NHS doctors ‘consider selling their homes’ because of pension tax bills

nhs doctor
nhs doctor

A tax trap has forced doctors to consider selling their homes after being hit with huge bills from HMRC, according to a senior NHS director.

Sir James Mackey, director of elective recovery at NHS England, said large demands from the taxman remained a "big problem" for some clinicians who worked extra hours.

“I remember speaking to clinicians who were getting bills of thirty, forty, fifty thousand pounds, having to think about whether they have to sell their house to be able to pay their tax," he said.

The problem relates to the tax treatment of pension contributions, which can leave high-earning doctors facing tax bills bigger than their overtime earnings in some cases.

Workers currently receive relief on up to £40,000 of contributions each year, though a tapering system limits the amount some high earners can claim, slashing their annual allowance to as low as £4,000 in some circumstances.

The so-called lifetime allowance of how much people can contribute tax free has also been reduced substantially from £1.8m in 2011 to just above £1m today, meaning people with large pension pots who are still working can face tax bills for continuing to top it up.

The problem is being exacerbated by the NHS's extremely complicated pensions scheme.

The Institute for Fiscal Studies (IFS) has previously warned that the annual allowance tapering system had left some NHS workers facing "ludicrously high marginal tax rates", when taking on overtime.

This has contributed to a trebling of doctors taking early retirement since 2008

Sir James said: “That does make people hesitant about doing something, then tripping over a barrier and then getting a big tax bill. It's a natural thing to feel very anxious about."

Sir James, who is part of a team tasked with reducing backlogs, said the issue had caused anger and anxiety among some staff at a time when the health service is struggling to cope with demand.

Speaking at an IFS event, he said: "I spoke with a group of clinicians about it in November who were very angry about it.”

Sir James said some trusts, including his own in Northumbria, had adopted a "pension recycling scheme", where employees who opted out of the NHS scheme for tax reasons received unused employer contributions as additional salary instead.

"It's absolutely not as good as what they came into the service expecting. But I think those days have gone," he said.

The IFS warned this week that the Tories will not succeed in bringing NHS waiting lists down before the next general election, a promise made by Rishi Sunak as prime minister this year.

Roberto Tamsanguan, a GP who also spoke at the IFS event, said backlogs were putting extra pressure on his services.

He said: "I'm seeing lots of patients come back, despite me seeing them ... and referring them on. They need hospital input, but because they can't access that, they often come back to me. It prevents me from seeing someone with a new problem, which then compounds the 'I can't get a GP appointment' [issue]."