It is widely known in the healthcare industry that NHS England announced last year they would make good any annual allowance excess charge arising for staff in 2019/20 only.
This came off the back of the announcement that the thresholds for tapering to the annual allowance would be increased from 2020/21, with no intention to make changes to the 2019/20 tax year.
Now that the 2019/20 tax year is over and the tax return filing deadline has passed, additional guidance has been released on how to ensure the NHS Pension scheme pay this tax on your behalf and the steps are as follows:
Step 1 and 2: Check you are eligible for the scheme to pay your tax and make an election on your 2019/20 tax return – in most cases this will have already been completed as the deadline to file this return was 31 January 2021.
Step 3: Complete the scheme pay election forms by 31 July 2021 confirming the information included on your self-assessment tax return and detailing the split between the 1995/2008 and 2015 schemes.
Step 4: Complete the ‘Compensatory Policy’ application form which can be found here: *2019-20 Annual Allowance Charge application form V4 (england.nhs.uk).
The deadline for step 3 to be complete the 31 March 2022 and it needs to be completed after the scheme pays election has been made.
Step 5: You will then receive a letter from the NHS pension scheme confirming receipt of the above forms. And there will be nothing further to do.
In previous years, only steps 1 to 3 were required however, to make use of the Compensatory Policy that pays the tax on your behalf, it is important step 4 is also completed.
If you do not complete this step, the NHS Pension scheme will not pay the tax on your behalf and instead the election will be treated as a normal scheme pay election. This means that the tax due will be paid using your pension benefits, rather than being refunded by the NHS and may therefore affect your entitlement to benefits on retirement.
If you would like our assistance with your NHS scheme pays election forms, please contact your Whiting and Partners contact in the usual way.
More detailed information on the above van be found in the policy guidance issued by the NHS here: PowerPoint Presentation 16.9 (england.nhs.uk)