Tens of thousands of high earners will receive a pension tax windfall under plans to solve a staffing crisis among NHS doctors, reports The Times Online.
The Treasury is preparing to give tax relief to high earning doctors to stop them being hit with huge bills, which are causing them to turn down extra work and harming patient care.
Once workers earn more than £110,000 (known as ‘Threshold Income’) they face more stringent taxes on their contributions. Under the NHS scheme, in which contributions are calculated automatically and are outside the control of beneficiaries, senior consultants have been landed with unexpected tax bills of tens of thousands of pounds.
As doctors turned down extra shifts to avoid breaching the limit, the problem was said to have led to cancelled operations and lengthening NHS waits. A&E performance hit a record low last month, with one in five patients waiting more than four hours.
Boris Johnson promised on Wednesday to “get those waiting lists” down as his government hinted at scrapping the target.
Before Christmas ministers approved an emergency measure under which the NHS promised that any doctors hit by tax bills this winter would have their incomes topped up in retirement to what they would have been without the charge.
However, few doctors had taken up the offer in recent weeks, sources said. “Trust is the number one problem. People just don’t buy that they’re going to see this money,” one added.
The Conservative manifesto promised to address a problem “which causes many [doctors] to turn down extra shifts for fear of high tax bills” and ministers and officials have been floating solutions with medical leaders.
The Times understands that in discussions this week the Treasury proposed raising the “cliff edge” threshold from £110,000 to £150,000 at which pension contributions are counted as earnings and lower tax-free allowances start to kick in.
It was argued that this would solve the problem for the majority of doctors. Consultants’ median earnings are £112,000 and it is estimated that 90 per cent would fall below the new limit.
The change would apply to all workers, whether in the public or private sector, and could cost the Treasury significant sums, given that the present policy is due to raise £1.3 billion this year.
Paul Johnson, director of the Institute for Fiscal Studies, said it was hard to estimate exactly how much the change would cost, saying that the present rules were overly complex. A more fundamental review both of the tax system and public sector pensions would be welcome.”
At Mantles, we believe the current system is far too complex and over-restrictive – why have both a complex Annual Allowance restriction AND a Lifetime Allowance limit ? Hopefully, this will mean we now get more joined up thinking on pensions for everyone.