If you have not reviewed your pay slip in a while, you should ensure you are being paid the correct amount. We have seen a high number of pay slips from new clients this year with significant errors.
Although receiving the subsequent large repayment cheque can be gratifying for those missing out on their deserved income, the mistake can cause grave consequences in terms of your pension contributions.
There are harsh penalties for excess annual and lifetime pension savings. If you are on the wrong pay scale, your pension will be greater than projected and could lead to breaches of the tax-free savings limits. Any repayment paid as a lump sum could also trigger a tax charge.
The new ‘tapered’ annual allowance means senior doctors earning over £150,000 from all sources (which includes their pension growth) face a significantly lower tax-free savings limit, down to just £10,000 per year in some cases. The lifetime allowance currently stands at £1,030,000 – a hefty drop from its peak of £1.8million in 2011.
The pay slip is complex and mistakes can be easily missed by busy medical professionals or financial advisers not well versed in every NHS pay nuance. Computer-generated pay details often need a thorough ‘sense check’ to ensure you receive what you deserve, stay on the right side of the taxman and can mitigate any liabilities due.
Note that HMRC will not make allowances for doctors breaching tax limits even if the fault lies elsewhere.
To check your own position, contact one of our advisers on 020 7636 7006.