Individuals are limited in how much they can pay into a pension scheme without incurring a tax charge. As this limit is currently £40,000 per annum many GPs are finding themselves affected.
The NHS scheme is a ‘defined benefit’ scheme where your limit is based on the amount your pension grows in a tax year. This is not based on your superannuation contributions (which are simply to fund the scheme as a whole) but instead on a somewhat notional calculation using set rules laid down by HMRC.
To calculate this accurately you need the ‘Pensions Annual Allowance Savings Statement’ issued by NHS pensions. Obtaining this can be a lengthy and involved process so it’s worthwhile having Moore Scarrott Healthcare manage this on your behalf.
It’s possible to ask the pension scheme to pay the charge on your behalf, known as ‘scheme pays’, however some challenges exist:
- You must elect for scheme pays by 31 July of the year after the tax year in question, however NHS pensions have often not issued the statements within that timeframe
- Any charge incurred will take the form of a loan to you from the pension scheme which will attract interest and be deducted from your overall pension. For younger GPs, this could lead to a huge overall loan over their working life to be deducted from their final pension – particularly if there are a number of separate tax charges over several years
Despite these challenges, scheme pays may still be the most appropriate method for you to pay an additional tax charge. Moore Scarrott Healthcare can work with you to ensure that a provisional election is put in place even if the exact figures have not been provided by NHS pensions.
To find out how Moore Scarrott Healthcare can assist you to balance your tax, pension provision and workload get in touch.
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