Tapered allowances

Q What is the tapered pension allowance?

Rule changes introduced by former chancellor George Osborne, which came into effect in 2016, mean that people who earn more than £110,000 face higher taxes on pension contributions.

The tapered annual allowance is a taxation threshold which restricts the amount of pension growth individuals are allowed each year before tax charges apply.

It gradually reduces the allowance for those on high incomes, meaning they are more likely to suffer an annual tax charge on contributions and a lifetime allowance tax charge on their benefits.

The tapered annual allowance means that for every £2 of income above £150,000 a year, £1 of £40,000 annual allowance is lost.

The minimum reduced annual allowance someone can have is £10,000.

Q Why is it affecting doctors?

NHS leaders have said the new pension rules mean senior doctors are effectively “incentivised to cut their hours or quit their jobs”.

The rules mean doctors have been turning down additional shifts because taking on extra hours can see them hit with an increased tax bill of tens of thousands of pounds.

Q How is this affecting patients? NHS Providers, the membership organisation for NHS trusts, said last year that NHS waiting lists were soaring because senior doctors were refusing to take on extra work in order to protect their pensions.

The Department of Health and Social Care estimates that one third of consultants and GPs may be reluctant to take on extra shifts on top of their contracted hours because they risk breaching limits on tax relief.

Q What is the government doing about it?

The DHSC launched a consultation in September on proposals that will allow senior clinicians to maximise the amount they can put towards their pension without becoming liable for large additional tax payments.

The department said it wanted to introduce the proposals in time for the start of the new tax year, with the consultation closing in November.