What NHS dentists need to know about pension allowances
NHS Dentists are at risk of fines and additional tax charges from HMRC if they fail to report when they’ve exceeded their Annual Allowance.
Being part of the NHS’s final salary pension scheme means that the Annual Allowance is calculated differently compared to a workplace or private pension.
You could be putting in less than £40,000 a year and still exceed your Annual Allowance. As a consequence, you not only have to pay additional tax, but you could also incur a fine.
Why is this my responsibility?
HMRC require you to calculate the tax you owe and report to them via your tax return. This includes calculating your position against the Annual Allowance – so unknowingly exceeding your allowance is not a defence.
Why do I need to worry about this now? The new financial year isn’t until next April?
NHS Business Services will provide your Annual Allowance figures each year. Being proactive will keep you informed about any potential tax liability and help you plan, rather than having to scramble around to pay the additional tax you could owe.
Getting an Annual Allowance calculation sooner means you can lessen the risk so you don’t fall into a tax trap.
While it is great news the Government are consulting on the implications of the Annual and Lifetime Allowances on medical staff, this consultation will not be concluded until April 2020. As such, those who potentially have an issue, still need to take action.
Is this really going to affect me?
Calculating the tax implications of pensions has become increasingly complex for dentists. You should check if you’re over contributing to your pension, regardless of how close you are to retirement.
This is a complicated area of financial planning. Get advice to be sure that you’re making the right decisions.
Read our guide to annual allowances here.
