Scheme Pays Election
Helping you make the right choice
We help GPs deal with the annual allowance pension charge and the mechanics of making a Scheme Pays Election.
What is a Scheme Pays Election?
You will be liable to the annual allowance charge if your annual pension savings are more than the annual allowance for a tax year taking into account any unused annual allowance brought forward. You will have to report the excess pension savings on your self assessment tax return.
The amount of the annual allowance charge will be included in your tax calculation and you would normally have to pay the tax charge with your usual self assessment tax. However, you may make an election requiring NHS Pensions to pay some or all of the annual allowance charge on your behalf out of your pension fund. There will be an appropriate reduction in your pension benefits.
This is the ‘Scheme Pays Election’.
You need to ensure you fully understand the consequences for your pension benefits before you decide to make this election.
When this might apply to you
In order to make a valid election, you have to meet the following conditions:
- You have to make the election within the time limit. For example, if you want your pension scheme to pay your annual allowance charge for a tax year, you must make the election no later than 31st July following the end of the next tax year.
- Your annual allowance charge for the tax year must exceed £2,000.
- The amount of your pension savings in the NHS scheme alone must be more than the annual allowance for the year.
If you make the Scheme Pays election, you will still need to make entries regarding your annual pension savings on your self assessment tax return. You will need to include an entry for the annual allowance charge and entries for the amount of the charge being paid by your pension scheme and the amount of charge being paid by yourself.
How Nichols Medical Accountants can help with this
When you use us to handle your affairs we can take the confusion out of things. We can:
- Calculate the annual allowance charge.
- Help you make the election requiring NHS Pensions to pay the annual allowance charge.
- Ensure that you understand the consequences of making the election.
- Ensure that HMRC acknowledge that you have made the election and that your account with HMRC is credited with the payment made by your pension scheme.