Accountants warn of more woes for GPs as pension ‘Scheme Pays’ deadline approaches

The 31 July deadline for GPs to ask NHS Pensions to pay their annual allowance tax charge is fast approaching but accountants are warning that a toxic mix of tax rule changes will bring a sting in the tail for many doctors.

This year, for the first time, NHS Pensions may not allow the full amount of the tax due to be covered by the Scheme Pays facility. In previous years Scheme Pays has allowed doctors to ask NHS Pensions to pay all the tax charges arising from excessive pension growth from their pension pot in exchange for a lower pension in retirement, as long as the tax charge was over £2,000.

However, a change in the tax rules means those with taxable income over £110,000 may find their annual allowance tapered down from £40,000 to just £10,000. The £30,000 loss due to tapering cannot be covered by Scheme Pays and a tax charge of up to £13,500 must be met from doctors’ own personal funds. Only Scottish pension scheme members are able to adopt Scheme Pays on the whole amount.

James Gransby, board member of the Association of Independent Specialist Medical Accountants, and head of healthcare at MHA MacIntyre Hudson, said: “These tax charges were due on 31 January 2018 and are already attracting penalties and interest in the eyes of HMRC. However, the figures relate to the 2016/17 tax year and NHS Pensions are not yet in a position to send figures to members of the pension scheme to help them assess their position. Without specialist advice it will be almost impossible for most doctors to work out what tax they might owe.”

Mr Gransby went onto explain that every GP’s situation will be different and urged doctors who think they may be affected to get in touch with their accountant or financial adviser.