TAX AND PENSION RULES ARE KEEPING DOCTORS FROM WORKING AND KEEPING WAITING LISTS HIGH, PROSPERITY INSTITUTE WARNS 

A new paper from the Prosperity Institute calls for urgent tax and pension reform to unleash additional NHS capacity, warning that punitive fiscal rules are discouraging some of Britain’s most experienced doctors from taking on extra work. 

The paper, “Unleash the doctors! How tax and pension reform can immediately increase NHS workforce capacity”, identifies three major fiscal barriers preventing NHS consultants and GPs from working more: the withdrawal of the income tax personal allowance above £100,000, the pension annual allowance and its taper, and IR35 off-payroll working rules.  

A 2024 BMA poll found that 77.1 per cent of consultant respondents said that without further reform to the tapered pension annual allowance, it would prevent or limit their ability to take on additional overtime. A subsequent survey in February 2025 found that among consultants, 21 per cent had reduced regular overtime, 16 per cent had gone part-time and 24 per cent had cut ad-hoc or waiting-list initiative sessions.  

The BMA has estimated that clinicians withdrawing work because of pension policy alone is equivalent to losing 5,400 consultants and four million GP partner appointments in England.  

The paper argues that reforming financial incentives could rapidly release additional capacity into the NHS, helping tackle waiting lists without relying solely on recruiting additional staff.  

The paper recommends: 

• Removing the effective marginal income-tax rate caused by withdrawal of the standard income tax personal allowance between £100,000 and £125,140. 

• Reforming the £60,000 pension annual allowance, either through total abolition or by abolishing the taper and indexing the threshold to inflation. 

• Simplifying, reducing or abolishing IR35 rules to remove disincentives to doctors undertaking additional work.  

Under current rules, the £12,570 personal allowance is withdrawn by £1 for every £2 of adjusted net income above £100,000. This creates an effective 60 per cent marginal income-tax rate between £100,000 and £125,140 in England, Wales and Northern Ireland, rising to 62 per cent including employee National Insurance, meaning workers retain 38p of each additional £1 before other deductions. All full-time NHS consultants fall into this tax band. 

The Prosperity Institute estimates that abolishing the personal allowance would have a central cost to the Treasury of £6.7 billion annually after accounting for behavioural responses, with approximately 73,000 NHS clinicians among those who would benefit. 

The paper also argues that the pension annual allowance creates significant uncertainty for senior clinicians. The current £60,000 allowance can taper down to £10,000 for higher earners, while NHS defined-benefit pensions are assessed according to the annual growth in promised benefits rather than simply the contributions an individual makes.  

The Prosperity Institute calculates that abolishing only the tapered annual allowance would have a central cost of approximately £270 million and could be funded by capping pension tax relief at 40 per cent for personal and salary-sacrifice contributions made by additional-rate taxpayers. The paper estimates this would raise £340 million and calculates a central benefit-cost ratio of 1.9 for abolishing the taper.  

It also calls for reform of IR35, arguing that the off-payroll rules can substantially reduce the financial benefit to doctors of taking on additional clinical work. The paper cites an estimated £10,000–£14,000 reduction in take-home pay on a typical £90,000 contract when moving from outside to inside IR35 status.  

One option proposed is to exclude medical services covered by SIC codes 86210 and 86220 from IR35 where eligible healthcare professionals are undertaking NHS-funded sessions.  

The paper argues that the success of these reforms should primarily be judged by the additional hours and clinical sessions they release. It points to an elective waiting list of 7.37 million pathways in August 2026, arguing that additional doctor capacity could translate into more appointments, diagnostic checks and operations, ultimately improving health outcomes.  

The paper concludes that the reforms could begin delivering additional capacity from the first day of the next tax year, arguing that Britain cannot afford to leave highly qualified NHS staff willing to do more work sitting idle because of fiscal disincentives.  

It is time to unleash the doctors.