Doctors look like winning a bitter battle with the government over how to tax treat their pay and pensions.
The NHS has announced proposals giving doctors a flexible tax structure that avoids breaking the annual allowance that sets how much income can be paid into a pension.
Around a third of NHS doctors and GPs earn more than £110,000 a year – the magic number which triggers tax penalties for saving too much into a pension.
The tapered annual allowance restricts how much high earners on with a ‘threshold income’ of more than £110,000 or an ‘adjusted income’ of £150,000 or more a year can pay into their pensions.
How the tapered annual allowance works
Most retirement savers can set aside up to £40,000 a year in contributions that receive tax relief, but those earning £150,000 or more lose £1 of tax relieved contributions for every £2 of income over the threshold.
The taper takes the limit down to £10,000 a year.
This is the problem at the root of calls to change the rules for doctors, who are refusing to work extra hours because of tax penalties on money automatically deducted from their pay packets.
Mark Cheetham, a consultant at Shrewsbury & Telford Hospital NHS Trust, who launched an online petition protestgathering more than 16,000 signatures, said: “Recent changes in pension taxation have reduced the annual allowance which can be put into a pension to £40,000 a year. In 2016, tapering was introduced which can further reduce the annual allowance to £10,000.
Consultation to open
“The combined effect of the tapered annual allowance and inflexible public sector pension schemes is having a catastrophic effect on retention and productivity in the public sector. In particular, in the NHS, where consultants are not able to afford to do extra work for fear of a punitive tax bill well in excess of any income earned.”
The British Medical Association, the trade body for doctors, has written to new Prime Minister Boris Johnson warning doctors are ready to give up their jobs if he does not fix the problem.
The NHS says a consultation is on the way to explain the proposed tax changes in detail – not only for doctors but other public sector workers as well.
