More than 500 doctors have unnecessarily paid more than £17.7m in Lifetime Allowance (LTA) charges, according to new research.
The figure was revealed via a Freedom of Information request.
It was announced in the Budget that the Lifetime Allowance had been scrapped in part to help stop senior doctors reducing hours or retiring early due to significant tax penalties once allowance limits had been reached.
At the end of 2021, Financial Planner and wealth manager Quilter believed that a substantial number of doctors had missed out on applying for LTA protection and had paid more than necessary in tax.
At the time through an FOI, it emerged that 400 doctors had overpaid LTA charges totalling £11m.
The new FOI data show that 506 doctor pension scheme members who have retired and paid LTA tax charges could have benefited from IP16 protection.
Individual Protection 2016 (IP16) enabled individuals to have a protected LTA of the value of their pension savings at 5 April 2016 if they had contributed more than the standard lifetime allowance, up to a maximum of £1,250,000.
Some 400 doctors had a collective total of £71,004,784 saved which could have been protected under IP16.
Since the issue was raised in 2021, 152 doctors have subsequently applied for lifetime allowance protection, but there are another 245 doctors who have since retired with LTA charges that could have been protected since the issue was unearthed, Quilter reckons.
As a result, the amount of tax potentially able to be reclaimed has increased by £6.7m.
Graham Crossley, NHS pension specialist at Quilter, said: “This information shines a light on why the government felt it necessary to recently scrap the lifetime allowance.
“The complexity of this tax law was catching out numerous medical professionals and landing them with significant tax bills they might have been able to avoid. It was producing artificial behaviours that ultimately were having a damaging impact on our health service.”
The company has written to the Department of Health and Social Care (DHSC) to ask the NHBSA (the NHS Business Services Authority) to contact all those members directly and provide factual information which explains how applying for the protection might impact their overall outcome, ultimately resulting in these LTA charges being refunded.
