BMA pensions victory means GPs face new tax bills

GPs nearing retirement could be faced with a tax bill worth tens of thousands of pounds because the BMA won its judicial review against the government's pension cap.

A High Court judge found that then health secretary Patricia Hewitt acted illegally when she retrospectively capped GP pensions in 2006. If his ruling were implemented, the BMA expects the decision to add 10 per cent to GPs' pension pots.

But Steve Caps, an accountant with Ramsey Brown, warned that GPs who gain from this change could find their pensions pushed over the tax-free allowance.

‘I've got clients who aren't making any more personal pension contributions because of this,' he said.

Under rules introduced two years ago, pensions are tax free if they were worth less than £1.5 million on 5 April 2006. This translates to an annual pension of around £65,000.

But above that allowance they are taxed at a rate of 55 per cent. So a GP who finds that, thanks to the ruling, their pension was worth £1.6 million in April 2006 will now face a £55,000 tax bill (55 per cent tax on £100,000).

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