The annual allowance is a limit on how much your pension can grow each tax year before you have to pay extra tax. As of April 2023, this limit is £60,000 for most NHS staff. However, if you’re a higher earner, your limit might be lower.

If you earn more than £200,000 a year (after pension contributions are taken out), your annual allowance might be reduced. This is called ‘tapering’. The more you earn above £260,000, the lower your allowance becomes, potentially dropping to £10,000 if you earn £360,000 or more.

NHS Pension Statement

The NHS pension scheme will send you a statement if your pension growth exceeds £60,000 in a tax year. This statement shows how much your pension has grown from 6 April to 5 April. If you’re in both the old (1995/2008) and new (2015) schemes, you might receive two separate statements.

If you go over your annual allowance, don’t panic – you might not have to pay any extra tax straight away. You can use unused allowance from the previous three tax years to offset any excess. This is called ‘carrying forward’. From April 2023, you can also offset any negative growth in your old pension scheme against growth in your new scheme.

If you still exceed the limit after using these options, you’ll need to pay tax on the excess amount. You can either pay this directly through your tax return or use ‘scheme pays’. With scheme pays, the NHS pension scheme pays the tax for you, but your pension will be reduced accordingly when you retire.

Pension and GP

For GP members, the situation is slightly different. Due to how GP income is calculated, statements are often delayed. GPs usually need to estimate their position and might need help from an accountant to work out their tax liability.

Important deadlines to remember

You must submit your tax return by 31 January following the tax year. If you want to use scheme pays, you need to submit the form by 31 July following the January tax deadline. For example, for the 2023/24 tax year, the scheme pays deadline would be 31 July 2025.

If you think your pension statement is incorrect, you can ask for the calculations to be checked. This might happen if you’ve received backdated pay or if there are errors in your service record. However, you’ll still need to meet the tax return and scheme pays deadlines even if you’re querying the figures.

To stay on top of your pension growth, it’s wise to request an annual allowance statement each year, even if you haven’t exceeded the standard allowance. You can contact your relevant NHS pension agency:

• England and Wales: NHSBSA
• Scotland: SPPA
• Northern Ireland: HSC

Remember, pension tax can be complex, and it’s often worth getting professional advice, especially if you’re a higher earner or have other pension arrangements outside the NHS.