The Government has extended a tax deadline to stop NHS workers sleepwalking into giant tax bills while on the frontline of the fight against coronavirus.
Doctors who are taking on extra shifts during the pandemic were at risk of ending up out of pocket because of continuing issues with the “tapered” annual allowance.
However, a deadline that allows staff to pay tax bills using their pension, known as “scheme pays”, has been extended by three months after Quilter, a wealth adviser, warned of the risks that NHS workers faced in an open letter seen by Telegraph Money.
Scheme pays allows savers to settle annual allowance tax charges of more than £2,000 through the NHS pension fund without needing to pay cash upfront. It converts the tax bill into a reduction applied to the pension in retirement.
Pension tax rules have caused huge problems for higher earning NHS staff, with many receiving hefty tax bills, resulting in some GPs cutting down their working hours or retiring early.
Most people can save £40,000 a year into a pension but this can fall as low as £10,000. Breaching the limit triggers a tax bill due immediately for income that may not be received for decades. Charges can be tens of thousands of pounds and in one case was as high as £125,000.
The deadline to claim for the 2018-19 tax year at the end of July was fast approaching, but Quilter called on the Chancellor Rishi Sunak and Matt Hancock, the Health Secretary, to extend this cut off by at least six months.
The Government has responded with a three-month extension to the end of October, which will be reviewed again at the end of July taking into consideration the level of the pandemic at that time.
This gives NHS staff, many of whom are working extra hours, some breathing room to get their finances in order.
Graham Crossley, of Quilter, said: “As doctors dedicate their time to the rest of us they are struggling to juggle their time and find room for planning their finances. Doctors are risking their lives and the least we can do is ensure they are not being financially penalised for it.”