There are some important pension deadlines coming up and many doctors risk missing out on the chance to have their 19/20 Annual Allowance tax bill paid by the government. This article explains what doctors need to know and do before the deadline of 31st March 2022 (11th February 2022 deadline for GPs).
Medics’ Money aims to empower GPs to make better financial decisions and is led by Dr Tommy Perkins, a GP Partner and Dr Ed Cantelo a GP, but also a Chartered accountant and tax adviser.
What is the Annual Allowance Compensation Scheme?
The punitive annual allowance tax charges on hard-working doctors NHS pensions led to some doctors declining extra work. To persuade doctors to increase hours, the Treasury authorised an Annual Allowance compensation scheme which allowed registered clinicians in active service to reclaim NHS pension annual allowance charges relating to the 2019-20 tax year. This will be facilitated using the ‘scheme pays’ process. It means that when you retire, you will be able to claim compensation for any scheme pays reductions relating to 2019-20.
Alarmingly, it seems that at least 7,600 doctors have an AA Pensions tax charge for 19/20 BUT only 2,100 have so far completed the paperwork to allow the government to pay the tax charge for you – free money. Please don’t miss the deadline which is at the latest 31/3/2022 , although PCSE have advised GPs to submit the paperwork by 11 February 2022 to allow processing ahead of the 31st March 2022 deadline.
Prefer to listen? This Medics Money podcast tells you about the 19/20 Annual Allowance compensation scheme and also about another important pensions tax deadline affecting GPs – Final Pay controls.
Who is eligible for the 19/20 Annual allowance scheme?
To be eligible you need:
- To be a clinician who is a member of the NHS England or Wales pension
- Have incurred and annual allowance pensions tax charge for 2019/20
- Elect to pay the charge using scheme pays and not to pay the charge using cash
What’s the catch?
Your final retirement pension will still be reduced by the relevant sum at retirement, but you will receive another payment which will be grossed up for all applicable taxes at the time of payment. The Policy and benefits due under it are guaranteed by the NHS and the Secretary of State for Health and Social Care. They will be administered by the NHS Business Services Authority (NHSBSA). The government will effectively pay your 19/20 Annual Allowance tax bill. It’s as close as you can get to free money, but only if you complete the paperwork in time!
What do I need to do?
- Submit SPE2 to NHSP. Do this as soon as possible. Download the form here.
- Declare this charge on your 19/20 Self-Assessment return.
- Download and submit the compensation form.
You can find the form for England here.
You can also find the form for Wales here.
Submit compensation claim as follows;
- Consultants / Hospital doctors – download compensation form , complete section 1 and 2 and sign form , pass to trust HR department to complete 3, submit return to NHSP once received back by 31 March 2022
- GP’s and non GP clinical partners – download compensation form, complete section 1 and 2 and sign form , upload to PCSE website by 11 February 2022
I’m not sure if I have an annual allowance charge in 19/20?
A common scenario for doctors, especially GPs. Many accountants would recommend you submit either a best estimate of your annual allowance tax bill or a nominal amount of e.g. £10 You can then amend the information on the scheme pays election up to four years later.
Where can I get more advice?
This is yet another example of where specialist medical advice is needed. Which is why we started Medics’ Money. We can match your unique requirements to a specialist medical accountant or independent financial adviser that specialises in doctors and fulfils our rigorous criteria https://www.medicsmoney.co.uk/medics-money-approved/.
This article does not constitute any form of accounting, legal or financial advice and tax allowances and thresholds can change.
