Individuals receiving Clinical Excellence Awards may be disappointed to find out that their new award could have a significant impact on the tax they pay.

Any increase in your pensionable pay could force you to unwillingly breach the annual allowance rate. This is the total amount you can pay into your pension each year before attracting a tax charge.

The annual allowance was cut to just £40,000 per annum in April 2014. Most senior doctors will find they will breach this rate by the yearly increase in NHS pension benefits alone, before considering the impact of private pension contributions.

In addition, from April 2016, individuals earning over £150,000 will see their annual allowance reduced even further by £1 for every £2 of income with a maximum reduction of £30,000 for those earning £210,000 or more. 

A new CEA will be backdated to April 2015. Unfortunately, this means you may only find out if you are liable for a tax charge long after your tax records for 2015/2016 have been submitted. The NHS Pensions Agency will probably not write to those breaching the annual allowance cap until this Autumn – and sadly little can then be done retrospectively.

You may be able to use your allowances from the last three years, known as ‘carry forward’, but your exact financial position and the implications for your tax status, can only be ascertained with detailed analysis.

Are you confident of your position? Will your award trigger a hefty tax bill?