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By Wesleyan

More doctors being caught out by the annual allowance

doctors pension
3 min
Female medical professional wearing scrubs with serious expression

Research from Wesleyan shows an increasing number of doctors are exceeding the annual allowance, with inflation to blame for pushing more and more medics over the tax limit.

Given the current crisis in UK healthcare services, it’s an issue of real concern - potentially driving experienced clinicians out of the profession at a time when they are so desperately needed.

To understand the scale of the problem, Wesleyan Financial Services submitted a Freedom of Information request to the government. Here’s what the data showed:

Officers and Practitioners exceeding annual allowance (AA)

Tax Year
Exceeded AA
Has Scheme Pays
Exceeded AA & Has Scheme Pays
Total Scheme Pays amount

Figures for practitioners are likely to increase further as more of their 2021/22 income data is submitted to the NHS Pension Scheme later this year.

Madeleine Dowling, technical manager at Wesleyan Financial Services, said: “Unfortunately, it was no surprise to learn that the number of doctors currently known to have exceeded the AA in 2021/22 was 55,765, an increase of 68% on the previous tax year. This is likely to increase again as Practitioners submit their 2021/22 income figures to the NHS Pension Scheme.

“Delving deeper into the numbers, we can see that the vast majority – 53,061 – of these are classed as Officers, who are mainly hospital doctors, a group which has seen the number of AA breaches increase by 90%.

“The NHS pension scheme is linked to the Consumer Price Index (CPI). Because inflation has been so high, and the AA limit hasn’t been increased by a proportional amount, it’s pushed more doctors over their limit, and means the risk of doctors having to pay additional tax has also increased.”

Jonathan Halberda, Specialist Financial Adviser at Wesleyan Financial Services, said: “We all know that hospitals are under the most extraordinary pressure, and hospital doctors feel the responsibility of their jobs very deeply. Every single one is committed to doing all they can to support patients, but – in part because of such high inflation – they may face eye-wateringly large tax bills for doing so, sometimes tens of thousands of pounds.

“This is a situation where they’re being effectively punished for their dedication. Ultimately, it means experienced doctors may feel they have no choice but to limit or reduce the hours they work to minimise the risk of being hit with a punitive tax bill; feel they have to opt out of their pension; or even retire altogether.

“This is a complex issue that has been causing doctors confusion and costing them money for too long now, prematurely pushing some of the NHS’ best people away from the profession and the patients they serve so well.

“It’s important to stress that there are ways for doctors to potentially manage the risk of facing tax bills – within a certain range – while still being able to continue doing as much as they can for patients. For example, they may be able to undertake more non-pensionable work, such as providing locum services. Given the complexity, it’s important that they seek professional advice to help fully understand the various options they have.

“Doctors facing unexpected tax bills also do have options for how to manage the impact on their personal finances, including Scheme Pays. This is where the NHS Pension Scheme pays their annual allowance tax charge, and they pay it back, with interest, when they retire.

“However, the amount they owe will ultimately be debited from their NHS Pension benefits, reducing their final retirement income. Whether Scheme Pays is the right choice for a doctor very much depends on their personal circumstances – again, seeking the advice of a specialist financial adviser can help them assess if it’s the right choice for them.”

This story was first featured in the Daily Telegraph.

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