Tax bills force doctors to consider selling homes
A TAX trap has forced doctors to consider selling their homes after being hit with huge bills from HMRC, according to a senior NHS director.
Sir James Mackey, director of elective recovery at NHS England, said large demands from the taxman remained a “big problem” for some clinicians who worked extra hours.
“I remember speaking to clinicians who were getting bills of 30, 40, £50,000, having to think about selling their house to pay their tax,” he said.
The taxing of pension contributions can leave high-earning doctors facing tax bills bigger than their overtime earnings.
Workers currently receive relief on up to £40,000 of contributions each year, though a tapering system limits the amount some can claim, slashing their annual allowance to as low as £4,000 in some circumstances.
The so-called lifetime allowance of how much people can contribute tax free has also been reduced substantially from £1.8m in 2011 to just above £1m today, meaning people with large pension pots who are still working can face tax bills for continuing to top it up.
The problem exacerbated by the NHS’S complicated pensions scheme.
The Institute for Fiscal Studies (IFS) has warned that the annual allowance tapering system had left some facing “ludicrously high marginal tax rates”, when taking on overtime.
This has contributed to a trebling of doctors taking early retirement since 2008. Sir James said: “That does make people hesitant about doing something, then tripping over a barrier and then getting a big tax bill. It’s a natural thing to feel very anxious about.”
Sir James, who is part of a team tasked with reducing backlogs, said the issue had caused anxiety among some staff at a time when the health service is struggling to cope with demand.
At an IFS event, he said: “I spoke with a group of clinicians about it in November who were very angry about it.”
Sir James said some trusts, including his own in Northumbria, had adopted a “pension recycling scheme”, where employees who opted out of the NHS scheme for tax reasons received unused employer contributions as additional salary instead.
“It’s not as good as what they came into the service expecting. But I think those days have gone,” he said.
The IFS warned this week that the Tories will not succeed in bringing NHS waiting lists down before the next general election, a promise made by Rishi Sunak as Prime Minister this year.