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NHS to pay doctors pensions tax

Many of you will have seen the unexpected announcement from the health secretary Matt Hancock last week that the government will take the unprecedented step of paying tax bills of NHS staff caught by the ‘tapered annual allowance’ in 2019/20.

In order to encourage doctors to once again take on extra shifts and / or additional sessions, the government has agreed to pay the tax liabilities of clinical staff who generate excess pension contributions for the current tax year only.

This new policy would mean doctors can choose ‘Scheme Pays’ to cover excess pensions charges and then be compensated by the NHS upon retirement – in a move which Simon Stevens, chief executive of NHS England, states as being ‘contractually binding’.

Mr Stevens said the surprise measure was implemented because the forthcoming election had meant that a long-term solution to the problems caused by the tapered annual allowance was unlikely to be found before the new tax year in April 2020.

Although this policy will provide some short-term relief for the many doctors facing punitive tax charges, it will add extra levels of complexity to the already over-complicated pensions tax system. For example, the tax payment is only applicable to charges resulting from excess contributions to the NHS pension, not to those generated by private pensions. There are also some specific policies set out by individual Trusts.

Make sure your adviser has knowledge of working with the NHS pension and is including this significant development into their planning.
For more information, please visit NHS England » Pensions tax annual allowance