By: 5 January 2018
Cavendish Medical – HMRC triples tax revenue from pension saving breaches

Money Matters

Simon Bruce on why you should seek help rather than pay extra tax


Recent sobering figures reveal that the Treasury increased the tax it collected from savers breaching the lifetime allowance by a substantial 80 per cent in the last year. Over the last five years, the tax revenue has tripled.

Nevertheless, there are still many doctors who will walk blindly into the lifetime allowance tax trap without taking some simple steps to mitigate their tax liabilities.

The lifetime allowance (LTA) limits the total amount which can be paid into a pension while benefitting from tax relief. In 2015-16, HMRC gained £36m from individuals exceeding the allowance – the year when it was reduced to just £1million, catching many savers unaware.

Above the £1m threshold, you will incur punitive tax rates of up to 55 per cent on anything taken as a lump sum and 25 per cent on top of your marginal rate of income tax if taken as income.

With the severe reductions to the LTA limit in recent years, more professionals are being caught in the net. Every middle to senior doctor is likely to breach the lifetime allowance limit due to the nature of making pension contributions into the NHS scheme over a number of decades.

There are pension protection schemes launched by the government which can restore previous lifetime allowance limits but they are often too complicated for many savers to use without proper guidance.

If you are unsure of your position, seek help without delay. Your tax liabilities could be minimised with careful planning.


Simon Bruce is CEO of Cavendish Medical – specialist financial planners for medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006. 

The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.