Raising the threshold income at which doctors see their tax-free pension allowance tapered, from £110,000 to £150,000, will not stop medical staff from reducing shifts, the BMA has warned in response to reports the Government is looking at the measures.
There have been suggestions that the Government is considering changing rules affecting the tax-free allowance for pensions, which will mean all high-earners – not just doctors – earning more than £110,000 will be given a tax break.
The measures have not been confirmed but The Times reported today that the tax relief would ensure lower tax-free allowances would only start to apply to people who have an income of £150,000.
Currently, those earning £110,000 and above have their tax-free limit cut, in a tapered manner according to income – and to as low as £10,000 for those earning the most.
It is believed the proposed changes would help to solve the doctors’ pensions crisis – in which medical staff are reducing their shifts to avoid tax charges on pensions.
But Dr Vishal Sharma, BMA pensions committee chair, said: ‘In its election manifesto, the Government pledged to “address the taper problem”, but this proposal would do no such thing.
‘It does not fix the fundamental problem of doctors being forced to limit the work they do to prevent being hit with significant charges on their pensions and many will still in effect be paying to go to work.’
The changes proposed today do not go as far as scrapping the tapered annual allowance altogether, which the BMA has been calling for.
It has also been calling for an end to the cap on how much pension pots are allowed to increase by, tax-free, in a year – which has been set at £40,000 since 2016.
The BMA said removing this annual allowance was the only way to stop doctors from declining shifts in a bid to avoid the tax charges.
Dr Sharma added: ‘The BMA firmly believes that scrapping the annual allowance and tapered annual allowance in defined benefit schemes – as suggested by the Government’s own advisers, the Office of Tax Simplification – is the only viable solution.
‘This will not only get doctors back to work caring for patients, but it is also a more cost-effective option for the Government than raising the threshold income.’
He said: ‘It will enable all doctors to do as much work as is needed without fear of punitive tax bills and save the NHS significant sums by reducing costs spent on locums and outsourcing to the private sector.
‘Crucially, without scrapping the annual allowance in defined benefit schemes, the NHS will continue to haemorrhage doctors at a time when it can least afford to.’
A spokesperson for the Treasury said the department ‘doesn’t comment on speculation about tax changes’.
Maximise your practice's financial potential and compare your performance with peers with Pulse Intelligence. Register for a 30 day free trial.