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The Annual Allowance And The NHS Pension Scheme

Are you a high-earner? You could be affected ...

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In 2015, the Chancellor, George Osborne, cut the annual allowance for higher earners and no-one realised the consequences for the NHS ...

If you're a high-earner you may be affected by this reduction in the annual allowance!

If you're a high-earner you may be affected by this reduction in the annual allowance!

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Introduced in April 2016, it means that anyone with an income greater than £150,000pa will have their annual pension contribution allowance slashed at a rate of 50p for every £1. The bigger the income, the smaller the maximum annual allowance, capped at £10,000, opposed to £40,000 for everyone else.

"This restriction in allowance applies to all high-earners, so why is the NHS in trouble?"

Because the NHS pension scheme did not amend its rules, and as a result, many high-earning consultants and doctors are suffering from additional tax charges. This means they are refusing to take on extra shifts because they don't want to cross certain income thresholds and taper their annual allowance.

This causes staff shortages and grows patient waiting lists! So, what can be done about it, if anything? High-earners may want to opt out of the NHS pension scheme although if a consultant's income is unpredictable, additional tax charges may apply unknowingly.

The NHS and BMA are lobbying for special treatment for the NHS pension scheme, but this probably won't produce a satisfactory solution that will make everyone happy.

So, some NHS trusts are offering cash payments in lieu of employer pension contributions which may alleviate problems with the annual allowance charges. This leads to further costs for both the NHS and the consultants, with cash payments being subject to Income Tax and NIC.

"Would you like to know more?"

If you're a high-earner (especially in the NHS) and would like to find out more about the annual allowance then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.