- NHS Providers warns changing tax rules in Budget will cost “significant” amount
- Reports suggest chancellor will raise annual allowance threshold for clinicians to tackle NHS workforce pressures
The NHS must be “realistic” about how far the government will be able to go when changing pensions tax rules in the forthcoming Budget, NHS Providers has warned, in anticipation of the Treasury confirming a partial solution this week.
Chris Hopson, chief executive of NHS Providers, told HSJ any solution to the NHS pensions crisis based on changing tax rules would likely have to apply to everyone in the wider economy and therefore cost “significant amounts of money”.
“We need to be realistic about how far the government will be able to go,” he said.
Mr Hopson’s comments follow reports the government could raise the annual allowance threshold in Wednesday’s Budget statement. Chancellor Rishi Sunak is expected to increase the pensions tax relief floor from £110,000 to £150,000 for the NHS’ top clinicians, the Financial Times has reported.
Current legislation means a taper restricts how much tax relief is available to earners whose annual income is above £110,000, reducing it from £40,000 to as little as £10,000.
The change would go some way to reducing the impact on NHS high earners, but many have called for the taper to be scrapped altogether, and the British Medical Association has indicated it is not far enough.
However, Mr Hopson urged realism. He added any solution also needs to apply to managers as well as clinicians and also “lower paid staff who have issues that need addressing”.
“We will need to see what solution is put forward in the Budget but it needs to be a definitive and comprehensive solution as there have already been four attempts to solve this problem,” he said.
Introduced in 2016, the aim of the taper was to target the country’s highest earners as they stood to gain the most from tax benefits for their retirement pots under the previous rules.
However, it has had the unintended consequence of punishing doctors with sizeable tax bills for earning extra income from additional shifts or clinical excellence awards.
Officials hope moving the threshold will stop many doctors from cutting down their hours for fear of being hit with these tax bills which are sometimes in the hundreds of thousands of pounds.
It follows NHS England and the government’s agreement to a stop-gap pensions “solution” for clinicians last November in a bid to ease the pensions crisis over winter.
Financial Times, interview with HSJ