June 2017 Issue 92
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INDEPENDENT PRACTITIONER TODAY
The business journal for doctors in private practice
In this issue Special report Keeping patient data safe
Advice on how to conform with the Data Protection Act when sharing patients’ information P10
Groups: a whole bunch of trouble The billing and collection problems of being part of a group P36
Pensions tax chaos By Robin Stride Independent practitioners are being alerted to gear up for far bigger tax payments than expected from January 2018 following new pension rules. Changes in the pension savings annual allowance rules in the 2016-17 tax year mean many will face an additional hit of £11,000 – and some nearly double that. And specialist medical accountants warn that more consultants, and some private GPs, will be caught by the revised regulations in future years. One accountant told Independent Practitioner Today: ‘Our concern is that, for many consultants, this problem is off their radar and many will be unprepared for the potential problem. ‘We would therefore recommend they take action early and speak to their accountants and independent financial advisers. ‘This is further compounded by the fact that, in many cases, NHS Pensions will not be providing information to enable an accurate assessment of this at an early stage.’ Des Liddy, director at accountants Hall Liddy in Manchester,
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added: ‘The new rules will catch many consultants who will no longer have the fall-back of the NHS Pension Scheme being able to pay the liability.’ He explained that the problem, raised at the Association of Ind ependent Specialist Medical Accountants’ annual conference last month, was twofold. Firstly, the 2016-17 tax year saw a change in the pension savings annual allowance rules. NHS consultants could previously rely on a £40,000 allowance to cover the notional growth in their pension benefits in any year. With the exception of years where they had increases in their pensionable pay, the allowance was usually sufficient to cover the growth. But, since April 2016, the allowance is tapered down based on ‘deemed’ earnings and could be cut to as little as £10,000. The problem lies in what deemed earnings represent, where a taxpayer has taxable income over £110,000. If a consultant’s taxable income exceeds £110,000, then deemed earnings are based on the actual taxable income plus a calculation of the benefits of the pension growth.
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Wealth Manag ement Guide 2017
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Superannuation is losing its ‘super’ How you can beat the Government changes that are trying to quash your plans for later life P40
Ortho-pedalists: New group Total Orthopaedics, based at Highgate Private Hospital, launched with a London to Brighton team cycle ride alongside friends for cancer research. Mr Pinak Ray (2nd from left), Mr Joyti Saksena (3rd from left), Mr Rajiv Bajekal (4th from left), Mr Simon Mellor (2nd from right), Mr Bob Chatterjee (far right). See their group formation story next month
Mr Liddy said if, for example, a consultant had NHS income of £100,000, private practice income of £40,000, rental income of £10,000 and a notional pension growth of £30,000, in the past there would be no further tax to pay, as the pension growth was below the £40,000 limit. But under the new rules, the combined notional income is now £180,000 and, as a result, the tapered allowance is cut to £20,000. As this is below the deemed pension growth of £30,000, then tax is chargeable on the excess of £10,000; in this case at 45%, meaning £4,500 of additional tax. The second issue is who can pay the tax. Mr Liddy said: ‘In the past, if a consultant had an annual allowance tax charge, they always had the option for the NHS Scheme to pay it on their behalf if they did not have the funds to pay it.
‘However, the current rules only allow for the scheme to pay any tax due on growth in excess of the £40,000 allowance.’ Therefore, in the above example, as the growth is below £40,000, the scheme is unable to pay the tax and the consultant must pay it. If this charge fell within the 201617 tax year, then the tax is due in January 2018. To make things worse, it also impacts in the payment on account due in January for the 2017-18 tax year. So, in this case, the additional payment in January 2018 will be £6,750. Mr Liddy said NHS Pensions was only obliged to provide information to a consultant where they have breached pension growth levels of £40,000 in any one year. So if the pension growth is only £30,000, it will not automatically calculate the amount even though there could still be a tax charge due. ➱ continued on page 7