NHS pension annual allowance

Doctors are being excessively taxed on their pensions. This guidance informs you about your annual allowance statement and your options should you be charged.

Location: UK
Audience: All doctors
Updated: Wednesday 20 July 2022
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The annual allowance is a threshold which restricts the amount of pension savings you are allowed each year before tax charges apply.

The standard annual allowance is currently £40,000.

 

Tapered annual allowance 2020/21

  • Adjusted income includes all pension contributions (including any employer contributions). Threshold income excludes pension contributions.
  • In the NHS pension scheme, you add pension growth to threshold income to get adjusted income.
  • If your threshold income is above £200,000 and your adjusted income is below £240,000 you will be subject to the standard annual allowance.
  • If your threshold income is above £200,000 and your adjusted income is above £240,000 then your annual allowance will be reduced. For each £2 that your adjusted income exceeds £240,000, your annual allowance threshold is reduced by £1. If your adjusted income exceeds £312,000 or over then you will have a reduced annual allowance of £4,000 only.
  • If your threshold income is under £200,000 you will not be subject to the taper irrespective of the level of adjusted income.

Use the HMRC tapered annual allowance tool to calculate if you are subject to tapering.

The NHS pension scheme will not necessarily know if you are subject to tapering and if you are subject to the taper you should request a statement.

 

Your annual allowance statement

The pensions agencies issue statements at the beginning of October relating to the previous tax year. Statements issued in October 2022 will relate to pension growth in the 2021/22 year.

GPs

This is not the case for GPs due to the certification process timeline. Statements issued in 2022 are likely to relate to 2020/21.

GPs can expect to receive a statement for the 2020/21 years in July 2022 following submission of the 2020/21 certificate of pensionable profit/type 2 forms.

GPs are therefore required to estimate their position to be able to pay charges when due and apply for scheme pays.

Read more about pension taxation and using scheme pays for GPs.

Nations

NHSBSA (England and Wales) and the HSC (Northern Ireland) will automatically issue statements if the combined growth between the 1995/2008 and 2015 schemes exceeds the standard annual allowance.

The SPPA (Scotland) is currently unable to issue combined statements and you will need to request a statement to ensure that your combined growth does not produce a tax charge.

 

What your statement includes

The scheme will provide you with details of the current year's growth details and that of the three previous years. Unused allowance in these years may be carried forward to offset any tax charge. The relevant limit will be detailed against each year (when the limit was previously greater).

Pension input start date

Pension input start date indicates the beginning of the year being assessed.

Pension input end

Pension input end date indicates the end of the year being assessed.

Annual allowance

Annual allowance details the actual or notional limit during the period.

Pension input amount 

Pension input amount details the growth in NHS benefits during the PIP (pension input period).

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Annual allowance compensation

See how you could benefit from the annual allowance compensation scheme 2019/20 - introduced to combat potential tax charges on clinicians who want to work more and help their patients but can't without being charged.