If your NHS pension has grown by more than your annual allowance, you'll have a tax charge to settle. The good news is you don't always have to find that cash yourself. The NHS Pension Scheme can pay the charge for you, in exchange for a small reduction in your pension. That mechanism is called Scheme Pays, and to use it you make a Scheme Pays election.
The catch is timing. There's a hard HMRC deadline of 31 July, and if you miss the mandatory route you fall into the voluntary route, where you stay on the hook for any late-payment interest. For dentists, this is easy to trip over, because your pension savings statement often lands late and the McCloud remedy has scrambled the figures for several recent years.
This guide explains who needs to think about Scheme Pays, the difference between the mandatory and voluntary routes, how the 31 July deadline works, and the special McCloud rules that have moved some of the goalposts. It's written for associate dentists, practice owners and salaried dentists in the NHS Pension Scheme. We'll work through an illustrative example so you can see the numbers.
This is general guidance, not personal advice. The annual allowance and the NHS pension are genuinely fiddly, so check your own position before you act.
What is an NHS Scheme Pays election?
A Scheme Pays election is your formal instruction asking the NHS Pension Scheme to pay your annual allowance tax charge on your behalf, in return for a permanent reduction in your future pension benefits.
The annual allowance is the limit on how much your pension can grow in a tax year before a tax charge applies. For the NHS Pension Scheme, "growth" isn't the contributions you pay in. It's the increase in the value of your promised pension, worked out using HMRC's formula. If that growth exceeds your available allowance, the excess is added to your taxable income and taxed at your marginal rate.
Scheme Pays lets you settle that charge out of the pension itself rather than out of your own pocket. You complete a form called the Scheme Pays Election (SPE2) and send it to the NHS Business Services Authority (NHSBSA). The scheme then pays HMRC, and your pension is reduced to reflect the amount it has covered. You can read the official overview on the NHSBSA annual allowance pages.
One important point for dentists who work through a limited company: associates and locums who provide their services via a limited company are not members of the NHS Pension Scheme for that work, so Scheme Pays does not apply to it. Scheme Pays is only ever about a charge that arose from growth in the NHS Pension Scheme.
When does a dentist get an annual allowance charge?
You get a charge when your total pension growth across all your pension arrangements in a tax year is more than your available annual allowance, and you have no unused allowance left to soak it up.
For 2025/26, the standard annual allowance is £60,000, unchanged since 6 April 2023 (source: gov.uk, who must pay the annual allowance charge). A few things can change the number that actually applies to you:
- The taper for high earners. If your "threshold income" is over £200,000 and your "adjusted income" is over £260,000, your allowance is reduced by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000 (source: gov.uk, tapered annual allowance). Practice owners with strong profits and several income streams are the dentists most likely to be tapered.
- Carry forward. You can carry forward unused allowance from the three previous tax years, used earliest first, as long as you were a member of a registered pension scheme in those years (source: gov.uk, check for unused annual allowances). This often wipes out a charge entirely, so always check it before assuming you owe anything.
How do you find out your growth? The NHSBSA issues a pension savings statement. HMRC's deadline for the scheme to send one is 6 October following the end of the tax year, but only where the scheme received your membership and pay data from your employer by 6 July. If the data arrives later, the scheme has three months from receiving it. For dentists, late statements are common, because the figures depend on your finalised NHS earnings, which flow through after your year-end certification.
That is exactly why so many dentists end up estimating their charge to hit a deadline, then correcting it later.
Mandatory vs voluntary Scheme Pays: what's the difference?
There are two routes, and which one you qualify for changes who carries the risk if the charge is paid late.
Mandatory Scheme Pays. The scheme must pay your charge if both of these are true for the tax year (source: gov.uk, who must pay the annual allowance charge):
- your pension savings in the NHS Pension Scheme alone are more than the standard annual allowance of £60,000, and
- your annual allowance tax charge for that year is more than £2,000.
Voluntary Scheme Pays. If you don't meet both mandatory conditions, the NHSBSA can still agree to pay the charge on a voluntary basis. This covers, for example, a dentist whose charge is driven by a tapered allowance below £60,000, or whose growth is spread across more than one NHS scheme so no single scheme breaches £60,000. There's no £2,000 minimum for the voluntary route. The scheme can only ever pay a charge that arose from NHS Pension Scheme growth, not growth in a private pension (source: NHSBSA, what is Scheme Pays).
The practical difference is about responsibility for interest. With mandatory Scheme Pays, the charge becomes the scheme's liability. With voluntary Scheme Pays, you remain responsible for the charge and any interest if HMRC isn't paid by its normal self assessment deadline of 31 January. So the route matters, not just the form.
What is the 31 July Scheme Pays deadline?
The standard deadline to make a Scheme Pays election is 31 July following the 31 January on which the charge had to be declared on your tax return. In plain terms, that's 31 July of the year after the following tax year (source: gov.uk, who must pay the annual allowance charge).
Worked through for a recent year: an annual allowance charge for 2023/24 is declared on the 2023/24 tax return due by 31 January 2025, and the Scheme Pays election deadline is 31 July 2025 (source: NHSBSA, what is Scheme Pays).
Two things follow from this:
- You still have to declare the charge on your self assessment tax return by 31 January, even if you intend to use Scheme Pays. The election is separate from the return.
- If you elect after the deadline on the voluntary route, the scheme will generally still pay, but because HMRC was not paid by 31 January you can be liable for interest on the late payment.
There's also a long-stop for anyone close to retirement: a Scheme Pays election normally has to be in before you take the relevant benefits, and at the latest by your 75th birthday.
How does the McCloud remedy change the deadlines?
The McCloud remedy is the fix for age discrimination in public service pensions. For the NHS, service from 1 April 2015 to 31 March 2022, the "remedy period", has been rolled back into the older 1995 or 2008 scheme. That rollback changes the pension growth figures for those years, which in turn changes annual allowance charges that may already have been declared and paid.
To deal with the mess this creates, two things exist:
- The HMRC digital service. This lets affected members reassess annual allowance charges for remedy period years, claim refunds of overpaid charges for 2019/20 to 2021/22, and claim compensation for overpaid charges for 2015/16 to 2018/19 (source: NHSBSA, the HMRC digital service).
- Extended mandatory Scheme Pays deadlines. For the remedy period years 2019/20 to 2021/22 and for 2022/23, the mandatory Scheme Pays deadline was extended. It moved to 6 July 2025 for members who were active or deferred on 30 September 2023, and to 6 July 2027 for members who were pensioners on 30 September 2023 (source: NHSBSA, understanding the effect of rollback on annual allowance).
The reassurance for remedy members is that a Scheme Pays election submitted after the mandatory deadline for those years is accepted on a voluntary basis, and the charge is paid by the scheme. You'll receive a Remediable Pension Savings Statement (RPSS) to help you check your position, and there are separate time limits, such as the window to claim compensation, that run from when you receive that statement. If you're a dentist with NHS service in the remedy period, don't assume your original 31 July deadline still applies. Check whether one of the extended dates is the one that matters for you.
How do I make a Scheme Pays election?
The mechanism is a form, but the planning around it is where dentists save themselves grief.
- Get your growth figure. Use your NHS pension savings statement. If it hasn't arrived and a deadline is looming, work from a careful estimate based on your finalised NHS earnings rather than missing the date.
- Check carry forward and the taper. Apply any unused allowance from the previous three years, and work out whether your allowance is tapered. Only then do you know if there's a charge at all.
- Declare the charge on your tax return. The annual allowance charge goes on your self assessment return by 31 January, whether or not you use Scheme Pays.
- Complete the SPE2. This is the Scheme Pays Election form, sent to the NHSBSA. It records the tax year, the amount of charge you want the scheme to pay, and whether it's mandatory or voluntary.
- Mind the date. Submit by 31 July (or the relevant McCloud-extended date). Once accepted, the election generally can't be reversed, so you can't later decide to pay it yourself.
Because the calculation depends on finalised NHS pay, dental practice owners and associates often need their superannuation position settled first. Superannuation contributions are an allowable deduction against your trading profits under HMRC's guidance at BIM54020, and your superannuation certificate (the SD86C) comes through Compass after the Annual Reconciliation Report, usually around the end of July. Getting that lined up early is what makes a tidy, on-time election possible.
If the interaction between your NHS pension, your accounts and your tax return feels like too many moving parts, that's normal. Our tax advisory service for dentists is built for exactly this kind of cross-checking, and you can read more about how we support practitioners on our accountants for dentists page.
Illustrative example: an associate with a £60,000+ input
Let's put numbers on it. This is an illustrative example, not a real client, and the pension figures are chosen to show the mechanism rather than drawn from any individual's statement.
Priya is an associate dentist in the NHS Pension Scheme. For 2025/26, her pension savings statement shows pension growth (her pension input amount) of £78,000. She has no unused annual allowance to carry forward, and she is not affected by the taper because her income is comfortably below the threshold.
Her position works out like this, using the standard annual allowance of £60,000 for 2025/26:
| Step | Figure |
|---|---|
| Pension input amount (growth) | £78,000 |
| Less: standard annual allowance (2025/26) | £60,000 |
| Excess over the allowance | £18,000 |
That £18,000 excess is added to her taxable income. Priya is a higher-rate taxpayer, so the excess is taxed at 40% (source: gov.uk, income tax rates):
| Step | Figure |
|---|---|
| Excess over the allowance | £18,000 |
| Annual allowance charge at 40% | £7,200 |
Her charge of £7,200 is more than £2,000, and her NHS scheme growth alone is more than £60,000, so she meets both mandatory Scheme Pays conditions. She can ask the scheme to pay the full £7,200, and that becomes the scheme's liability, in exchange for a permanent reduction in her future NHS pension.
The deadline she's working to is the 31 July after the 31 January on which she declares the charge. For a 2025/26 charge, she declares it on her 2025/26 return by 31 January 2027 and submits her SPE2 by 31 July 2027.
If part of Priya's growth had instead come from a personal pension, she could only use Scheme Pays for the slice that came from the NHS scheme. And if her allowance had been tapered below £60,000 so her NHS growth didn't breach the £60,000 mandatory trigger, she'd be in voluntary territory, with the late-payment interest risk sitting with her.
A Scheme Pays deadline calendar
Here's how the key dates line up for a standard, non-remedy charge. Use it as a map, then confirm your own dates against your statement.
| Tax year of charge | Declare charge on return by | Standard Scheme Pays election deadline |
|---|---|---|
| 2023/24 | 31 January 2025 | 31 July 2025 |
| 2024/25 | 31 January 2026 | 31 July 2026 |
| 2025/26 | 31 January 2027 | 31 July 2027 |
For McCloud remedy period years (2019/20 to 2021/22 and 2022/23), the mandatory deadline was extended to 6 July 2025 for those active or deferred on 30 September 2023, and 6 July 2027 for those who were pensioners on that date. After those points, a late election is accepted on a voluntary basis (source: NHSBSA, understanding the effect of rollback on annual allowance).
Frequently asked questions
Do I still file a tax return if I use Scheme Pays?
Yes. The annual allowance charge must be declared on your self assessment tax return by 31 January, even if you intend the NHS scheme to pay it. The Scheme Pays election is a separate instruction to the scheme, not a substitute for the return.
What happens if I miss the 31 July Scheme Pays deadline?
You miss the mandatory route. The NHSBSA can usually still pay the charge on a voluntary basis, but because HMRC was not paid by 31 January you can become liable for interest on the late payment. The risk shifts from the scheme to you, which is why the date matters.
Is the standard annual allowance still £60,000 for dentists?
The standard annual allowance is £60,000 for 2025/26, unchanged since 6 April 2023. It can be lower if you're caught by the taper, which can reduce it to as little as £10,000 once your adjusted income exceeds £260,000. Carry forward of unused allowance from the previous three years may also reduce or remove a charge.
Does Scheme Pays apply if I work through a limited company?
No. Associates and locums who provide their services through a limited company are not in the NHS Pension Scheme for that work, so there's no NHS pension growth and nothing for Scheme Pays to cover. Scheme Pays only ever deals with a charge arising from NHS Pension Scheme growth.
How does McCloud affect my Scheme Pays deadline?
For remedy period years (2019/20 to 2021/22) and 2022/23, the mandatory deadline was extended to 6 July 2025 for active and deferred members, and 6 July 2027 for pensioners, based on status on 30 September 2023. You can also use the HMRC digital service to reassess affected charges and claim refunds or compensation, with separate time limits running from your Remediable Pension Savings Statement.
Can I reverse a Scheme Pays election if I change my mind?
Generally no. Once the NHSBSA has accepted your election, you cannot reverse it and pay the charge yourself instead. That's why it's worth confirming your final figures, your carry forward and your taper position before you submit the SPE2.
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Get your NHS pension and tax working together
The annual allowance, Scheme Pays and the McCloud remedy interact with your accounts, your superannuation and your tax return all at once, and the deadlines don't forgive a late statement. If you'd like a second pair of eyes on whether you have a charge, which Scheme Pays route applies and which deadline is yours, our dental tax specialists can help. Talk to a Zmartly accountant through our tax advisory service, or see how we support practitioners on our accountants for dentists page.
