Pension Tax Charge Risk Reduced
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- Published: Wednesday, 01 March 2023 07:18
- Written by Guy Tuggle
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NHS Pensions is working to make the pension system more flexible according to a letter sent out to the dentists.
The letter notifies dentists that, among other things, the date of their pension review is changing – this should mitigate the risk of an unexpected tax charge due to pension growth.
The impact of inflation over the last few months has increased the likelihood that dentists and doctors could face unexpected tax charges, sizeable enough to make retirement an attractive prospect according to dental accountants Ross Brooke Dental. Rising inflation exacerbated a situation which was already very complex.
NHS Pensions has confirmed that from 2023 the date used to work out the pension growth for annual allowance tax calculations will be moved from April 1st to 6thApril to ensure that the pension growth calculation will only consider growth in pension benefits above inflation.
Linda Giles of Ross Brooke Dental said: ”This should allay widely publicised fears that 2022/23 annual allowance figures would be severely distorted by the increased inflation currently being experienced. This is welcome news.”
Paul Blaylock, Chair of the BDA’s Pensions Committee also welcomed the steps taken by the Department of Health and Social Care (DHSC). He said the BDA has been advising Government for years of the problems being caused by pensions taxation.
“We identified that the economic climate in the 2022/23 tax year was going to result in many more high pension tax charges being levied on dentists, unless remedial action was taken. These would arise because of a mismatch in the inflationary growth given to NHS Pensions and the allowed inflationary growth by HMRC.
“We sought a change to the underlying tax rules to ensure that this mismatch does not occur, but HM Treasury were not amenable to this. Instead DHSC has consulted on delaying the inflationary uplifts for NHS Pension Scheme members so that the inflationary calculations are aligned.”
The consultation undertaken by DHSC concluded at the end of January. Linda said: “The full outcome is awaited with interest. As always, the devil may well be in the detail!”
Paul Blaylock commented: “Whilst DHSC’s action will alleviate some of the pressure for 2022/23, some dentists will continue to see pension tax charges, which may act as a disincentive to NHS work. “
“The BDA continues to seek long-term reform that will allow our members the ability to better control their exposure to pensions tax charges and remove that disincentive.”
Nathan Poole of Ross Brooke Dental speaking of his company’s approach added: “We should stress that the complexity of the NHS pension should not deter you from joining the scheme. We always ensure any clients who are providing NHS treatment are signed up to it. Superannuation contributions are tax deductible, and the scheme delivers other benefits, such as support in the event of ill-health.”
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