As winter approaches, the NHS has taken radical action by proposing to cover senior doctor’s tax bills, in a bid to improve delays in treatment after the pension tax crisis. This proposal has been agreed to by the Department of Health & Social Care for NHS England.
In 2016, the introduction of the ‘tapered’ annual allowance which limits high earners on claimable tax relief has resulted in senior clinicians not taking on extra NHS shifts, due to the crippling tax bills they are now faced with.
This decision by the NHS, which will cost hundreds of millions of pounds, will grant front-line senior NHS staff early access to their pension pots to help cover any potential charges in their 2019/20 tax bill. The government will then top up each pension pot before the consultant reaches retirement.
Different solutions are being offered to doctors depending on whether they work in England or Scotland, as different tax rules apply in each region. Whereas NHS England will have the tax bills covered by the government, NHS Scotland may be allowed to recycle pension contributions into their pay.
In Scotland, any clinical staff who can evidence that they’re likely to breach the 2019/20 annual allowance and incur tax charges, will be able to get their employer pension contributions paid to them as part of their basic pay.
Financial advisors have noted that NHS England Clinicians will work out better for most doctors, as they no longer need to worry about the tax bill in the immediate and will continue to enjoy the benefits of a higher pension in retirement.
With experts warning that the NHS is likely to buckle under the rising demand as the colder weather sets in, the aim is to guarantee consultants and GP’s will return to taking on extra duties in the NHS over the winter period and with any luck avert the worst winter crisis on record.
As the NHS and government attempt to find a longer term solution to this crisis, it is becoming increasingly important for clinicians to get their tax calculations correct for 2019/20. This current news suggests a one off ‘fix’ for this winter and we would advise that you speak to an accountant to get an understanding of how this will affect you in April 2020 and for future retirement planning. At Wilder Coe, we have put together a simple fact sheet on how the NHS Pension Scheme can impact your tax liability which can be downloaded on our website. If you have any questions, don’t hesitate to get in touch with us on 0207 7724 6060 or online.
This blog has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this blog without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this blog and, to the extent permitted by law, Wilder Coe LTD, or its Members, Partners, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this blog or for any decision based on it.
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