Dr Benjamin Holdsworth on the surprise government move to hold on to the workforce
Doctors will have their tax bills covered this year by the NHS in an emergency measure by the government to ease the current workforce crisis. This one-off move would apply only to the tax period 2019/20 and would allow senior NHS staff to choose the ‘Scheme Pays’ option to cover excess charges caused by strict pension savings limits. Their pension would then be compensated by the NHS before they retire.
Many senior doctors had been reducing their hours or choosing to retire early rather than face punitive extra tax charges after changes were made to the amount which can be accrued in pensions tax-free, known as the ‘tapered annual allowance’.
NHS chief executive Simon Stevens said the exceptional in-year move was necessary because the election and subsequent deferral of the Budget had meant that a long-term solution to the problems caused by the tapered annual allowance was unlikely to be found before April 2020.
NHS England expects the announcement to encourage staff to take on extra shifts or additional sessions once again but many doctors will be apprehensive about trusting a contract which will not be truly challenged until they have retired – possibly still several decades away.
Although this news could come as a relief to the many doctors facing significant tax charges, the policy raises several short-term questions such as the ability to disentangle tax generated by individuals’ personal pensions from those arising from the NHS scheme. There are also locally-agreed Trust policies which will impact individuals’ pensions and tax positions.
We are also still awaiting to hear the conclusion of the government consultation to make pension saving more flexible, launched in summer. At turbulent times such as these, it is imperative to check your own situation as soon as possible so that you are able to make well-considered decisions in good time.
Dr Benjamin Holdsworth is director 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. www.cavendishmedical.com
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.