Making the most of what you earn
Nine years of university, two degrees, a whopping
great student loan, and a sunny elective later, I
arrived bright eyed and bushy tailed for my first
‘proper job’. The thought of having money left over
to save after student loans, bills, courses and exam
fees were paid was a bit of a fantasy. By the time
I reached ST3, I finally put my maths degree to
some use and claimed back tax relief on some of
the expenses that had accumulated over the years.
How hard could it be, right? To my surprise, it wasn't
actually that taxing at all. A few thousand pounds
later (yes thousands!) from those five previous years
of exams, memberships and course fees helped pay
for a honeymoon. Here are some of the things I've
learned along the way.
How to claim a tax rebate
It's easy. HMRC have developed an online Government Gateway
. You are eligible to apply for a P87 – ‘Claim Income tax relief
for your employment expenses’. All you need to do is tot up your
expenses for each tax year April-March (Table 1). Then access
the gov.uk website and follow the questionnaire to work out if
you are claiming less or more than £2500 per tax year. You will
then need to create a Government Gateway ID and password.
It usually takes 10 min (have your P60 and national insurance
number handy). You will be asked for a PAYE tax reference
from your employer (on your P45/P60). If you have moved NHS
employers during each tax year, you may have to contact HMRC
for these details if they're not readily available on your payslips.
You can claim tax relief on the last five years of work-related
expenses that have not been reimbursed elsewhere. Once you
get the ball rolling, it is easier to keep on top of expenses in
each tax year using a year-by-year P87.
If you claim under the £2500 threshold then the online PAYE
form is easy to fill out. If you are claiming more than £2500 per
year, it is advisable to employ the guidance of a tax accountant –
but your rewards will potentially be greater. You must have paid
tax on the earnings from your job in the year you are claiming
for. You will get tax relief based on what you have spent and the
rate at which you pay tax.
Top tips for financial wellbeing
I have become increasingly interested in pay, savings, and my
financial wellbeing. It has helped that my husband is a financial
advisor (conflict of interest declared here!). Here are some things
he's taught me along the way.
Examples of annual expenses:
- Association of Anaesthetists
- Medical Indemnity insurance
- Other faculty/college fees (a full list is available on the
Work-related expenses such as:
- Examination fees (including resits)
- Travel expenses (not already reimbursed by local deanery)
- Travel and overnight expenses
- Courses (there are some 'potentially allowable' courses
that are approved as tax-deductible; check on an individual
Finances These are dependent on personal circumstances
- no two people are the same. Have a plan and think about
protecting what you earn, saving for emergencies and your
long-term financial well-being. What is your long-term picture?
Your dream home, kids' university fees, holiday home abroad
are more easily achieved with a strong commitment to your
Emergency funds An emergency fund is vital. It is recommended
that you keep 3-6 months of expenses in an easily accessible
cash account, such as a savings account. However, holding
excess cash above this level can be detrimental to your longterm
financial health because of inflation. Inflation is the increase
in the average price of goods. If your cash account (Cash ISA,
Current Account, Savings Account) is not giving interest returns
above inflation (1.4% in December 2019) your money will lose
its buying power.
ISAs Individual Savings Accounts are a government-endorsed
means of tax-free saving. You may have heard of Cash ISA,
Stocks & Shares ISA, and Lifetime ISAs. You have the ability to
save up to £20,000 per tax year across all ISA savings.
Cash ISA A savings account without any tax on the interest
gained. A range of Cash ISAs are offered in banks, building
societies, and credit unions – there are plenty on the market so
shop around for the best rate. The downside is that they remain
in cash, and interest returns may not keep pace with inflation.
Lifetime ISA The Lifetime ISA (LISA) lets you save up to £4000
every tax year towards a first home or your retirement, with
the government giving you a 25% bonus on top (Table 2). A
fantastic way to help first-time buyers onto the property market.
Alternatively, if you are not a first-time buyer, a LISA can be used
as a pension savings account, although it cannot be accessed
until the age of 60.
|Savings per year?
|When is the bonus added?
|Maximum property value?
|Who can open it?
||Anyone aged 18-39
|Can a couple have one each?
|Yes, if they intend on buying their first property together
|Minimum holding period before access?
|None, but will pay a 25% withdrawal charge if withdrawal is within the first 12 months of your first payment
|What can I pay with the LISA?
|Deposit for a mortgaged house only
Stocks & Shares ISA An option that can prevent your money
from losing its buying power is to invest in the stock market.
Stocks & Shares ISAs give you the opportunity to achieve tax
free growth. You must first understand the level of risk you are
willing to take, the length of time you wish to invest and the
desire you have for any investment growth. With risk comes the
potential for reward. The higher the risk level you are willing
to take, the higher the potential for growth. Markets can be
volatile but with a long-term plan, it is possible to withstand
the bumps in the road. Keep your emotions neutral. Remaining
level-headed can be difficult, but emotional investing can have
a negative impact on your objectives. There is no perfect time to
invest and trying to ‘time’ when is good or bad is less profitable
than ‘time in the market’. Seeking professional advice will allow
an adviser to manage your fund and your expectations.
Insurance Insuring yourself and your health is the foundation of
a strong financial plan and a way of protecting those you love.
We all hope we plan for something that never happens, but we
are all too aware of the unforeseen ahead. It is the same as your
car insurance - you pay a monthly premium in the hope you
never have an accident.
Life insurance Pays out a tax-free lump sum on death. It allows
your family to continue their current standard of living. The sum
assured can be used to repay any or all debts (mortgage, school
fees, credit cards). The more you insure yourself for, the more
expensive it will be. Again, everyone is different, and no two
families have the same needs.
Critical illness cover Tax-free lump sum on diagnosis of specific
critical illness (all providers offer different levels and areas
covered). It is usually more expensive than life insurance and
contains a ‘survival period’. It could provide money needed to
clear debt or cover home amendments, healthcare costs, travel
or any other associated costs.
Income Protection The NHS scheme provides a salary of six
months full pay and then six months half pay if you are on long-term
sick leave. After that you are unpaid. Income protection
pays you a monthly predetermined sum, or up to a maximum
percentage of your salary. It is deliberately designed not to pay
you your full salary and to encourage getting back to work.
Elected Member Association of Anaesthetists Trainee Committee
ST6, South East Scotland
Conflict of interest declared: husband (Michael Allen) is a
Editorial note: this article is a guide only and not a substitute
for professional advice; we remind readers that we take no
responsibility for the contents or for any losses that result from
the advice provided.
- GOV.UK. Claim tax relief for your job expenses, 2020.