Tax Allowances: Health Professions

Treasury written question – answered on 15th June 2022.

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Photo of Stephen Farry Stephen Farry Alliance, North Down

To ask the Chancellor of the Exchequer, with reference to the Answer of 31 May 2022 to Question 8221 on Tax Allowances: Health Professions, what assessment he has made of the potential for inflationary pressures to (a) drive pension growth and (b) cause medics to inadvertently exceed annual allowances and incur associated tax bills.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

The Government is committed to ensuring that hard-working NHS staff do not find themselves reducing their work commitments due to the interaction between their pay, their pension, and the relevant tax regime.

The NHS pension scheme protects pensions in payment by increasing them by CPI and revalues accrued CARE benefits by CPI+1.5% each year.

99 per cent of pension savers make annual contributions below £40,000, the level of standard annual allowance which has applied from 2014/15. Individuals who breach the annual allowance on tax-relieved pension savings can also use an option called ‘scheme pays’, under which they can require their pension scheme to pay their annual allowance tax charge now (in return for an actuarially fair reduction in their pension), provided that the annual allowance charge is at least £2,000 and they have exceeded the annual allowance of £40,000. In England and Wales, the NHS Pension Scheme goes further, allowing Scheme Pays to be used on any annual allowance charges relating to accrual in that scheme.

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