NHS doctors have been “unfairly targeted” by extortionate tax bills on their pensions, as the system penalised health care workers more than any other profession.
One third of savers who breached the “annual allowance”, the yearly amount you can pay into your pension tax-free, were NHS workers in 2019-20, a Freedom of Information request by wealth manager Quilter has shown.
More than 42,350 people paid tax penalties for contributing more than the £40,000 limit into their pension, of which 15,583 were NHS staff. However, many more could face charges worth tens of thousands of pounds, as 18,631 GPs still had not received their 2019-20 annual allowance statement by the end of January.
An additional £949m was contributed to pensions above the allowance, equivalent to £22,400 per person on average. Paying this amount into a pension would incur a £9,000 tax bill, with excess charged at the marginal rate of income tax.
NHS doctors have been refusing extra work and retiring early to avoid devastating tax bills due to “flawed” pension rules, experts have warned.
Doctors taking on extra shifts and working overtime, or receiving pay rises, are at risk of falling foul of the annual allowance, leaving them with enormous tax bills. This is due to the type of pension NHS workers save towards, known as “defined benefit”. Any growth in salary can cause savers to exceed the pensions annual allowance, therefore incurring tax bills.