[UK] March 2020 Budget to Present Tapered Annual Allowance Response?

In September 2019, the government announced a consultation on “increased flexibility” for senior clinicians in the NHS Pension Scheme.  This was, in part, a recognition that the tapered annual allowance means some clinicians can face high tax charges leading them not to take on extra NHS work.

The tapered annual allowance is a complicated calculation that reduces the annual allowance.  For every £2 adjusted income goes over £150,000, the annual allowance for that year reduces by £1. The minimum reduced annual allowance you can have is £10,000. 

Matt Hancock, the Secretary of State of Health and Social Care had already written that the treasury would allow a “Scheme Pays” mitigating solution for 2019/20 only.  This takes the effect of settling an annual allowance tax charge arising from increased pension saving in the NHS schemes in 2019/20.  But this is a temporary fix. 

In a reply to a written question, Edward Argar MP, Minister of State at the Department of Health and Social Care, indicated that the government was assessing the consultation.  He wrote that the government “recognises that the annual allowance may contribute to decisions from NHS consultants to retire early or limit their NHS commitments” and they are “listening carefully”.  This seems to indicate that an announcement may be made at the budget on a long-term solution rather than a temporary fix.  Although, even though the government has promised a review it has not made any commitments to abolish the Tapered Annual Allowance.

Global Payroll Association Comment

Note that we are reading into Mr Argar’s reply that an announcement will be made at the March budget.  In any event it is good to know that the government are looking at the issue. 

But as we have said before, issues caused for high earners and the consequences of the Tapered Annual Allowance do not just apply in the NHS and certainly not only for NHS staff in England.   Maybe we are being too optimistic that the budget will herald a radical review of tax relief and pensions that will apply to all sectors across all of the UK. 

In September 2019, the government announced a consultation on “increased flexibility” for senior clinicians in the NHS Pension Scheme.  This was, in part, a recognition that the tapered annual allowance means some clinicians can face high tax charges leading them not to take on extra NHS work.

The tapered annual allowance is a complicated calculation that reduces the annual allowance.  For every £2 adjusted income goes over £150,000, the annual allowance for that year reduces by £1. The minimum reduced annual allowance you can have is £10,000. 

Matt Hancock, the Secretary of State of Health and Social Care had already written that the treasury would allow a “Scheme Pays” mitigating solution for 2019/20 only.  This takes the effect of settling an annual allowance tax charge arising from increased pension saving in the NHS schemes in 2019/20.  But this is a temporary fix. 

In a reply to a written question, Edward Argar MP, Minister of State at the Department of Health and Social Care, indicated that the government was assessing the consultation.  He wrote that the government “recognises that the annual allowance may contribute to decisions from NHS consultants to retire early or limit their NHS commitments” and they are “listening carefully”.  This seems to indicate that an announcement may be made at the budget on a long-term solution rather than a temporary fix.  Although, even though the government has promised a review it has not made any commitments to abolish the Tapered Annual Allowance.

Global Payroll Association Comment

Note that we are reading into Mr Argar’s reply that an announcement will be made at the March budget.  In any event it is good to know that the government are looking at the issue. 

But as we have said before, issues caused for high earners and the consequences of the Tapered Annual Allowance do not just apply in the NHS and certainly not only for NHS staff in England.   Maybe we are being too optimistic that the budget will herald a radical review of tax relief and pensions that will apply to all sectors across all of the UK.