Striking NHS workers could be stung with ‘astronomical’ tax bills

High-paid doctors demanding a 30pc pay rise could be hit with tax bills as high as £87,000 because of punitive pension rules.

Healthcare workers have threatened to join rail and Royal Mail in mass strike action if their calls for a bumper 30pc pay rise are not met.

But a sudden increase in salary would hit thousands with “astronomical” tax bills, pension experts have warned.

A consultant with a £120,000 income would be forced to pay £87,000 if their pay increased by 30pc, according to calculations from Quilter, the wealth manager. A GP earning the average £100,000 would receive an immediate pension tax charge of £34,500.

This is due to the type of pension NHS workers save towards, known as "defined benefit". Any growth in salary can cause savers to exceed how much they can save into a pension every year, known as the annual allowance.

Most Workers can save up to £40,000 a year into a pension tax free, but breaching this limit – unavoidable for doctors as a proportion of their earnings is put into a final salary scheme – triggers a tax bill.

Graham Crossley, of Quilter, said: “The tax bills would be astronomical. Doctors are arguing that they should have had this pay increase gradually over the years. If that had happened, they would be facing significantly lower tax charges. I would hope that is taken into account if they do receive a pay restoration.”

Healthcare professionals at the British Medical Association’s annual conference said a real-terms pay cut in the last 12 years meant doctors had lost millions of pounds. On top of a 30pc pay rise, the trade union has also asked for an increase of 2pc above inflation this year for senior doctors and consultants – the most vulnerable to large tax charges.

The pension rules have already forced NHS doctors to refuse extra work and retire early. Unlike private sector workers, NHS staff cannot control how much goes towards their pension each year, which means the only solution is to reduce working hours.

The number of doctors taking early retirement has more than tripled in a decade, according to NHS figures. More than 50,000 NHS staff quit the health service’s pension scheme last year.

The BMA has been approached for comment.