George Montgomery works as an NHS and private dentist. He believes the effective 60 per cent tax rate between £100,000 and £120,000 is too punitive
In our How I Manage My Money series, we aim to find out how people in the UK are spending, saving and investing money to meet their costs and achieve their goals.
This week we speak to George Montgomery, 40, lives in Stamford, Lincolnshire, with his wife, Lucie, 39, and their two children, Tilly, 10, and Felix, nine. George, a dentist in the NHS and private practice, uses pension contributions to reduce his income to below £100,000 and says the 60 per cent “tax trap” deters him from working full-time.
Monthly budget
My monthly income: Two-thirds of my income comes from private work, while one-third comes from my NHS job. I have around £3,000 coming in from my NHS work each month. Before tax and professional expenses, I make between £6,000 to £6,500 from my private practice dentistry work. My wife’s NHS salary is about £40,000 pro-rata over three days, primarily working from home.
My monthly outgoings: Mortgage, £1,250; council tax, £273.10; groceries, £500; gas and electric, £212; water, £45; broadband, £29; two mobile phones, £30; subscriptions like Netflix and Amazon Prime, about £40; car fuel, £60; trains, £100; childcare, £200; eating out and takeaways, £200; day trips and activities with the children, £150; money into joint savings account, £250. I add about £500 a month to a private pension and around £500 to £600 a month to my stocks and shares ISA. A squash club we go to costs £120 a year. Our house insurance is £500 per year and we pay £830 a year to insure two cars. Any surplus income is used to offset our mortgage account.
I knew I wanted to be a dentist from the age of 15. After studying biomedical science at the University of Sheffield, I studied dentistry at the University of Bristol, qualifying in 2012.
I’m a dentist in both the NHS and private practice. I take home about £3,000 per month from my work as an NHS dentist, and between £6,000 to £6,500 from private work.
I’m an associate dentist, which means I don’t own my own practice. I simply turn up, do the work, and when I leave, my time is my own. I don’t have to deal with employing staff or managing a business, so it’s essentially a nine-to-five role. My current schedule is Monday, Wednesday, Thursday and Friday, with Tuesdays off. The Tuesday off allows me to do school runs and contribute more at home.
I think the pay I receive is fair given the years of training and effort that went into reaching this stage, though I couldn’t maintain my lifestyle if I worked 100 per cent in the NHS.
What I enjoy most about being a dentist is the people I meet. I enjoy building trust with patients who have had poor dental experiences in the past. The dentistry itself I could take or leave, but the human side of the job is very rewarding.
I’ve always been relatively careful with money. I research purchases thoroughly and avoid impulse-buying. I’ve never been in any serious debt. As my dad was an independent financial adviser, saving for retirement has been on my radar from a fairly early age. For the first decade of my career I was well covered by the NHS pension, but with my NHS income now halved, I’ve had to put more aside separately.
I would like to retire at the age of 55. If I’m healthy, I wouldn’t mind tapering down to work one or two days a week to bridge the gap before I can draw my NHS and private pensions. To do this comfortably, I estimate I would need a resilience fund of £250,000-plus. Hopefully by this point the mortgage will be cleared, and downsizing may also be an option.
Saving money into pensions is a priority for me and I add £500 a month to a self-invested personal pension (SIPP), split across a mix of UK and global trackers. I have about £20,000 in my SIPP. I contribute between £350 to £400 a month to my NHS pension. I used to contribute £800 per month to my NHS pension. If I stopped paying in now, by retirement, I believe my NHS pension would provide around £14,000 per year.
I could not survive solely on the state pension, though I plan to use it as part of my income. Ideally, I’d like a combined pension pot worth £700,000, though it’s difficult to predict exactly what’s required. It will depend heavily on when I stop working and my general health.
I’ve always been happy to pay tax and see it as making an important contribution to society. However, the effective 60 per cent tax rate between £100,000 and £120,000 is too punitive. It discourages many self-employed people, myself included, from moving into that bracket. This probably loses the Treasury money.
I use pension contributions to reduce my income to below £100,000, and the tax trap is a factor in me not working full-time. Even when my children are older, unless the rules change, I don’t see myself returning to full-time hours. If the tapering rules around £100,000 were adjusted, I think HMRC would raise more revenue. There must be many people in my position who are limiting their earnings to avoid this penalty.
Aside from saving money in pensions, I add £250 a month to a joint cash savings account for emergencies. I also add around £500 to £600 a month to a stocks and shares ISA via Stratiphy’s app whenever I can. I have about £14,000 invested and will move some of the money into my SIPP at the year end.
My investments are spread across multiple stocks rather than just relying on one, which reduces my vulnerability to big losses and should provide me with steady returns over the long-term.
I’m not motivated by money for its own sake. The figure in my bank account doesn’t make me happy. But I do want to maintain the lifestyle I have and provide for my family.
After expenses, I currently earn between £85,000 to £90,000 per year, and I’m content with that. I don’t feel I need more, though I’d like a bit more for household savings and holidays abroad.
Whether I manage to retire at 55 remains to be seen, but I’m hoping my investments and steady pension contributions will help me get there, with compound interest playing its part.
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