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Document How can I pay the Annual Allowance Charge?

You are responsible for making arrangements to pay your annual allowance charge to HMRC. You can either:

  • pay, all or part of the charge, directly to HMRC; or
  • ask us to pay, all or part of the charge, for you using our scheme pays facilities, mandatory and/or voluntary scheme pays.

If you pay the charge yourself it is payable as part of a self- assessment tax bill. Make sure you pay your annual allowance charge to HMRC by their 31 January deadline. They may ask you to pay interest if your payment is late.

You can ask us to pay by mandatory scheme pays if your pension input amount in either the 1995/2008 NHS Pension Scheme or the 2015 NHS Pension Scheme is more than the standard annual allowance and your annual allowance charge is more than £2,000.

The maximum amount of annual allowance charge that you can ask us to pay by mandatory scheme pays is based on the pension input amount in the NHS scheme that is more than the standard annual allowance.

The standard annual allowance is currently £40,000.

If you are a member of both the 1995/2008 NHS Pension Scheme and the 2015 NHS Pension Scheme you can ask us to pay by voluntary scheme pays if your pension input amount in one or both NHS schemes was under the £40,000 standard annual allowance but when added together your total pension input amount from both schemes was more than £40,000.

For an annual allowance charge from 2017/18 onwards we extended voluntary scheme pays facility to include you if you have an annual allowance charge, as a result of having an available annual allowance lower than £40,000.

You could have a reduced annual allowance as a result of being affected by the tapered or alternative annual allowance.

In addition, from 2017/18 it is no longer a condition that you must have an annual allowance charge of more than £2,000. As a result you can ask us to pay up to 100% of the annual allowance charge that relates to your NHS benefits as long as we receive your election before the deadline.

If you want us to pay your annual allowance charge you need to complete a Scheme Pays Election Notice (SPE2) available on our website. In exchange for paying your charge we will permanently reduce your NHS benefits when you retire or transfer out.

If you are a member of both the 1995/2008 NHS Pension and the 2015 NHS Pension Scheme you can ask us to pay the charge from both NHS schemes. You can’t ask us to pay your charge from one scheme only.

We must receive your election by the 31 July, following the January in which the annual allowance charge must be declared on your self-assessment tax return.

The 31 July deadline is the same for both mandatory scheme pays and voluntary scheme pays.

Tax Year

Deadline

2017/18

31 July 2019

2018/19

31 July 2020

2019/20

31 July 2021

2020/21

31 July 2022


You should complete and send us your election earlier if one of the following events takes place before the deadline, either you:

  • retire - the election should be completed and sent to us before your NHS benefits become payable; or
  • reach age 75 - the election should be completed and received by us before your 75th birthday.

Once your election has been accepted you are can’t change your mind and pay the charge yourself but you have up to four years to change it.

HMRC have published a help sheet, HS345 - ‘Pensions - tax charges on any excess over the lifetime allowance, annual allowance and on unauthorised payments’ to help you to complete the ‘Pension Savings Tax Charges’ section on page Ai4 of the additional information pages.

More information about the deadlines, reporting and paying an annual allowance charge can be located in the Pension Savings Statement Guide and factsheets on our website.

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