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TAX TIP TUESDAY: Just One Week Until NHS Scheme Pays Deadline

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 


The deadline to elect to use NHS Scheme Pays to take care of your annual allowance overage tax bill is quickly approaching. Wednesday, 31 July is the last day to choose this method of payment, so it’s important to act now.


How does NHS Scheme Pays work?

If you’re expecting a tax bill from exceeding your annual pension allowance, you can opt to use a portion of your NHS pension to pay part or all of the charge and in exchange, your NHS benefits will be reduced.

There are two types of scheme pays available: mandatory and voluntary. As of the 2017/18 tax year, the voluntary scheme pays facility includes the ability to pay a charge if your allowance falls under the £40,000 standard annual allowance.

Members of both the 1995/2008 and 2015 NHS Pension schemes can elect to pay the charges from one or both schemes, but you cannot direct the NHS to pay 100% from one scheme.

Keep in mind that you can only use Scheme Pays to pay for annual allowance charges incurred from NHS pension schemes. And you can only choose to pay the maximum amount of a charge that has already been calculated from the schemes you are a member of.


Stipulations to meet

In order to qualify to be able to use NHS Scheme Pays you must meet the following conditions:

  1. Pension growth in the 1995/2008 Scheme or the 2015 Scheme exceeds the standard Annual Allowance, and
  2. Your total Annual Allowance charge liability is more than £2,000

Scheme Pays for tapered annual allowance

The surge in popularity of the scheme pays is due to the introduction of the tapered annual allowance in 2016. Last tax year, the ability to pay your annual allowance charge through scheme pays came into play, allowing you to cover 100% of your bill. All you need to do is send in your election before the deadline. You can only pay your overage charge for the current tax year and cannot cover any previous tax charges.

Individuals who wish to use Scheme Pays in relation to their tapered annual allowance overage must first exhaust their carry forward allowance from previous tax years.


Help is here to manage your tax charges

In order to complete your election, you’ll need to complete a Scheme Pays Election (SPE2) and return it before HMRC’s deadline of 31 July. If you’re unsure whether or not you’ll actually be subject to an overage charge or not, or think you’ll need assistance completing your election, don’t hesitate to get in touch with one of our specialist advisors.


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