Seven in 10 doctors will miss chance to slash pension tax bills

Thousands of NHS workers on the front line face devastating tax bills as a result of punitive pension rules and “grossly unfair” deadlines.

Seven in 10 doctors will be hit with hefty tax charges – due to the “tapered” annual allowance – and will have to settle bills from their own savings, a Freedom of Information request, submitted by wealth firm Quilter, has revealed. This is due to a forthcoming deadline many doctors will miss.

Pension tax rules have caused costly problems for higher- earning NHS staff, leaving them tens of thousands of pounds out of pocket when they exceed the pensions allowance.

Doctors can settle bills using the “scheme pays” system. This converts tax demands of more than £2,000 into a smaller pension, with the scheme paying HM Revenue & Customs. The deadline to claim this benefit for the 2019-20 tax year is March 2022, but experts have warned this was not enough time due to the onerous paperwork required.

The deadline has already been pushed back from July 2021. However, three quarters of doctors have missed the deadline every time in the past three years, the FOI showed.

Graham Crossley of Quilter called for an end to the “ridiculous” cut off date and said it was “grossly unfair”.

“The system is overly complicated and there is a big risk a lot of the doctors – who were promised they wouldn’t have to pay tax up front – will pay with their own savings. Some have had to remortgage their house,” he added.

Most workers can save £40,000 a year into a pension tax free, but this tapers down to just £ 4,000 for high earners. Breaching this limit – unavoidable for doctors as a proportion of their earnings is put into a final salary scheme – triggers a tax bill. One doctor faced a demand for £125,000.

The scheme pays deadline for the 2018-19 tax year was extended to March 2021 after Quilter warned of the risks. Even so, only 38pc of those facing the penalty applied in time. Around 8,500 doctors paid the demands out of their own pocket.