‘I’m up to my neck in Covid cases but my tax bill keeps me awake at night’

NHS staff who have taken on extra shifts to aid the fight against coronavirus risk sleepwalking into giant tax bills.

Doctors and healthcare professionals working overtime during the pandemic could face eye-watering charges because of issues with the “tapered” annual allowance for pensions. Tax relief is restricted if workers save more than £40,000 in a tax year. Higherearning NHS staff have been forced to cut down their hours or retire early because of the resultant charges.

The NHS Pension Scheme allows staff to cover tax bills using their retirement pots, known as “scheme pays”. However, staff must apply to use the scheme every tax year.

Following pressure from campaigners, the deadline for applying for relief in the 2018-19 tax year was extended to March 2021. However, workers will need another extension for subsequent tax years. The deadline for a scheme pays application in the 2019-20 tax year is July this year, sparking fears that many staff members could miss out as they battle the pandemic.

Scheme pays agreements allow savers to settle annual allowance tax charges of more than £2,000 through the NHS pension fund by converting tax bills into reduced retirement income.

Dr David Stevens, 57, a full-time clinician whose name has been changed, said he had no choice but to turn down extra shifts to avoid a big tax penalty.

Dr Stevens, who earns £ 110,000 a year, said: “I’m up to my neck in Covid19 cases but the size of my tax bill is what keeps me awake at night.”

The clinician was asked to pay £ 14,000 in each of the past two tax years after his annual pension contribution exceeded the £40,000 limit.

He said: “The size of the tax bills are eye-watering. There are a huge number of people declining work because of this. When I ask colleagues to work extra shifts they have been saying they can’t risk the tax bill it might incur.”

However, three in four doctors are unaware of pension tax rules, according to a report by Wesleyan, a specialist financial adviser. Most people can save £40,000 a year into a pension but this can fall as low as £10,000 because of tapering. Tax charges can be tens of thousands of pounds and in one case a doctor received a £125,000 bill.

Rachael Hall, of adviser Sandringham Medical, who specialises in NHS pensions, urged the Government to ensure workers were not the “unwitting victims” of pension tax charges.

The NHS scheme pays deadline for the 2018- 19 tax year was extended after Quilter, a wealth adviser, warned of the risks that NHS staff faced in an open letter. The firm has called on the Government to consider a similar extension to the 2019-20 deadline.

Graham Crossley of Quilter said: “This is an absurd scenario that penalises hardworking medical professionals and it needs to be rectified.”

Chris Dawson, of NHS Pensions, said the July 2021 deadline for scheme pays applications would be reviewed.

H Telegraph hM Money fi thi hli ht d How Tl first highlighted the plight of NHS pension savers