GPs could face huge tax bill as result of inflation

High-earning GPs could face higher tax bills as a result of inflation figures which could see pension pots grow.

GPs with large pension pots who are still working close to full-time in a high-earning practice could see the majority of their pension growth taxed when they settle their tax bill next year.

Changes to the annual allowance on pension contributions that took effect in April 2016 mean that GPs with a gross income in excess of £150,000 from all sources, including pension growth, have their £40,000 allowance ‘tapered’ down.

Accountants are warning that current inflation, based on September’s Consumer Price Index, is likely to be double that of the previous year’s.

Although this means GP pension growth will be higher, it will also see more high earners pushed over the £150,000 income threshold and see their personable annual allowance reduced, leaving them liable for income tax on contributions above this.

Bob Senior, medical services lead at accountancy firm RSM UK, told Pulse: “The £150,000 [annual allowance] is based upon income from all sources: GP, part-time gardener, buy-to-let.

“So it’s gross income from all sources before any pensions deductions, it also includes the growth in the pension over and above their contributions.’

“A significant proportion of GPs are breaching that £150k, particularly towards the back-end of their careers when they’ve got quite big pension pots built up.”