McCloud latest – complex calculations to mend tax charge
Online pension tax calculating tool is proving difficult to use.
By Edie Bourne
Doctors affected by the ‘McCloud remedy’ – finally introduced last month – have been assessing the impact on their previous annual allowance tax charge payments.
The remedy aims to recompense NHS Pension Scheme members deemed to have suffered age discrimination when the 2015 pension scheme was introduced.
They will now be able to receive their original benefits from the 1995 or 2008 scheme for the seven years of the ‘remedy period’, which runs from 2015 when the new pension scheme began to 2022.
But those who paid annual allowance charges for excess pensions savings growth in that same period must now recalculate their position based on corrected figures.
The annual allowance is the most you can save in your pension pots in a tax year. Once the allowance is exceeded, a pensions tax charge may be payable. Those who have paid charges may now be due a rebate once the figures are recalculated in their legacy scheme.
Revised calculations
Patrick Convey
Patrick Convey, technical director at Cavendish Medical, explained: ‘The “McCloud remedy” is an incredibly complex area. Reworking through figures over a number of years – and remember, we may need to go back to the 2010-11 tax year because of the carry-forward rules – can be particularly challenging if this is not your day job.
‘The pension scheme is due to provide revised calculations by October next year. It has already said that the 2022-23 annual statement, which would normally be provided in autumn each year, will be omitted in 2023 while the recalculations take place.
‘However, given the high number of mistakes that we see in normal pension statements and pay slips, I would not advise waiting until late next year to see what your own post-McCloud position might be.
‘We expect that many members will find they have paid too much annual allowance tax and are due a rebate of any overpaid tax, but there is a chance that others will have paid too little. The year that the error has occurred will have a bearing on what steps need to be taken.’
He added that although the new figures are due to be provided by October next year, this leaves little time to check the calculations, correct any errors and be ready to submit tax positions as normal the following January.
Online tool
Doctors are advised to get their own standing checked as soon as they receive their figures.
HM Revenue and Customs has launched an online tool to help ‘calculate your public service pension adjustment’.
For the tax years 2015-16 to 2018-19, members should be able to use the tool to assess rebates for previously overpaid annual allowance charges. If a member has paid too little tax, no repayment will be due.
For the tax years 2019-20 to 2022-23, members will be able to submit a correction of their previous charges into the online tool plus enter the information for the last tax year. They may have tax owed back to them but will not be asked to pay more.
Mr Convey said: ‘The online tool had a few teething problems, but is hopefully working more efficiently now.
‘One major issue is that users cannot save their progress and return to their work if they do not have the exact information needed to hand. After 15 minutes of inactivity, the service will time out and the member will need to start any calculations again.
‘If using this system, you will need your pension savings statements, your previous self-assessment tax returns, P60s and records of other income, plus details of any benefits drawn.
‘This is proving testing for many busy doctors who do not have the time or experience in these calculations.
‘It is very likely many will need specialist help to achieve success when negotiating the remedy. Please do contact us if you require assistance.’