Pension alert: Tax errors found on NHS Annual Allowance Statements – doctors warned
NHS has 'become like a religion' says Calvin Robinson
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Pension allowance rules were introduced in 2006 in an attempt to stop wealthy people from taking advantage of excessive pension tax relief. The current yearly limit is £40,000 but there are tapered annual allowance rules which can come into play and new research shows doctors are being hit by operational problems.
Errors on statements
Linda Wallace, Director of Wesleyan Financial Services, the specialist financial services mutual for doctors, warned advisors are noticing troubling issues.
“Over the past few days, our financial advisers have had a number of clients raise concerns about errors on their NHS Annual Allowance Pension Savings Statements,” she said.
“These letters are sent to members of the NHS Pension Scheme if the growth of their pension has exceeded the annual allowance limit in the 2020/21 tax year.
“While mistakes on statements do naturally happen, we are receiving more requests for help than we usually would in this area.”
For those affected by this, Ms Wallace urged urgent action to be taken.
Ms Wallace continued: “It can be a bit of a shock, and in some cases distressing to receive a statement unexpectedly, or to face a much larger tax bill than expected. If you have received a Pension Savings Statement, and suspect that it might be incorrect, it’s important that you seek advice and confirm the details.
“A financial adviser who understands the NHS Pension Scheme can help you assess where there could be problems with your records, while the NHS Business Services Authority will be on hand to help put any problems right.
“It’s important to note that some doctors will receive a statement they weren’t expecting, and the details will be correct – for example, some clinicians will have received pay rises in the past year that have boosted their pension growth beyond the annual allowance limit, and they will now have tax to pay.
“In these cases, seeking advice from a financial adviser will again be key. They’ll be able to help you understand the implications for your pension, and advise on how to manage your annual allowance liability going forward.”
Ms Wallace provided insight on how these issues could work out in practice. “The type of errors are varied,” she said.
“For example, one of our clients’ full time equivalent salary was incorrectly recorded as more than £130,000, when in fact their actual full time salary was around £92,000 – ultimately giving them an incorrect £140,000 pension input for one of the schemes they were a member of, and pushing them well above the annual allowance threshold. Another had their pension input listed as more than £300,000 – nowhere near the actual amount.”
Britons left with £65 per month in disposable income: Pensions at risk [WARNING]
State pension in shock £1BN shortfall: 134k pensioners owed £9k each [INSIGHT]
‘Not even manifesto promises are off limits’ Sunak may hit retirees [EXPERT]
Income tax changes
On top of these issues, changing income tax rules may hit GPs from 2022. The Government is aiming to simplify the income tax system and accountants warned individual GPs could be hit with higher bills as a result. Unfortunately, some experts expect GPs could drop out of their pension schemes entirely.
In late August, gponline.com reported under the Government’s plans, all businesses, which included GP partnerships, would be taxed on profits arising in a tax year in the future. This is different to how businesses are taxed now and the state confirmed it will consider 2022/23 to be a “transition year”.
As a result of the changes, businesses may experience higher than normal profits, which would raise tax liabilities. Individual GPs may also face significantly high tax bills during this transition year, with unexpectedly high pensionable income impacting their retirement planning.
In response to these changes Graham Leyfield, a national account manager at the Wesleyan Group, explained how GPs will struggle going forward.
“The measures under consultation could mean that GP’s face a spike in tax,” he said.
“While this may only be a one-off hit, it’s important GPs and GP partners have a plan in place for how they’re going to foot the bill.
“Often with tax changes there are wider ramifications, and in this case a year with a surge in income could see some doctors trigger the tapered annual allowance, which reduces the amount of money they can save into their pension tax-efficiently.
“This, coupled with GPs potentially having more pensionable income and therefore higher pension contributions, puts clinicians at a greater risk of facing what can be significant tax charges for simply saving into their pension. To avoid this, we could see some doctors opt out of the NHS pension scheme – a move that could negatively impact their retirement plans. For anyone considering this course of action, it will be essential that they seek professional advice.
“More broadly, there’s a concern that the threat of tax charges could accelerate existing partners’ choice to leave or simply dissuade doctors from taking up GP partnership roles.
“The GP sector is already facing a looming crisis of headcount, and the GP partnership model is showing signs of strain. Measures like these could only exacerbate these issues.
“The end of the tax year also coincides with the time when doctors must complete their quality and outcomes framework assessments. The proposed measures could pile more paperwork on their desks at a time when they need it least.”
Going forward, it appears more focus will be levied on doctors and their earnings levels. New regulations have been implemented which will force GPs and practice employees with more than £150,000 in NHS earnings in the 2019/20 financial year to declare their income by November 12.
The guidance, published on October 5, confirms this information will be made publicly available before the end of the year.
The intention of these changes is to, among other things, “to safeguard public trust” in the GP partnership model.
GPs affected by this will need to self-declare this information through the NHS Digital Strategic Data Collection Service.
Source: Read Full Article