By Ian Quinn
Thousands of GPs are to be hit by a Government crackdown on tax relief for pensions, the Department of Health has admitted, with some set to face an extra bill of up to £10,000 a year.
The Government is pushing ahead with plans to slash £4bn off pensions tax relief for high earners, with changes due to come into effect next April.
The DH has released evidence estimating that 10,000 members of the NHS Pensions Scheme will be hit by reductions in the annual allowances for tax-relieved pensions benefits from £250,000 to £50,000 per year, warning the scheme will be ‘disproportionately’ affected by the move because of the ‘relatively large’ numbers of high-earning staff and contractors.
The new rules target pension scheme members, both public and private sector, receiving consistently high annual and/or one-off increases in the value of their pension benefits.
The report says: ‘The NHS has the most members likely to be affected – in the region of 10,000 – primarily GPs, medical consultants and very senior managers.’
Dr Andrew Dearden, chair of the BMA’s Pensions Committee, said some GPs would find themselves caught in a ‘perfect storm’ by the changes, which will hit the highest earning GPs who have consistently made high contributions to their pensions over a long period of time the hardest. Those who have been paying pensions for 20 to 30 years are among those most likely to be affected.
Dr Dearden said: ‘These people may find themselves with a significant tax bill at the end of the year. For some people it will be between £5,000 and £10,000 extra tax.’
A second DH document adds: ‘HMRC (Revenue and Customs) has estimated that around 85% of public sector staff will be outside the scope of the new arrangements and this will include the vast majority of NHS Pension Scheme members. The NHS Pension Scheme will, however, be affected disproportionately because of its relatively large numbers of higher paid staff and contractors.’
It also revealed figures suggesting that the changes would impact on 31% of NHS Pension members earning between £100,000 and 150,000 per year, and 90% of those earning more than £150,000.
Bob Senior, chair of the Association of Independent Specialist Medical Accountants, said: ‘The impact of these changes will be felt by those GPs who are full-time, high-earning, paying full added years on their pensions and in the last 10 years of there career.’
He said a GP on pensionable earnings of £150,000 with £2.7m dynamised career earnings could expect to be hit with an extra £1,800 tax bill.
However, both Mr Senior and Dr Dearden said the changes to tax relief would not hit as hard as plans which had been proposed by the previous government to cap tax relief on higher earners’ pension contributions, which would have reduced tax relief to the standard rate of 20% for pension scheme members earning over £150k pa.
The BMA has warned some GPs could face an extra tax bill of up to £10,000 a year The BMA has warned some GPs could face an extra tax bill of up to £10,000 a year