My last article looked at tax thresholds which can affect GPs. One of our readers pointed out that I had not included non-tax thresholds which will also affect ‘take home’ income, so this month I’ll discuss some other thresholds.
Pension tier rates
You are probably aware of the pension tier rates, but not necessarily the implications. They do not work like tax rates where each band of income has its own rate. The rate is determined by pensionable income and is chargeable on the whole amount. So for example, if your pensionable income is £70,630 you would pay at 12.5%. If you earned £1 more, then you would pay at 13.5% – so you’d pay an extra £706 of pension contributions – without earning any additional pension.
What’s more as a GP locum or salaried GP you cannot just incur additional expenses to reduce pensionable income because all of a salaried GPs income (up to full time) is pensionable and 90% of a locum’s fees are pensionable.