Dentists Who Invest Podcast
Official Podcast of the Dentists Who Invest platform. Talking all things investing, money and finance with a dental spin. Have you ever wondered how you can grow your wealth and protect your hard earned money as a Dentist? We've got you covered. Featuring famous guests such as Andrew Craig, Edward Zuckerberg and Benyamin Ahmed we delve deep into EVERY aspect of finance to educate and empower ALL Dentists.
Dentists Who Invest Podcast
What's Changed With ISAs/Pensions/GIAs This Tax Year with Anick Sharma
You can download your FREE report on how you can avoid financial mistakes as a dentist using the link just here >>> dentistswhoinvest.com/podcastreport
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If you’d like to discuss your finances with a professional you can connect with Anick here: https://www.viderefinancial.com/contact
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Financial planning takes on new dimensions with each tax year, and 2025 brings significant changes dentists need to understand. Financial planner Anik Sharma from Vider Financial Planning joins us to unpack investment vehicles available to dental professionals and crucial updates affecting your financial strategy.
The conversation kicks off with a fundamental yet often overlooked principle: financial organization eliminates the annual scramble before tax deadlines. Beyond reducing stress, this approach delivers measurable benefits – contributing to investments at the tax year's start rather than its end could generate an additional £60,000 over 30 years through compound growth.
Anik walks through the key investment accounts dentists should consider, starting with ISAs. Recent rule changes now allow contributions to multiple stocks and shares ISAs within a single tax year (while maintaining the £20,000 annual limit). We explore misconceptions about platform diversification and the Financial Services Compensation Scheme, clarifying that the £85,000 protection applies to banking licenses rather than individual institutions.
For pensions, we delve into tax relief benefits while highlighting complexities for high earners. The most significant upcoming change arrives in April 2027, when pensions will potentially fall within inheritance tax scope – though final implementation details remain pending. NHS pension scheme members face additional complications with the ongoing McLeod remedy affecting annual allowance calculations and private pension planning.
Limited company owners have additional considerations when deciding whether to invest through corporate structures or extract funds for personal investment. This leads to the fundamental question: how should dentists allocate investments across different accounts?
The answer lies in comprehensive cashflow planning – mapping your current position to your desired future before determining the optimal investment strategy. This approach ensures your portfolio powers your life plan rather than existing as an end itself.
Looking to optimize your financial strategy for the new tax year? Subscribe for more insights on building financial resilience that supports both your dental practice and personal aspirations.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
On this podcast. We've covered what investment accounts are available to dentists an awful lot of times, but what we haven't done is covered what has changed specifically in the new financial year that started just a few weeks ago. I am today joined by financial planner and IFA, Mr Anick Sharma. He represents Videre Financial Planning. Anick is going to be talking to us about our options as dentists whenever it comes to the accounts we can invest within, what's new for 2025, what we can expect to change going forwards, and what considerations we need to know in order to make the best strategy and make the most progress towards our financial goals. Considerations for investing for the new financial year. This is going to be super useful to the dentists in the audience.
Dr James:We came up with a little bit of a structure as to how we might do this when we were chatting off camera, so basically, what we decided was that we're going to reel off all the common investment accounts that are available to dentists and the considerations that we need to understand before investing in this tax year, and also some of the new stuff that's come around in the chancellor's new budget that we need to wrap in there as well. So we're going to proceed on that foot. The order that we're going to do things is what do you need to know if you're going to invest in an ISA? What do you need to know if you're going to invest in a pension? This tax year? The nhs pension we're making that a little bit of a standalone topic limited companies and then finally, personal general investment accounts, and then we're going to talk about how you decide which one to prioritize. That's coming up a little bit later. Anyway, Anick, over to you. Should we start off with ISAs?
Anick:yeah, thanks, james. Um, just a bit of housekeeping before we start. This is all factual information talking about different accounts. It's not any recommendations in any way, shape or form Before we even jump into ISAs. Taxi errands are quite funny. Everyone gets into a mad scramble and the stress and I've got to throw my ISA money in. Or pension contributions.
Anick:Of course we're here to help, but why does this happen? Being financially organized can help remove the clutter. What's that phrase? Tidy desk, tidy mind or something, and being financially organized it's quite similar. Now I appreciate for those who have their own business. They need to wait close to taxier ends and typically company accounting end periods that can be quite similar to those dates. So they need to see closer to the time. I also appreciate we're in a really funny period. So the McLeod remedy statements have started to come in, but until we know what those annual allowance numbers are, it makes trying to put money into a private pension really difficult because there are various calculations in play which might impact how much we can impact how much we can pay into a pension.
Anick:Now a baseline foundation cash contingency really important, moving five or six steps ahead if we invest in any of those mechanisms or vehicles you just mentioned. The last thing we ever want to do is rip money out when markets are taking a massive haircut. Take right now, for example. Um, having cash contingency really helps things and you know what it's like. Life happens. The boiler goes the windows, whatever it might be, and having that emergency fund is critical.
Anick:Now, um, isa's really useful tool. Essentially it's a tax sheltered account. There are two main forms. We can put money into an ISA Cash, so, just like a bank account, and that means interest accrued with it is not subject to income tax Very, very useful. The second is a stocks and shares ISA and similar to a cash ISA. Any interest we receive, depending on the underlying investments, there is no tax on it and any of the profits. So when the investments grow and you decide to sell it, there's no tax on the profit. So really, really great. The flip side is that we can only put £20,000 in currently into an adult ISA, £9,000 for a junior ISA. At the moment, money from an ISA is paid from your personal pocket as well, so most people will have earnings, pay income tax on it, or maybe if they're taking a dividend from the company, they'll pay income tax on the dividend, and then that money is then used to fund the ISA. It's different to tax relief and a pension, which I'll come on to in a moment.
Dr James:I was just going to say one thing. One thing, that's I think this changed last financial year, but you can now contribute to multiple ISAs. I've got that right, haven't I?
Anick:Yeah, so there used to be really strict rules about the types of ISA accounts you can open and the amount of accounts you can have in any one period, but it's a bit more flexible now because you have a lifetime ISA, typically used for a first house purchase or retirement Stocks and shares. I just mentioned cash, or the lesser known one is the innovative finance ISA.
Dr James:It's essentially used for startup companies to fund essentially yeah, and just to make that clear what I was saying a second ago, yes, you've got your different types of ISA, as in cash ISA, stocks and shares, etc. You can now contribute to multiple different stocks and shares ISAs in the same tax year, right, different providers.
Anick:Yeah, so yeah, I think things are more flexible at the moment now.
Dr James:Just worth reiterating that, because I don't think everybody knows that quite yet. Anyway, you're in full flow, yeah, although I would question what.
Anick:I get this a lot Insert massive global brands that houses their ISA platform and people will say I want to diversify away from it. Okay, fine, I take that point to some degree, but what merit is there in having 10 different stocks and shares ISAs Because you have to track them all? Nine out of 10 times someone forgets about a pot somewhere. Money gets lost behind the sofa. Now, if it's a diversification perspective, we need to look at the investment piece first. Investment should be diversified across a global market capitalization perspective. From a platform perspective, we do need to be very careful. Some platforms may hold client money on their balance sheet, which means the platform goes under well. Money could potentially be at stake and most of the better platform providers will have it ring-fenced and separate on the account. But from a diversification perspective, we're not actually gaining that much by splitting over a load of platforms.
Dr James:some go what? What do you say to the people whose main argument on that front is the 90k limit by the financial services compensation scheme, 85 000 pound limit. By the final I thought it changed to 90, but anyway it's 85 it depends on how it's structured.
Anick:So if that 85k only applies to deposits, um, so it's different to it's different to investment, so there are complicated rules over this sort of thing, but the bank deposits 85 000 pounds. Now what I find really interesting there are some providers out there. Well, that will advertise the fscs. So financial service Services Compensation Scheme. And for those listeners who don't know what that is, it essentially means if let's start with a bank if a bank goes, pop goes under, the Financial Services Compensation Scheme will protect deposits up to £85,000. So if you have £84,000 and well-known high street bank goes under, it's fine, you will get your money back eventually. If, eventually, if you had 90 000 pounds, then 5k is potentially lost. Now I get a lot of pushback against this because you know that banking license risk is something that can be mitigated against. They'll say don't be stupid. Insert well-known high street bank is never going to go under. Equally, everyone said that about lehman brothers, credit suisse recently, svb banks to go under. Equally, everyone said that about Lehman Brothers, credit Suisse recently. Svb banks do go under. So, yep, they might seem relatively safe and stable, but it is important to try and protect ourselves against this Now within that FSCS limit.
Anick:Diversification is important, but what a lot of people fail to understand is the limit applies to the banking license, not the high street bank. So you could have three or four high street banks grouped within the same banking license. So that means if you had your money spread across three or four different banks and it belongs to that one license, you only get one set of 85 000 pound per person. So in theory, you could be at risk, um, if it was to go under. A lot of people fail to recognize this.
Anick:The other thing as well if we have large amounts of cash sat in the bank, I'd say that in itself is a massive risk, because inflation, without a doubt, is the biggest risk when it comes to financial planning protecting for the future. If cash is paying 4% interest and inflation is at 5%, well, money's going backwards by 1% every year. Now, to some that might not sound like a lot. Compound that over 40, 50, 60 years, that's a huge number and all of a sudden you're now in retirement, your money's worth next to nothing because inflation's eroded, it backwards. You can't go out and get another job because peak earning years have gone, um, and you've stuffed. Essentially and to me that's risk um being in that situation. No one wants to be there right.
Dr James:I see so really. When let's say that someone applies the financial services compensation scheme argument to their ices, because I see so really. When let's say that someone applies the financial services compensation scheme argument to their ices, because I see people quote this a lot and they're like, oh, I want to diversify my platforms because of this, that's. It's not really a consideration for that.
Anick:So much is it so the answer is it depends on how money is is structured, structured and whether it's sat as a bank deposit or something else. And again it can get quite complicated. So seek advice if you're unsure. But what's quite interesting is many platforms out there will have the FSCS stamp on it to try and say, yeah, look at us, we're approved by a financial service compensation scheme, we're approved by a financial services compensation scheme. When you go into the financial services compensation scheme website type in said platform provider or technology provider, it actually turns out they're not covered. So I know we'll have a chat about it off this, but it's actually quite remarkable the amounts out there that fall foul of this Right, so there's more depth to it than one might immediately perceive, is a nice way to summarize it.
Dr James:Yes, cool. Anyway, rewind before I sidetracked everybody because I wanted to know that. I wanted to know that definitively, because we've never talked about that on the podcast ISIS. Have we just about covered everything for ISIS?
Anick:Yeah, yeah, happy with Isis Pensions incredibly tax-efficient vehicles and one of the main attractive features tax relief. It essentially incentivises us to put money into pension for retirement. If you're a high-rate taxpayer, it essentially costs you £60 to put £100 into the pension, because the remaining £40 is tax relief. Now the actual mechanism, how that's delivered, is quite complicated and there are a few different things, but broadly speaking, most people can put £60,000 into their pension every year. There are incredibly complicated rules once income goes above £200,000, depending on the type of contribution, whether that's personal or an employer.
Anick:An employer contribution is one that's made on behalf of someone, so through a limited company, maybe, or through some sort of employment. Tax relief side of things, too, get very complicated depending on the type of income you have and whether that contribution is personal or employer. So again, take care. I've seen so many situations where someone has tried to make an employer contribution but it's actually personal and the interplay between those two can be incredibly costly, because if someone gets it wrong, it needs to be unwound and it can end up out of pocket good to know and anything that it's worth, anything that's changed or anything new that's worth mentioning.
Dr James:Uh, with the new tax year on the pension front, the biggest thing on the horizon is from April 27,.
Anick:Pensions will be caught within the inheritance tax scope. Now, from my side as a professional, there are so many conversations going on over the mechanism, how platform providers will do this, and there's a lot of kickback. Whether or not it will happen in its current form or as it's designed, we don't know. Hmrc had a consultation period that ended last month or the month before.
Anick:So this summer we're expecting to have more guidance on how those rules can change. So, yeah, previous planning. As we've known, it will likely change, which reiterates the point of checking in regularly. It's not a case of sticking money into a well-known index fund in the world and letting it do its thing. Um, because things change, we have to adapt, we have to change our approaches, um, and it's really important to do so.
Dr James:The NHS pension obviously is complicated.
Anick:But I'm seeing more and more of an interplay between a private pension and the NHS pension. I mentioned the annual allowance a couple of moments ago and that's essentially how much money can be put into a pension over a tax year. It's really complicated to work out for the NHS pension because you basically need to look at input periods and that's essentially how much your benefits increase by the period, and there are various reevaluation factors too. Now, obviously, this will depend on how someone is working and the type of income they are receiving and where it's coming from, etc. But the NHS pension is a defined benefit pension that's a bit of industry jargon for it. It's a pension for life. It doesn't matter.
Anick:Markets could drop by 99% and that pension promise is still there. Granted, if markets drop by 99%, there's some sort of global catastrophe that's about is still there. Granted, if the market's dropped by 99%, there's some sort of global catastrophe that's about to kick off. But that's a different argument. The key thing is here is being very organized, looking at your TRS, knowing what your statements are showing, how much your expected promise is to be. You can look at buying yours where relevant, and for some people that may be appropriate. It might not be further.
Dr James:so that needs to be weighed up within the context of personal circumstances and what's right or suitable for that individual really um, good, big consideration that's new, then, is the or the big consideration for those who are contributing this year, rather, is the McLeod remedy. There's still a little bit of uncertainty on that right.
Anick:Yeah, some people have received statements, some people are still receiving statements and it's it's a it is a funny period because until those statements we're happy with, we can't really go back and backfill unused allowances, which is something we can do with. We can't really go back and backfill unused allowances, which is something we can do with pensions. So until we have received those, those statements, and have conviction in those numbers, I wouldn't be looking to take pension contributions to the line and leave a bit of fat within the equation. So in case numbers don't pan out how we expect them to, it's not, it's not taken right to that limit, which could lead to a load of problems down the line and just to make that extra clear, not pension contributions to your nhs pension, because you can't control that.
Dr James:You know you just get paid what you pay, you get paid and then that is. You're. Basically it comes out of your gross at a predetermined rate. What you mean is how much you can subsequently, how much is subsequently left over, to top up your private pension with correct exactly that.
Anick:The the private pension one's quite an interesting one within the context of tax year and what I was saying about being financially organized, so we had some context to it. Within a tax year we're essentially looking at start period and end period. Now the VFP portfolio 60% equity portfolio has done about 8.5% every year after portfolio costs, since February 2005. So let's say someone makes a £60,000 contribution at the start of the tax year. That means they could expect roughly about £5,000 on the growth in that contribution if it'd been made on the first day of the tax year instead of the last. Now, if we take that £5,000 and compound it at that same rate of return, that would result in £12,000 after 10 years, £26,000 after 20 years and about £60,000 after 30 years. All from getting your skates on being organized and making that contribution at the start of the tax year, because that additional growth is going to compound over a big period of time you know it's.
Dr James:It makes complete sense. I just never really thought about that, for and traditionally, everybody leaves it until the deadline, don't they?
Anick:yeah, and yeah, I get it. People are busy companies. It's a bit more difficult because they want to see the lay of the land before making those sort of contributions. Um, but it's that. You know, in that example there's no guarantee on that return and the uncertainty of outcome is essentially what we mean by risk. It's still better to be getting on with it. Essentially, it's that cliche, isn't it? Everyone's heard of it it's all about time in the markets rather than trying to time the markets.
Dr James:Indeed Limited companies.
Anick:Yeah, we did a great webinar on limited company investing. If you haven't heard it, I'd recommend all listeners go watch it.
Dr James:Actually, you're right. That's a good opportunity to find that episode. I'm going to do that in the background whilst you're talking.
Anick:Fine, we can invest through limited companies. There are so many considerations and, without wanting to repeat the entire webinar, um, I'd encourage people to have a look at it. But there are essentially tax implications at play. Um, if you're going to take money out and pay income tax and dividends and hold it in your personal name, some sort of general account, for some it might make sense to invest via a limited company, for some it might not. Again, it just depends on personal circumstances, requirements, needs, what else is going on, plans, etc.
Dr James:But yeah, you can invest through a limited company and it can be somewhat tax efficient to do so, depending on how it's done absolutely, and that's episode two 357, should anybody be interested of the den who invest podcast how to invest via limited company with Luke Hurley and Annex Sharma of Videre financial planning, and it probably is a good example of an instance in which it is good to take some financial advice, really whenever you're investing in the limited company, correct, annex? Yeah, 100%.
Anick:It can get into all sorts of complexities with holding companies and how that's structured, and into company loans and the different structures at play.
Dr James:Wonderful. Let's talk about personal GIAs now, the final thing that we said we'd talk about today, and the considerations with regards to things that we need to understand when it comes to investing in the new financial year understand when it comes to investing in the new financial year.
Anick:Yeah, so most or some people once they've filled up ISAs um pensions whether or not a investing violence company is a good option or bad option. One other alternative is investing in a personal name um general investment accounts. It's essentially a non-taxed, exempt or tax-sheltered wrapper. So, depending on the investments that are structured, you could be liable for tax on any potential investment, growth or interest received, dividends etc. Or when you make sales, you can potentially pay tax.
Anick:Capital gains tax has changed a lot in recent years. So we used to have a capital gains tax exemption, which was essentially the first X amount of gain wasn't taxed, but that's been reduced over the recent years. Tax rates have changed massively as well. So it's really important, before going down that route, to be crystal clear on the potential tax implications at the end, because most people think about getting money in, but they fail to think about what about getting money out? What's the tax implication? At the moment? Things could change absolutely and the reality is over the next 10, 15, 20 years time they will likely change again, but it's important that we're at least comfortable with what the rules are at the moment and if it ever comes to it, or if any change happens, then we can look at amending along the way as well I guess the next question that all this talk on selecting the correct investment account and the new considerations that we need to have for the new tax year well, you know, we have to bear in mind.
Dr James:Basically, I guess the next question that that spawns is how do you decide what allocation to put in which? How does that look? What's the process?
Anick:really, really good question, james. Asset allocation is so important and wrapper selection and how we do it. The short answer is you need a plan, you need a strategy in place.
Dr James:So over there financial planning.
Anick:We absolutely bang the drum about cashflow planning and for those that haven't listened to previous podcasts, cashflow planning is essentially mapping out where you're at the moment your point A, mapping out the future point B and drawing a line to get there.
Anick:Now, that line to get there is essentially the type of investment, the accounts, how we're going to put money in strategies and down, down, down, tax optimization, etc.
Anick:Once you have that plan in place, you can then take a step back and say what's the portfolio needed to get there, because our view is the portfolio powers the plan.
Anick:Now, without a plan, you're essentially selecting a portfolio without a plan, and having this financial planning first perspective that we do at Vidaire really helps to identify how we should allocate the money. Now, that's essentially a long-winded way of saying once we define that point B, we can then say the most efficient way is allocating this money to this account first, or we actually we need to put money into this account, or actually the most tax efficient way to get to the future state and that could be retiring early, selling the practice, sailing off to the sunset, whatever it is for each individual person. Once we get down to that, or the crux of it. We can then look at the type of account, how much the allocation should be, the type of investment, and and and and and. That way of financial planning is it puts the person at the heart of it and puts the future requirement or future needs, because life isn't a rehearsal. We only get one shot of this, so making sure we get it right and getting these strategies perfect is vital.
