Commenting on the publication of the Department of Health and Social Care’s NHS pensions scheme consultation response, Deborah Wood, Vice Chairman, the Association of Independent Specialist Medical Accountants, said:
“Despite the widely-held concerns raised during the consultation about the financial impact of the 6.3% increase in employer pension contributions, the increased rate of 20.6%, plus a 0.08% administration charge, will be implemented from 1 April 2019.
“For 2019/20 a transitional approach is being applied so that 6.3% will be paid directly by NHS England to the pension scheme. Therefore, from a cashflow point of view there will be no immediate effect on GP practices. In 2020/21 GP practices will pay the full 20.68% but should have received funding to cover the extra cost.
“However, the tax impact on individual GPs, who are deemed to pay their own employer contribution for tax purposes, needs to be understood. If HMRC takes into account the additional 6.3% when determining exposure to the pension annual allowance and subsequent tax charges, then even more GPs could find themselves affected by annual allowance tax charges on a regular basis.
“It will be essential for GP practices to see a clear correlation in their funding allocations for the additional 6.3% being added to their budgets out of which they will then have to make the additional employer contributions on a regular monthly basis from April 2020 onwards.”