Following lobbying from the Association of Independent Specialist Medical Accountants (AISMA) and other bodies, changes in the rules around pension annual allowance tax charges will bring welcome relief to doctors in England and Wales facing unprecedented tax bills in January 2019. The changes mean higher earning doctors can elect for the NHS pension scheme to pay over the tax on the full annual allowance charge, instead of having to find significant amounts of cash themselves from their own funds.

For the 2016/17 tax year members of the pension scheme could only ask the scheme to pay the tax on the excess over the standard annual allowance of £40,000. However, some higher earning doctors have their annual allowance tapered down to £10,000 which meant their tax bills were significantly higher than in previous years (see example).

The Department of Health and Social Care has now instructed that for 2017/18 the NHS pension scheme should pay over all the tax on the excess over the tapered allowance. The Scottish pension scheme has already adopted this rule change.

AISMA representative David Walker, a tax adviser at accountancy firm MHA Moore & Smalley, said: “The change in the rules will alleviate the immediate cashflow worries of doctors facing many thousands of pounds in extra tax charges.” Mr Walker went on to explain: “Doctors who elect for the scheme to pay the tax should understand that there will be a larger reduction in final benefits paid by the pension scheme. This will need to be factored into any decision the doctor makes about whether to elect for the whole amount of tax to be paid by the scheme.”

“Advice should be sought from a suitably qualified financial adviser who has specialist knowledge of the NHS pension scheme.”

Example
In 2016/17 a doctor with pension benefit growth of £60,000 and a fully tapered allowance of £10,000 (and no unused allowances available from earlier years) could ask the pension scheme to pay the tax on the £20,000 above the standard £40,000. However, he or she would have to pay the tax through their self-assessment on the balance of £30,000 above their tapered allowance of £10,000.  For a 45% tax payer, this amounted to a further £13,500 in their January 2018 payment, plus payments on account for the following year.

In 2017/18 a doctor in the same situation can now ask the scheme to pay the tax on the whole excess of £50,000.

Commenting on the Welsh government’s announcement that GPs in Wales will receive a 4% pay rise, backdated to 1 April this year, Jim Duggan, AISMA board member said:

“For too long now Welsh practices have struggled due to a lower level of funding compared to their counterparts in England and indeed Scotland. It is refreshing to see the DDRB recognise this and take steps to alleviate the financial pressures hard working practices have faced. There is still room for improvement and I look forward to seeing further increases in the funding for Welsh practices to help secure their future viability.”

In the September issue of Practice Management magazine, AISMA member Rebecca Gascoyne-Richards offers a round-up of tax relief on mileage and car expenses. Download the full article

Letter to The Rt Hon Matt Hancock MP, from AISMA on behalf of its members, highlighting the significant issues surrounding the recruitment and retention of senior health professionals within the NHS, which are being driven in part by the changes to the taxation of pension savings introduced in the 2015 Summer Budget.

Read the letter in full

Following the notification to GP members of the NHS Pension Scheme from NHS England and NHS Business Services Authority, alerting them to discrepancies between some of the pensionable earnings and contributions data which has been provided to NHS BSA, Lizzy Lloyd, board member of the Association of Independent Specialist Medical Accountants, said:

“This has come as no surprise to accountants dealing with the fall-out from Capita’s mishandling of GP pension contributions since September 2015. All GPs will be concerned but locums are particularly worried about the data discrepancies since they have no way of checking whether the pension payments they submit to PCSE each month are received.

“Even when Total Reward Statements are available from NHS Pensions they are often inaccurate and GPs should get them checked by a specialist financial adviser or accountant who understands the scheme.”

Read the full story on GPonline.com

An analysis by Pulse of the latest earnings and expenses statistics, released by NHS Digital last week, includes comments from AISMA chair Bob Senior. He says a smaller workforce is creating a ‘vicious circle’, whereby the remaining GPs ‘don’t really have the option of reducing sessions to avoid paying nasty tax rates’. Read the full article here.

Who do GPs pay different pension contributions? In the July/August 18 issue of Practice Management magazine AISMA accountant Faye Armstrong answers a common query from practice managers about GP pensions contributions. Click here to download the full article

AISMA Chairman Bob Senior adds his comments to an article written by Pulse news editor Sofia Lind, on the Government’s 4.2% contractual funding uplift. Click here to read the full article.

The Association of Independent Specialist Medical Accountants (AISMA), the national network of accountancy firms specialising in the healthcare sector, has appointed Jim Duggan and Lizzy Lloyd to its executive board.

Duggan is a partner at MW Medical where he looks after GP practices, locum GPs, consultants and hospital doctors in Bristol, Gloucestershire, Wales along the M4 corridor and throughout the south and south-west.

Lloyd is a partner at Larking Gowen and acts for GP practices, private hospital consultants, locum GPs and GP federations throughout Essex, London and East Anglia.

Extending a warm welcome to the two new board members, Bob Senior, AISMA Chairman and head of healthcare at RSM UK, said: “Jim and Lizzy are already regular contributors to the work of the Association and bring valuable experience to the board in the areas of new contractual structures and statistical analysis.

“As a body the Association is growing in expertise and its members are well-equipped to help doctors deal with the financial complexities of the ever-changing UK healthcare environment.”

The NHS pay deal agreed by union leaders and ministers earlier this year is likely to lead to increases in staff salaries, particularly at the lower end of the pay scales. In the June issue of Practice Management magazine, AISMA accountant Andrew Burwood looks at the impact on general practice and how practice managers can prepare for the new NHS wage deal. Click here to download the full article