NHS Pension & Annual Allowance Accountants

NHS PENSION AND ANNUAL ALLOWANCE ACCOUNTANTS

Annual allowance calculations, scheme pays elections and McCloud remedy statements for NHS clinicians.

The annual allowance is the single most misunderstood tax charge in medicine. It is not a charge on what you paid into your pension; it is a charge on how much the promised pension grew. That is why a consultant or GP can receive a five-figure tax bill in a year when their take-home pay hardly moved — and why so many of these charges are calculated, or reported, incorrectly.

TaxDigit calculate the position properly, apply everything available to reduce it, and make sure the result is reported correctly on your tax return.

What we do

• Calculate the pension input amount for each scheme and each year, and check it against your pension savings statement.
• Test the taper using threshold and adjusted income, which requires your whole tax position, not just your NHS pay.
• Apply carry forward from the previous three years before accepting that any charge is due.
• Prepare scheme pays elections and advise whether to use them.
• Work through McCloud remedy statements and any revised earlier-year positions.
• Report it correctly on self assessment — including the scheme pays boxes people routinely miss.

The annual allowance in 2026/27

• Standard annual allowance: £60,000.
• Tapered annual allowance: applies only where threshold income exceeds £200,000 and adjusted income exceeds £260,000. The allowance then reduces by £1 for every £2 of adjusted income above £260,000, to a minimum of £10,000. Both tests must be met — a high salary alone does not trigger it.
• Money purchase annual allowance: £10,000, where it applies.
• Carry forward: unused allowance from the previous three tax years, provided you were a member of a registered pension scheme in those years.
• Lifetime allowance: abolished on 6 April 2024. It was replaced by the lump sum allowance of £268,275 and the lump sum and death benefit allowance of £1,073,100.

Scheme pays — the practical detail

Scheme pays lets the pension scheme settle an annual allowance charge on your behalf, in exchange for a permanent reduction in your benefits. There are two routes.

Mandatory scheme pays is available where your total annual allowance charge liability for the tax year exceeds £2,000 and the pension input amount in that particular scheme exceeds the standard annual allowance. Note that the £2,000 test looks at your total liability for the year, not scheme by scheme — a very common error, and one that leads to invalid elections. Where the conditions are met the scheme must accept the election, and liability passes to the scheme.

Voluntary scheme pays covers other cases, including charges arising from the taper. It is offered by the NHS scheme but you remain personally liable to HMRC for the charge, which matters if anything goes wrong.

The deadline is the same for both: 31 July in the year following the year in which the tax year ends. For 2025/26 that is 31 July 2027. Where the scheme issues a revised pension savings statement late, the deadline can be extended. Missing it usually means paying the charge personally.

McCloud, rollback and remediable statements

All active members of the 1995 and 2008 sections moved to the 2015 scheme on 1 April 2022. Under the public service pensions remedy, service between 1 April 2015 and 31 March 2022 was rolled back into the legacy scheme, which can change pension input amounts — and therefore annual allowance positions — for those years.

Affected members may receive a Remediable Pension Savings Statement. Not everyone does, and where one arrives it can revise earlier-year charges in either direction. These need working through with the tax returns for the years concerned rather than being filed away.

NHS pension employee contributions from 1 April 2026

Contribution rates for the NHS Pension Scheme in England and Wales are tiered by pensionable pay. From 1 April 2026 the tiers are:

• Up to £13,259 — 5.2%
• £13,260 to £28,854 — 6.5%
• £28,855 to £35,155 — 8.3%
• £35,156 to £52,778 — 9.8%
• £52,779 to £67,668 — 10.7%
• £67,669 and above — 12.5%

Scotland and Northern Ireland operate separate schemes with their own rates and administration.

Who this affects

• Hospital consultants — particularly after a merit or clinical excellence award, or a significant pensionable pay increase.
• GP partners — where profits, and therefore pensionable earnings, move sharply between years.
• Salaried GPs and SAS doctors with additional pensionable sessions or solo income.
• Dentists in the NHS scheme, and senior nurses and practice managers with long service.
• Anyone who has received a pension savings statement or a remediable pension savings statement and does not know what to do with it.

Useful official sources

We would always rather you read the primary source than a firm’s summary of it. The NHS Business Services Authority publishes guidance on the annual allowance and on the public service pensions remedy; HMRC publishes the current pension scheme rates and allowances; and the British Medical Association maintains detailed guidance for members.

Frequently asked questions

What is the NHS pension annual allowance?

It is the limit on how much your pension can grow in a tax year before a tax charge applies — £60,000 for 2026/27. In the NHS scheme the measure is the increase in the capital value of your promised pension over the year, adjusted for inflation, not the contributions you or your employer paid.

Why did I get a charge when my salary did not go up much?

Because pension growth and pay growth are not the same thing. A merit award, a change in pensionable pay, a promotion part-way through a year, or unusual movements in GP pensionable profits can all produce a large input amount from a modest pay change.

Does the taper apply to me?

Only if your threshold income is over £200,000 and your adjusted income is over £260,000. Both tests. Adjusted income includes the pension input amount itself, which is why it needs calculating before you can even tell whether the taper bites. This is the calculation most commonly got wrong.

What is carry forward and can I use it?

Unused annual allowance from the previous three tax years can be carried forward, provided you were a member of a registered pension scheme in those years. It is applied after the current year’s allowance and often removes a charge entirely. Always check it before paying anything.

What is the difference between mandatory and voluntary scheme pays?

Mandatory scheme pays applies where your total charge for the year exceeds £2,000 and the input amount in that scheme exceeds the standard annual allowance; the scheme must accept it and takes on the liability. Voluntary scheme pays covers other cases — including taper-driven charges — and you remain personally liable to HMRC.

When must I make a scheme pays election?

By 31 July in the year following the year in which the tax year ends. For 2025/26, that is 31 July 2027. A revised pension savings statement issued late can extend the deadline, but do not rely on that.

What is a Remediable Pension Savings Statement?

It is a statement issued under the public service pensions remedy showing revised pension input amounts after service between 2015 and 2022 was rolled back into the legacy scheme. It can change annual allowance positions for earlier years, sometimes producing a refund rather than a charge.

Do I still need to worry about the lifetime allowance?

The lifetime allowance was abolished on 6 April 2024. Two allowances replaced it — the lump sum allowance of £268,275 and the lump sum and death benefit allowance of £1,073,100 — which control the tax-free element of lump sums rather than capping the pension itself.

Do I need to report the charge on my tax return even if the scheme pays it?

Yes. The charge and the scheme pays election both have to be reported on your self assessment return. Omitting them is one of the most common errors we see when we take over a doctor’s tax affairs.

Can you help if I have several years to sort out?

Yes, and it is common. We work back through the pension savings statements and remedial statements year by year, recalculate each position and correct the returns where necessary. It is methodical work rather than difficult work.

Information correct as at 12 August 2026. This page is general information about UK pension tax and NHS Pension Scheme administration and is not advice for any particular person; the calculations depend on your full financial circumstances. We are accountants and tax advisers, not regulated financial advisers, and nothing here is investment or pension transfer advice. Please speak to us before acting on anything you read here.