By: 20 September 2018
Money Matters – Will your pay slip trigger a tax breach?

Dr Benjamin Holdsworth on the importance of sense-checking

If you have not reviewed your pay slip in a while, now is the time to ensure you are being paid the correct amount. We have seen a substantial number of pay slips from new clients this year with significant errors. If left unchecked, the errors could also lead to significant tax breaches.

As we know, there are now harsh penalties for excess annual and lifetime pension savings. The new ‘tapered’ annual allowance means senior doctors earning over £150,000 from all sources (which includes their pension growth) face a significantly lower yearly tax-free savings limit, down to just £10,000 per year in some cases. The lifetime allowance currently stands at £1,030,000 – a hefty drop from its peak of £1.8million in 2011.

If you are on the wrong pay scale, your pension will be greater than projected and could lead to breaches of the tax-free savings limits.

Although receiving a large income repayment cheque can be gratifying, it may mean grave consequences in terms of pension contributions. And any repayment paid as a lump sum could also trigger a tax charge.

The NHS pay slip is complex and mistakes can be easily missed by busy medical professionals or financial advisers not well versed in every NHS pay nuance. It is important to note that HMRC will not make allowances for errors caused by computer-generated pay slips.

Please do make sure you have given such statements a thorough ‘sense check’ to ensure you receive what you deserve, stay on the right side of the taxman and can mitigate any liabilities due.

Dr Benjamin Holdsworth is director of Cavendish Medical – specialist financial planners for medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006.


The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions.  

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.