Workforce/HR/Employment law Pay and Pensions

COVID-19: How pension changes and tax requirements affect returning GPs

Accountant James Gransby answers some key questions

When the Coronavirus Act was passed on 25 March 2020 it included changes to pensions that will allow recently retired GPs to return to frontline duties. The changes also allow retired GPs who have already returned to work to increase their commitment to the NHS without any impact on their pension benefits.

What do GPs need to know?

There are three key changes in the emergency coronavirus legislation relating to NHS pensions1:

  1. The 16-hour rule was relaxed for doctors taking 24-hour retirement.
  2. The rules on pension abatement were lifted.
  3. The requirement for some pension scheme members to reduce pensionable pay by 10% if they continue working was suspended.

In addition to understanding how these changes will affect them, retired GPs will also need to consider their personal tax reporting requirements if they return to work.

What is 24-hour retirement and what is the 16-hour rule?

24-hour retirement only applies to GPs in the 1995 section of the NHS pension scheme. It is a mechanism that allows doctors to start drawing their NHS pension and then return to work. It means taking a one-day break from work and then, in the month following, working for a maximum of 16 hours per week.

With the lifting of the 16-hour rule, doctors who would have been restricted can now work for as long as they wish to each week in the month directly after taking the 24-hour break.

What is pension abatement?

Pension abatement affects members of the NHS pension scheme with ‘special class status’. Special class status allows these members to retire at age 55 years without a reduction in their pension benefits. However, between the ages of 55 and 60, they must not earn more, including their pension benefits, than they did immediately before they retired. If they do earn more their pension payment is restricted – or abated – to keep within the limit.

With the pension abatement rules relaxed, those affected will be able to work without needing to restrict their earnings. This could potentially allow such GPs to work up to an extra two days per week (based on £40,000 pension, and £10,000 per session per year wages).  

Who has special class status?

Special class status is a historical provision applying only to members of the 1995 section of the NHS pension scheme. GPs who have spent part of their NHS service as mental health officers may have special class status. The relaxation of the abatement rules will affect these GPs if they are between 55 and 60 years old and have already taken their pension.

Other grades with special class status include nurses, physiotherapists, midwives and health visitors.

Are 2008/2015 pension scheme members affected by the changes?

Before the changes came in, members of the 2008/2015 pension scheme who had elected to draw down a proportion of their benefits and continue working had to reduce their pensionable pay by 10%. This requirement has now been suspended.

Will any other pension measures help returning GPs?

Last month’s Budget saw the annual allowance threshold for taxable income rise from £110,000 to £200,000.

This means that doctors with taxable income up to £200,000 will now get the full annual allowance of £40,000. The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes.

The majority of GPs will therefore escape the allowance tapering that had caused many to face significant tax charges, although this does not mean that they will avoid pensions tax charges altogether as the tapering is just one part of the equation.

What about personal tax?

According to reports, some 20,000 former NHS workers have returned to the service to help deal with the pandemic. For the GPs among them, the responsibility for reporting their personal tax will depend on how they are engaged.

If they are taking on an employed role this is straightforward. They will be on the payroll and will receive a monthly pay slip showing the tax deducted. If they had only recently left an employer they would need to supply a P45.

GPs returning as self-employed locums prior to, or on, 5 April 2020 will need to inform HMRC as soon as possible and before the deadline of 5 October this year. Self-employed doctors returning after 6 April will have until October 2021 to register with HMRC but they are encouraged to do so before this deadline. For returning locums who have submitted tax returns in the past, re-registering should be simple as they can use their existing Unique Tax Reference Number.

Registering the new source of self-employment with HMRC is not relevant if a returning locum doctor is already continuing to complete a self-assessment tax return (for example, for declaring rental property income) as the figures will be reported in the self-employment pages when the return is submitted.

When will the tax be payable?

The tax will need to be paid on self-employed earnings by the end of the January following the end of the tax year. So for doctors returning to the service now, this would mean the tax becomes payable on 31 January 2022. 

It will be important to keep track of tax-allowable expenses and set aside the money due for tax and, if applicable National Insurance. Many GPs will be taxed at 40% of profits, although some will be taxed in higher marginal bands.

Those below state pension age will also need to pay employee’s National Insurance at up to 9% on some or most of the profits and so this should be saved aside in addition to the tax.

Can returning NHS workers get extra tax relief?

The government has issued an alert about tax avoidance schemes targeting returning NHS workers. The warning signs are schemes which claim to save tax, many involving the use of umbrella company structures. The government has made its position on these very clear –they will be considered to be tax avoidance and treated accordingly.

James Gransby is a partner at RSM UK and a board member of the Association of Independent Specialist Medical Accountants


UK Government. Coronavirus Act 2020. Chapter 7, Part 1: Pensions; Section 45. NHS pension schemes: suspension of restrictions on return to work: England and Wales

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