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On 5 April 2026, the 2025–26 tax year comes to an end. With it, some important tax-saving opportunities also disappear. In this article, Medics’ Money sit down with Dr Tony Goldstone (former National Clinical Adviser to the BMA on Pay and Pensions) and Andy Pow (specialist medical accountant) at Medics’ Money and Pow Thomas to explain why Annual Allowance (AA) is such a problem this year — and what doctors can still do about it in the next few weeks.
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Why is Annual Allowance a problem for doctors in 2025–26 – and what can you do?
Annual Allowance has become an issue again because the limits are frozen, but incomes and pension growth are not. While the AA itself sits at £60,000, the income thresholds that determine who is affected have not increased. At the same time, inflation has been high and doctor pay — and therefore pension growth — has risen in nominal terms.
This combination means more doctors are drifting into danger zones, particularly around £100,000 of income, where personal allowance and childcare benefits are lost, and £200,000, where the tapered Annual Allowance can reduce the allowance to as little as £10,000. Crucially, this isn’t just NHS income — it includes private practice, dividends, rental income, interest, and pension income.
On top of this, protections that helped in recent years are disappearing. Carry-forward from earlier “quiet” years is running out, and negative pension growth buffers from 2023–24 are now gone. The result is that many doctors who were unaffected before may now face unexpected tax charges.
The key point is simple: you must estimate your position before 5 April 2026. Only then do you still have options.
If you haven’t calculated your AA, should you just wait for the brown envelope?
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The short answer is no — waiting is too late.
The NHS Pension Savings Statement, often called the “brown envelope”, usually arrives months after the tax year has ended. Many doctors are also missing statements entirely due to ongoing McCloud delays. Even when the statement does arrive, it is purely retrospective — it tells you what has already happened, not what you can still change.
This matters because most solutions, such as adjusting work patterns, planning pension contributions, or managing income timing, must be implemented before 5 April. Annual Allowance is also highly individual, meaning colleagues on the same rota or in the same practice can have very different outcomes.
Instead of waiting, doctors should estimate their NHS pension growth, add up all sources of income, and check how close they are to the £100,000 and £200,000 thresholds. Modelling tools or specialist help can make this far easier. Waiting for the envelope means losing control — and potentially missing valuable opportunities.
If you want Tony, Andy and the Medics Money team to guide you through the whole process then you can join us here – but be quick time is running out. https://medicsmoney.co.uk/nhs-pensions-tax-traps-course/
If you think you’ll have an AA charge, how can you mitigate the impact?
If an AA charge looks likely, there are three broad strategies — but choosing the right one depends on knowing your numbers.
First, it may be possible to adjust work or income. In some scenarios, working more actually leaves doctors worse off, especially around the £100,000 and £200,000 thresholds. Reducing sessions, overtime, or private work can sometimes improve net income once tax and lost allowances are considered.
Second, pensions can be used strategically, including SIPPs. While it sounds counter-intuitive, additional pension contributions can reduce taxable income below £100,000 or £200,000 and improve the overall tax position — even if an AA charge still applies. The critical rule here is never to add pension contributions without first understanding NHS pension growth, as this can make the problem worse.
Finally, if mitigation isn’t possible, the charge must be paid — either personally or via Scheme Pays. For many doctors, Scheme Pays is less punitive than opting out of the NHS Pension, but this should always be modelled carefully.
What next?
The 2025–26 tax year is unusually risky because multiple protections have disappeared at once. Annual Allowance is no longer just a problem for the very highest earners, and doing nothing is increasingly likely to cost thousands — sometimes tens of thousands — of pounds.
The next steps are clear. Estimate your Annual Allowance position now, identify exposure around £100,000 and £200,000, decide whether to adjust work, use pensions carefully, or accept and manage a charge, and seek help or use tools if needed. Most importantly, act before 5 April 2026.
The key takeaway is simple: you don’t need to be a tax expert — but you do need to know your numbers in time to do something about them.
If you want Tony, Andy and the Medics Money team to guide you through the whole process then you can join us here – but be quick time is running out. https://medicsmoney.co.uk/nhs-pensions-tax-traps-course/
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The information provided in this content is for educational and informational purposes only and does not constitute financial advice. You should not rely on this content as a substitute for professional advice tailored to your specific financial situation. The value of your investments can go down as well as up. Past performance is not indicative of future results.
