One in four doctors refuse overtime to avoid five-figure tax bills

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01-04-2025

Labour's pledge to slash NHS waiting lists is being sabotaged by a litany of administrative errors, pension delays and punitive tax rules, Telegraph analysis shows.
With millions waiting months for treatment, doctors are turning down shifts out of fear they could be stung with exorbitant tax bills due to a cap on pension contributions which would leave them effectively paying to go to work.
And despite being given three years to prepare, an overhaul of the NHS Pension Scheme remains months behind schedule and does not know when it will catch up.
As NHS waiting lists stand at almost 7.5 million, eight months after Labour took power, Telegraph Money can reveal:
A quarter of doctors have reduced their overtime because of potential five-figure tax bills, leading to a 10pc reduction in NHS capacity.
62,000 crucial pension statements are now six months overdue, despite extra NHS spending on overtime and additional staff.
A statutory deadline given three years in advance will be missed, leaving NHS workers and retirees in the dark over how much their pension will be.
Thousands of doctors and dentists are in line for first-time tax bills.
Labour swept to power last July with a huge majority after promising a raft of reforms in an election manifesto entitled 'Change'.
The 136-page document included a firm pledge to save the NHS and cut waiting lists by providing an extra 40,000 appointments a week in England alone.
However, waiting lists have fallen by just 3pc since Labour took power and currently stand at 7.4 million. More than three million people have waited over 18 weeks for treatment.
Experts are now warning that the refusal to tackle draconian legislation and a pension scheme racked with delays is obstructing progress – with serious knock-on effects for patient care.
Doctors have long warned that convoluted pension rules were forcing them to turn down work or even retire early. The Conservatives responded by removing the Lifetime Allowance – a cap on pension contributions before tax charges became due.
However, like all workers, NHS staff can still only contribute £60,000 or their salary – whichever is higher – into a pension each year and receive tax relief. Worse still, the limit can be reduced to just £10,000 for high earners – and any breach incurs a tax charge.
According to the British Medical Association, the rule has led to doctors reducing their workloads and turning down overtime because it creates a cliff edge where just £1 in extra earnings can generate a £22,500 tax bill.
Its latest research, released this week, found that the NHS had lost the equivalent of 5,400 full-time consultants, representing almost 10pc of the available workforce, and around four million GP appointments as a result.
Dr Vishal Sharma, the organisation's pensions committee chairman, said: 'It is an absurd situation when the Government is promising to bring down near-record waiting lists, yet doctors are being forced by complex and unfair pension tax rules to turn down or reduce extra work.
'Doctors want to do more to help patients and do as much as they are able to, but no one should be expected to pay to work, which is the bizarre scenario that this cliff edge can create.
'This is a real, not hypothetical, issue affecting the capacity in hospitals and GP practices right now.'
The British Medical Association is calling on the Government to remove the annual allowance reduction.
A Department of Health and Social Care spokesman said: 'Current tax arrangements mean doctors can take on extra hours and stay within tax-free pension saving limits. The tapered annual allowance, meanwhile, applies only to those whose taxable earnings exceed £200,000 per year.
'We have already made progress on our Plan for Change – delivering an extra two million appointments and cutting waiting lists by 193,000.'
Doctors who work privately or pick up overtime rely on remediable pension savings statements to track their income and pension contributions, helping them avoid excessive tax bills.
The NHS Business Services Authority – which runs the NHS Pension Scheme – was required to send statements to 137,000 staff by Oct 6 last year.
At the end of January 2025, it said 57,000 had been sent, 56,000 were still outstanding and another 25,000 had been calculated but not yet posted. It also said extra resources had been taken on to deal with the backlog, including offering overtime and recruiting more staff, and that most of those outstanding would be issued by the end of February.
By mid-March, however, Karin Smyth, health minister, admitted that just 61,000 had been sent and the number calculated but not posted was actually 2,000. The true backlog stood at 75,000.
The mix-up in the figures was attributed to some statements being categorised as issued when they were in fact still undergoing quality checks.
Dr Sharma said: 'Doctors' pensions are incredibly complex and without clear records. It is almost impossible to make any decisions about finances and work commitments.
'There's no doubt that without up-to-date information, doctors will be pre-emptively reducing or turning down extra work to avoid additional pension tax bills that they might not even be due.'
Dr Luke Evans, shadow health minister, said it was time for The Pensions Regulator to intervene.
He said: 'The delays and confusion mean that some doctors are actively choosing not to carry out further vital work in the NHS. This will have a direct impact on patients and waiting lists, simply because of admin errors with pension calculations.
'For the sake of patients and doctors alike, the NHS Business Services Authority and ministers need to get their figures right and work urgently to issue the remaining statements, and the regulator needs to take swift action to work out what has gone wrong.
'The previous government made progress on the annual allowance to remove perverse disincentives stopping our most senior and experienced doctors from working. I would urge Labour ministers to get a grip of the reality of NHS pensions, their administration and their impact on doctors providing care.'
An NHS Business Services Authority spokesman said: 'A total of 75,000 Remediable Pension Savings Statements have been dispatched as of March 25. The NHS Pensions Service has assigned additional resources to issue [statements] as a matter of urgency.
'We're prioritising the [statements] that are more complex and require manual calculations. These will be dispatched in batches in the coming weeks.'
In 2015, the government introduced reforms to curb pension costs. Public sector workers, including NHS staff, were moved from gold-plated final salary pensions to less generous schemes based on their average earnings.
In 2018 however, the Court of Appeal ruled that the changes were implemented in a way that amounted to age discrimination in what is known as the McCloud judgment. The result is that eligible workers can now choose between the two available pension schemes for service between 2015 and 2022.
When the necessary legislation was passed in March 2022, the NHS Pension Scheme was told to contact those affected and outline their choices by March 31 this year.
However, the NHS Business Services Authority has now confirmed it will miss the deadline. Anyone in or close to retirement won't know how much pension they'll receive until their statement arrives.
Dr Evans said that just 21 statements had been issued by mid-March, which he described as 'astonishing'.
He said: 'It's simply not good enough that there are over 381,000 doctors still waiting for statements ahead of the statutory deadline of March 31. This matters, as it means they can't make an informed choice on how to plan their futures. Ministers and the NHS Business Services Authority must look at this urgently.
'This is clearly just the tip of the iceberg. With the NHS Business Services Authority being referred to the Pensions Regulator, deadlines constantly missed, and Ministers getting their numbers wrong, there is a wider issue with NHS pensions that the Government needs to get hold of.'
An NHS Business Services spokesman said deadlines were being discussed with the Department for Health and Social Care.
He added: 'We will update NHS Pension Scheme members directly to confirm delivery timelines as soon as possible.'
According to figures from financial specialists Wesleyan, provided exclusively to The Telegraph, 4,120 doctors and dentists are also in line for a new pensions tax bill.
As a result of the McCloud judgment, NHS workers' 2015-2022 service will be temporarily 'rolled back' into the old pension scheme until they make their choice at retirement.
This means that some will now receive higher pensions than they expected – leading to a tax bill if this makes them exceed their allowance.
Madeleine Dowling, of Wesleyan, said: 'We're seeing clients not able to get the paperwork they need, or when they do, critical information is missing or incorrect. We even know of some people who are having to retire without an accurate understanding of how much they have in their pension – a worrying position for anyone to be in.
'When it comes to McCloud, there isn't one path that will be right for everyone. Some people will be better off in one scheme, and some in another, even if that means having a tax charge to pay. The challenge is that working out what the 'right' option is can be very complicated.'
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