Tax  

Scottish govt presses chancellor on pension tax

Scottish govt presses chancellor on pension tax

Scottish health secretary Jeane Freeman has called on the Chancellor of the Exchequer to find a permanent solution to fix the issue of the tapered allowance impacting NHS doctors.

In a letter, published today (February 3), Ms Freeman urged Sajid Javid to “take decisive action” to ensure pension and taxation rules stop having negative outcomes for senior clinicians across Scotland and other areas of the UK and for a solution to be found before April.

The tapered allowance, which gradually reduces the annual allowance for those on high incomes, is causing doctors across the NHS to stop contributing to their pensions, cut their hours or retire early to avoid significant tax bills.

The Scottish government introduced a temporary opt-in policy from December whereby NHS staff have the option to get their employer pension contributions paid as part of their basic pay.

Doctors in England were promised the government would cover their tax bills for the 2019/20 financial year.

But this interim measure is due to stop on March 31, 2020 and no permanent solution has been found.

In the letter Ms Freeman called on the Chancellor to find a lasting solution or the Scottish government would continue to find its own solutions.

Ms Freeman said: “Considerable effort has been expended to date in trying to offset the very real consequences for NHS staff and services of UK government tax policy. 

“The Scottish government will continue to act to mitigate the harmful impact of pensions taxation rules on NHSS staff and on frontline service delivery from April 2020 should this prove necessary. It is however clear that a permanent solution is urgently required, and can only be offered by your department.”

She urged Mr Javid to use the budget on March 11 to offer a solution.

Ms Freeman added: “It is incumbent upon you to take the opportunity of the March budget to fully and finally remedy the situation, and allow our NHS staff to get on with delivering care without fear of the consequences. These concerns are echoed across the entire UK, and I urge you to act.”

The tapered allowance, introduced in 2016, means that for every £2 of adjusted income above £150,000 a year, £1 of annual allowance will be lost.

This adjusted income is calculated by adding the threshold income to the value of pension savings. The taper applies to individuals who have a threshold income – the gross income minus any tax relievable contributions such as pension contributions – above £110,000.

Last month (January 16), it was reported HM Treasury official were considering raising the tapered annual allowance threshold income from the current £110,000 to £150,000.

It was argued such a solution would solve the problem for most doctors who have been turning down additional work for fear of large tax bills, since consultants’ median earnings are £112,000 and it is estimated that 90 per cent would fall below the new limit.

amy.austin@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.