In April the government announced a one per cent pay increase for all NHS consultants in the UK, following recommendations from the DDRB (the Doctors’ and Dentists’ Review Body) in the autumn. Clinical Excellence Awards (CEAs) will also be subject to the same rise.

While any increase in pay is a positive step, you should be aware that as the pay rise is pensionable, your annual allowance could be impacted. The very nature of the NHS pension (a salary related defined benefit scheme) means it is all too easy for small increases in pensionable pay to significantly increase your pension savings beyond annual limits and amount to hefty tax charges.

The annual allowance – the total sum which can be paid into a pension each year while still benefitting from tax relief – is now just £40,000. However, if you have an ‘adjusted income’ of over £150,000 your annual allowance will be reduced by £1 for every £2 of income with a maximum reduction of £30,000 for those earning £210,000 or more. Adjusted income includes not only your NHS salary but benefits in kind and pension contributions as well as taxable income from other sources (such as private practice, dividends and rental income etc) which adds to the complexity of the income calculation.

It is imperative to find out your total annual contributions across your NHS and also private pensions as the onus is on the individual to tell HMRC if you are liable for the charge.

Are you sure of where you stand? To check your position, contact one of our financial planners in confidence on 020 7636 7006.