Thousands of GPs will be hit by the Chancellor’s reduction of tax relief for pensions savings, GP leaders and accountants have warned.
In his autumn statement today, George Osborne announced the Government will reduce the amount of money people can save annually and in their lifetime savings before incurring tax.
From 2014-15, individuals will receive tax relief for the first £40,000 of their pensions contributions, down from £50,000. They will also stop receiving tax relief when their lifetime pension contributions exceeds £1.25m – down from £1.5m.
A BMA spokesman said: ‘The change to the tax allowance on pensions savings will affect thousands of doctors – not just the highest earners. Doctors with long service in the NHS could be facing a large tax bill. This is on top of the whole raft of changes the government is implementing to NHS pensions including raising the normal pension age and hugely increasing contributions.’
Dr David Bailey, deputy chair of the BMA’s pensions committee, added: ‘Our initial assessment of the £50,000 annual allowance was that it wouldn’t affect that many GPs. The £40,000 allowance will affect a significant number more.’
Paul Samrah, a medical accountant with Kingston Smith, warned GPs should consider all their pensions arrangements and not just their NHS pension.
He said: ‘Bringing the lifetime allowance down to £1.25m will bring more into the net. At £1.5m it was only the high earners. It might now affect those GPs who aren’t close to the retirement age.’
The additional tax GPs will face would be taken out of their pension pot when they claim their pension, rather than immediately, he said.
Bob Trunchion, a spokesperson for the accountancy firm MHA MacIntyre Hudson, said: ‘The reduction in the Pensions Annual Allowance from £50,000 to £40,000 will have a disproportionate affect within the medical profession, particularly for GPs whose pension fund is uprated annually by a dynamisation factor over which they have little control.’
‘A GP with 30 years’ service and earning in the region of £120,000 could easily fall into a tax charge by exceeding the annual allowance.’
Keith Taylor, head of medical services at RMT Accountants & Business Advisors, said: ‘Reducing these allowances… will make this impact felt even more deeply and widely, and could also further exacerbate the tax problems we’re expecting to see hit many GPs in the new year and beyond.’