments if you use the right accounts.

Lifetime Individual Savings Account (LISA)

A Lifetime ISA lets you pay in up to £4,000 per year. The government adds a 25% bonus.

• Put in £1,000 → government adds £250

• Put in £4,000 (annual limit)→ government adds £1,000

A Lifetime ISA (LISA) can be opened by anyone aged between 18-39. It is meant for two main goals: buying your first home (up to £450,000 property valuation in the UK) or building a pot for retirement with tax-free access at age 60, not before.

It gives a 25% government bonus on what you pay in (up to £4,000 per tax year), so you can get up to £1,000 a year in bonus on top of your own contributions.

That £1,000 is not a discount voucher. It is hard cash, added to your account, which you can then invest and turn that £1000 into £2000 (with time). If you did that £4,000 every year from age 25 to 50, you would get £25,000 of government money on top of your own £100,000 you have contributed into your LISA.

Now add investment growth once you invest that money within the LISA account. If that £25,000 free government money total then grew at, say, 7% per year for another 25 years, it could roughly grow to more than £70,000 by your 50th birthday. That pot of money that did not even come from your payslip in the first place. You did not have to work for that money. It's all from claiming tax relief!!

Self-Invested Personal Pension (SIPP) and pension tax relief

With a personal pension or SIPP, basic-rate tax relief is 20%. The SIPP provider claims this for you: you pay in £80, and it becomes £100 in the pension, after the government tops top extra 20% for you.

• Put in £1,000 from your bank into your SIPP → HMRC will add in £250 (20%) for basic-rate taxpayers or £250 into SIPP and £250 tax relief from their tax bill (total 40%) for higher-rate taxpayers after reclaiming extra relief

• Put in £5,000 a year→ HMRC boosts it to £6,250 (£5,000 from you, £1,250 from HMRC) for basic-rate tax payers. Higher-rate taxpayers will get a further £1,250 off their next tax bill, on top of the £1,250 that basic-rate taxpayers get!

All of this tax relief money comes BEFORE any investment gains with ZERO risk!

Key note: For higher and additional-rate taxpayers, the effective relief can reach 40% or 45% once you claim the extra via self-assessment.

Again, this is government money being dropped into your long-term pot. You are not being ‘clever’; you are just using the rules that already exist to claim what is rightfully yours. The government or the NHS won’t chase after you to make sure you do it and don’t miss out on this. If you don’t ask or apply, you don’t get it. Your loss.

How this can buy you years of your life

Let’s join the dots.

Imagine you:

• Claim £200 a year of work-related tax relief from fees from GMC, MDU, courses and exams

• Get £1,000 LISA bonus each year by investing £4,000 into a Lifetime ISA

• Get £2,000 of pension tax relief each year on your SIPP contributions as a higher-rate taxpayer

That is £3,200 of government and tax-relief money per year flowing into your corner instead of being left on the table. Over 10 years, that is £32,000 of extra money before growth.

If that £3,200 per year is invested and grows at 7% annually for 30 years, the future pot could reach well over £300,000. Even a more cautious return via low risk index investing would still produce a six-figure sum.

If your annual spending in later life is, say, £30,000, then £300,000 could fund around 10 years of living costs by itself. That is 10 years where you might:

• Work fewer days

• Drop nights and weekends

• Take a slower-paced role

All partly funded by money you could have claimed from the government decades earlier.

So what can you do now?

Here is a simple checklist you can act on this week:

• Check if you are due tax relief on uniforms, registration fees, exam fees, courses fees or union subscriptions

• If yes, submit a claim to HMRC for the last four years if you have not already

• Open a Lifetime ISA if you are eligible and consider using some of your annual allowance

• Review your pension or SIPP contributions and understand what tax relief you are getting

• Automate monthly payments via direct debit so this happens without relying on willpower

~ Find Out Your Financial Fitness Score ~

The question is not ‘Are you bad with money?’

The better question is: ‘How much free money and future investment growth are you comfortable giving up, just because you can’t be bothered to fill in some forms?’

Once you see that, the real leak is tax inefficiency and unclaimed incentives. The daily latte suddenly looks harmless compared with thousands of pounds quietly walking out of your financial life every year.

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Disclaimer

All content on this blog is provided for general financial education and entertainment purposes only and does not constitute financial, investment, tax, legal or any other professional advice. Nothing on this site takes into account your individual objectives, financial situation or needs, and you should not rely on it to make any financial decision. You remain solely responsible for your own decisions and must do your own research, due diligence and independent learning before acting on any information mentioned or implied here. Examples, case studies and any numbers used are purely illustrative and cannot be guaranteed or replicated in your circumstances. Investing and financial planning carry risks, and the value of any investment can go down as well as up. Before making any financial, investment or tax decisions, you should seek personalized advice from a suitably qualified, regulated professional adviser.