Managing Tax for Doctors and High Earning Healthcare Professionals

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If you’re a salaried doctor employed by the NHS, your will be in receipt of your income through PAYE (Pay as You Earn) and will not have to submit a self-assessment tax return. 

However, this is not the case for healthcare professionals and doctors who are classed as ‘high earners’, those who are receipt of earnings above £100,00 per annum.

If this is your professional situation, you will need to be aware of some benefits you may lose that you would have otherwise been entitled to.

This is where an accountant such as Blue Rocket Accounting can help. We would be able to make you aware of the pitfalls of being a high earner but also help you with your overall tax planning strategy enabling you to keep more of your hard-earned money.

We know your time is precious, therefore our team of expert certified accountants can make sure your tax affairs are in order, your obligations met and your take home income maximised.

Let’s run through a few of the key areas you will need to take into consideration when you become a high earning healthcare professional.

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Personal Allowance

Most UK individuals are entitled to a tax-free personal allowance, which as of the 2024/25 tax year stands at£12,570. However, if you are a high earner there is an exception to the Personal allowance. At this stage, every £2 you earn above this decreases your personal allowance by £1. This is a very important income tax rule to be aware of for doctors. At this stage, you’ll also need to do a Self-Assessment tax return. 

Those earning above £125,140 2023/24 have no personal allowance.

Self-Assessment Tax Return

If you’ve received earnings in excess of £100,000 in a tax year, you must submit a self-assessment tax return, even if your income has already been taxed under PAYE. HMRC should contact you to inform you. It is worth noting that even if no extra tax is due, you will still be liable to substantial penalties if you fail to submit a return.

Adjusted Net Income

Your adjusted net income is your total taxable income before any Personal Allowance and after certain tax reliefs, for example;

• trading losses if you are self-employed or in a partnership
• donations made to charities through Gift Aid
• pension contributions

This is where those high earners with an Adjusted Net Income above£100,000 start to lose their personal allowance. The allowance is reduced by £1for every £2 earned above £100,000.

Child Benefit Considerations

If you or your partner earns above £50,000, you will be liable to the High Income Child Benefit Charge, which reclaims part or all of the child benefit you received during that period.

• If either of you earns £60,000, the full amount of Child Benefit will be reclaimed.
• You can choose to either:
  • Get Child Benefit payments and pay any tax charge at the end of each tax year
  • Opt-out of receiving payments and avoid the tax charge altogether

Use the Child Benefit calculator to determine if your income exceeds the threshold.

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Pension Contributions

Pension contributions are an extremely tax-efficient form of investment, and the benefit is even greater for high earners. Pension contributions reduce your adjusted net income, saving you up to 60%, or up to 62% if contributions are made via a salary sacrifice scheme (as National Insurance contributions won’t be included).

The Annual Allowance for pension contributions is £60,000 for the 2024/25 tax year. However, this is reduced (‘tapered’) for very high earners if both:

• Your threshold income exceeds £200,000
• Your adjusted income exceeds £260,000

You usually pay tax if your pension pots are worth more than the Lump Sum Allowance (£268,275) or the Lump Sum and Death Benefit Allowance (£1,073,100).

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Charitable Donations

Charitable donations made under Gift Aid have tax advantages for the organisation receiving the donation, who can claim a 20% uplift in your donation (the effect being to also pass to them the basic rate tax you've paid on that income). Higher and additional rate taxpayers can claim an additional tax relief from their Income Tax. Of particular relevance to this guide is the fact that such donations are deducted from your income when calculating your Adjusted Net Income. This means they may be saving you further tax, at up to 60%.

Tax Efficient Investments

Although, with the exception of pension contributions, these won't help alleviate any of the tax pitfalls for higher earners, making use of tax efficient investments is still an important part of tax planning for high earners. At Blue Rocket Accounting, we have built a network of trusted investment advisors whom we can connect you with at your request. Simply ask us to arrange an introduction and we’d be happy to connect you.

Salary Sacrifice Schemes

In addition to the benefits of pension salary sacrifice, some employers offer schemes which are also an effective way of saving you Income Tax and National Insurance, such as:

• Childcare vouchers(subject to restrictions on the amount you can benefit from on childcare vouchers, and the phasing out of this benefit)
• Cycle to work schemes
• Ultra-low emission vehicles including company cars
• Retraining courses and outplacement services
• Buying additional annual leave

These may be saving you tax at up to 62% depending on your marginal rate of Income Tax.

Tax relief for locum doctors

As a locum doctor you may work via an agency or the NHS, or you may decide to operate through a limited company. There is additional guidance and advice about tax relief for locum doctors provided by The British Medical Association who advise speaking to an accountant before setting up as a limited company. Read more at Tax relief for locum doctors (bma.org.uk)

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How Blue Rocket Accounting Can Help

Managing your tax as a high-earning healthcare professional can feel overwhelming, but it doesn’t have to be. At Blue Rocket Accounting, we specialise in simplifying tax and financial planning for doctors and healthcare professionals like you.

Our expert accountants can help you:

• Maximise your income and reduce your tax burden.
• Ensure compliance with all your tax obligations.
• Create a tailored tax strategy to suit your financial goals.

Free up your precious time for what matters most. Contact us today to see how we can help you.

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Want to Read More?

Explore related topics:

• Pension Tax Planning for High Earners | Blue Rocket
• How to File a Self-Assessment Tax Return | Blue Rocket
• Does My Tax Return Bill Include National Insurance? | Blue Rocket

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