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PAYE? You still need to understand your NHS Pension tax position!

It is not enough to assume that NHS Pensions will tell you if there if you must pay pension tax.

Changes made to pension legislation over many years and successive governments have changed the rules by which all types of pensions, including the NHS Pension Schemes, operate. These changes have become necessary due to several factors. As an example, the alteration to retirement ages is, in large part, due to increased life expectancy and consequently the higher cost of funding index linked pensions for longer.

Some of these changes mean that extra charges, paid alongside your income tax can become payable by a pension scheme member where that individual is for example a high earner and / or has very high pension benefits. The charges fall under the income tax rules and regulations, they are not optional and if applicable, need to be considered when completing annual self-assessment tax returns.

It is not enough to assume that NHS Pensions will tell you if you must pay pension tax. If you have exceeded the £40,000 annual allowance you will receive a Pensions Savings Statement (PSS) at some point, but these can take many months to come through. And by then, HMRC will have already expected you to notify them of the charge and the related tax, accruing interest on any tax deemed due, even if you are taxed at source – i.e. PAYE.

There are numerous circumstances where you won’t receive a PSS but could be in line for charges, including entitlement to reduced allowances and personal pensions that NHS Pensions are unaware of. This, of course, assumes that your NHS pension record is complete, correct and up to date!

Completing Type 1 and type 2 pension forms and paying NHS pension contributions does not guarantee your pension ‘record’ – the history of pensionable earnings and contributions – is up- to-date and of course if some of these forms are missing then your pensions record will not be updated!

It is better to check the completeness of your pension records now and get warning of any potential annual allowance pension charges so you can minimise any tax. BW medical accountants offer a Pension Management Service which can provide information to help reduce the possibility of a surprise and unwanted tax demand for which provision has not been made.  It can also play a part in helping you plan for your retirement and give you the information you need to consider the options open to you.

If you want to learn more, please call our client services team on 0191 500 6930 or email enquiries@bw-medical.co.uk

Keith Taylor FCA

Keith Taylor FCA

Director of Medical Services

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  • BW Medical Accountants have a good working knowledge of General Practice and are keenly aware of the challenges Practices face within the changing environment of the NHS.  We have been very impressed by the way BW Medical continue to deliver the range of services they provide from Accounts to Tax and NHS Pension advice. 

    We have found Practice consultation and engagement from BW Medical specifically helpful to shape the future of the Practice.

    GP Partner
    GP Practice, Newcastle
  • We had no hesitation in moving to BW Medical Accountants.  For any business your accountant is integral, and for us one of the most important factors to this relationship is to have a personal and trusting approach, which BW have undoubtedly achieved. 

    The service we receive and the interest they show in our practice assures us that they have a genuine interest in us and commitment to us.  More importantly they are always helpful and polite to answer even the dumbest of questions!  They give us confidence and reassurance knowing that they are always very up-to-date with all the numerous changes within general practice and we would have no hesitation in recommending them to other practices seeking a professional and personal accountancy service.

    Jackie Rotherham, Practice Manager
    The James Street Family Practice, Lincolnshire
  • We changed to BW Medical Accountants and I would say we have just had the most transparent and understandable end of year meeting and the best planning advice I have ever had in 16 years of practice.

    GP Partner
    Cumbria

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