The pensions annual tax free allowance is being increased from 6 April 2023 which is good news for the medical community.
It’s estimated by the office of budget responsibility that the annual tax free allowance being increased will keep as many as 15,000 highly skilled people working at a time when they are most needed.
With Doctors striking over pay adding to an already depleted NHS trying to recover from the effects of Covid-19 this is welcome news for health industry workers and for anyone that needs the NHS.
Tax rules surrounding doctors NHS pensions has been an issue for many years with substantial numbers of senior doctors being subject to heavy and often unexpected tax bills.
In many cases Doctors have had to draw funds from their pensions to cover the cost of the tax bill typically caused by the pension annual tax free allowance threshold and pensions lifetime allowance.
Leadership from within the British Medical Association have been campaigning on behalf of their members for years and have been key in achieving fairness in the rules on how pensions are taxed.
Consultants prepared to take industrial action over pensions
The unhappiness led to 86% of consultants backing industrial action in a BMA consultative ballot and considering options like working less hours or even early retirement.
Losing such valuable members of the NHS would be very damaging at a time when the health service needs all the support it can get.
Health and Social Care Secretary, Steve Barclay, said:
“These changes will ensure doctors are not disincentivised from remaining in their roles in the NHS and taking on extra hours – meaning more will continue treating patients and helping to tackle the backlogs which will deliver one of our key priorities.
“This comes alongside our wider reforms to the NHS Pension Scheme which introduce new retirement flexibilities to support older staff meaning they can re-join the scheme and continue to build their pension, ensure the interaction between the pension tax system and inflation doesn’t impact their standard of living, and allow staff in primary care networks to access the Scheme.”
What is the pensions annual tax free allowance?
The pensions annual tax free allowance has been improved from £40,000 to £60,000 which is a big boost for doctors caught up in the tax on pension troubles.
A big increase in the pensions annual tax free allowance means that most doctors hopefully won’t need to consider reducing working hours to avoid heavy tax bills directly related to pension contributions.
Pensions lifetime allowance
The pensions lifetime allowance was the maximum pension saving amount (from all pensions excluding state) you were allowed before incurring a tax charge.
Before April 2023 the lifetime allowance was set at £1,073,100 after which the rate at which you paid tax was:
- 25% if you receive pension payments or cash withdrawals.
- 55% for pension lump sum payments.
From April 2023 the government has abolished it completely with the pensions lifetime allowance removed for everyone and not just doctors.
Before April 2023 the pension lifetime allowance threshold was forcing doctors to consider choices like taking early retirement.
Removing the lifetime allowance should mean doctors don’t need to consider retiring early because of how their pensions are taxed.
BMA pension department
The BMA has a pensions department which is dedicated to giving guidance and representation to BMA members who have occupational pension issues.
If you are a member of the BMA and need some support or representation you can contact the BMA pension department by phone or email:
Phone: 0300 123 1233
Email: [email protected]
