New pension tax rules could be implemented by the start of the new tax year

13 January 2020

In its manifesto, released back in 2019, the Conservative government pledged to work to fix the tapered annual allowance problem that is impacting the pensions of doctors.

The results of the government’s review on the topic should be released in the Budget, being held on 11 March, and could be implemented by the start of the new tax year, on 6 April 2020. This timeframe has been predicted by the British Medical Association (BMA), who government confirmed it would work in conjunction with, alongside the Academy of Medical Royal Colleges to solve the “taper problem”. Government also confirmed that it would solve the issue within the first 30 days after winning the election. There was no discussion of completely disregarding the taper and no commitment to examine the issue outside of NHS staff pensions.

The BMA encouraged the government to fix the problem for the NHS and wrote to both the prime minister and the chancellor straight after the election to make sure that the review was being held as pledged in the manifesto.

The chair of the BMA pensions committee, Vishal Sharma received feedback to confirm that the review, led by the economic secretary, is currently underway and the BMA will meet with the government in the near future. Speaking to the Financial Adviser, he said:

 “The outcome of this review will be announced in the upcoming Budget on 11 March and the BMA are clear that the necessary reforms need to be in place for the start of the next tax year.”

A Treasury spokesperson also said:

 “We want to make sure that doctors spend as much time as possible treating patients. That’s why we are urgently reviewing the pensions taper to ensure doctors aren’t turning down extra shifts for fear of high tax bills. 

“We keep the tax system under constant review and make changes at budget, in the context of the wider public finances.”

The BMA has confirmed that it would like to see the taper scrapped completely. The tapered annual allowance reduces the allowance for individuals who have higher salaries which means that the likelihood of them receiving annual and lifetime tax charges on their pension contributions is high.  For every £2 of adjusted income that exceeds £150,00, £1 of the annual allowance is removed. This rule has resulted in large numbers of doctors reducing their hours, leaving the pension scheme and some have even retired early to avoid being subject to tax charges.

A fix was put in place for the 2019-20 tax year only whereby the government promised to pay the tax bills of clinicians who were members of the NHS Pension Scheme in England. Experts will want to see a more permanent fix implemented and hope that this will be in place in time for the new tax year.

 


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