An NHS pension annual allowance charge can be settled in one of two ways: pay HMRC from your own money, or elect Scheme Pays and let the NHS scheme pay it in exchange for a permanent reduction in your benefits. The tax is the same either way. What changes is where the money comes from. Mandatory Scheme Pays is a statutory right only where your charge exceeds £2,000 and your pension input amount in a single scheme exceeds the standard £60,000 annual allowance for 2026/27, and a 2026/27 charge must be elected by 31 July 2028. This page is about making the choice, not about how the charge arises. For that, start with the NHS pension annual allowance complete guide.
Which is better, paying the charge or Scheme Pays?
Neither is better as a rule, because the trade is cash now against pension later. Paying from savings costs you money you have already been taxed on, but it leaves your accrued benefits untouched and still growing under scheme revaluation. Scheme Pays costs you nothing today and instead attaches a debit to your pension, which the scheme revalues until you draw your benefits, so the reduction that finally bites is larger than the cash the scheme handed to HMRC.
Three things usually decide it. The first is liquidity. A defined benefit charge arises on capitalised growth in a promised future pension, not on money you have received, so a consultant or GP partner can face several thousand pounds of tax with no matching rise in take-home pay. If settling it means borrowing, breaking an investment or drawing down a partnership capital account, Scheme Pays is generally the cheaper route once the cost of that funding is counted.
The second is time to retirement. The further away you are, the longer the debit is revalued against you, which argues for paying in cash if you comfortably can. The third is whether charges are likely to repeat. A doctor who breaches the allowance once in an unusual year is in a different position from one who will breach it every year to retirement, where stacking debits year after year deserves modelling rather than a reflex election. The Scheme Pays calculator sets the two paths side by side on your own figures.
The two routes compared
| Point of difference | Pay the charge yourself | Elect Scheme Pays |
|---|---|---|
| Cost today | The full charge, from taxed cash | Nothing |
| Effect on your pension | None, benefits stay whole | A permanent debit on NHSBSA and GAD factors |
| Cost over time | Fixed at the amount you pay | The debit is revalued until you draw benefits |
| Reversible | Yes, it is simply your own money | An election can be amended, never revoked |
| Deadline | The Self Assessment payment date | 31 July in the year after the year the tax year ends |
| Best suited to | Liquidity, a one-off charge, years to retirement | A cash squeeze, a large charge, or borrowing to pay |
Do you have a right to Scheme Pays, or only a request?
Mandatory Scheme Pays is a right under Finance Act 2004 s.237B, and it applies only where both conditions are met for the tax year: the annual allowance charge exceeds £2,000, and your pension input amount in a single registered pension scheme exceeds the standard £60,000 annual allowance. Note that it is the charge that must exceed £2,000, not the amount by which you have exceeded your allowance. Where both are met, NHSBSA has no discretion and must accept a valid election for the qualifying part.
Two situations catch doctors out. The first is the split. NHSBSA treats your 1995 or 2008 benefits and your 2015 benefits as separate schemes for the input test, so £35,000 of growth in each is £70,000 of NHS growth, a real charge, and no mandatory right, because neither slice on its own exceeds £60,000. The McCloud remedy made that split the normal case rather than the exception. Read the two figures on your statement separately before assuming you have a right.
The second is the taper. If your NHS input is below £60,000 but your tapered allowance is lower still, the input test fails and the charge is voluntary-only. That is the usual position for high-earning doctors, and the tapered annual allowance guide works through how the taper is calculated. Voluntary Scheme Pays is offered at NHSBSA's discretion, on the same election form and by the same 31 July date, and the statutory extended limb is not yours as of right. A single year's charge can also be part mandatory and part voluntary, where input is above £60,000 but a lower tapered allowance drives part of the bill.
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What is the Scheme Pays deadline for a 2026/27 charge?
31 July 2028. The rule in FA 2004 s.237BA is that the notice must be given no later than 31 July in the year following the year in which the tax year ends. The 2026/27 year ends on 5 April 2027, the year following ends on 5 April 2028, and the deadline is the 31 July in that year. A 2025/26 charge, on the same logic, runs to 31 July 2027. The common mistake is assuming the deadline is the July immediately after the tax year.
There is an extended limb, and for NHS members it is the one that matters most. Where the scheme administrator gives you information about a change to your pension input amount on or after 2 May in the following year, the time limit becomes the earlier of three months from that information or six years from the end of the tax year in question. Late and revised NHSBSA statements are routine rather than exceptional, and this limb is what makes it possible to settle McCloud-revised historic charges through Scheme Pays.
Running the other way is a hard stop. Under FA 2004 s.237B(6) a notice may not be given after you have become actually entitled to all of your benefits under the scheme. Taking everything closes the statutory door and leaves only NHSBSA's discretion. If you expect a charge in your final working years, elect first and retire fully second. This is one of the sequencing points that makes partial retirement worth understanding before you fix a date.
What should you do before you decide?
Confirm the pension input amount for each scheme from your NHSBSA statement, calculate the charge at your marginal rate on the excess after carry-forward from the previous three tax years, and work out which part of it is mandatory and which is voluntary. Then model the permanent debit against the cash cost before electing. Whichever route you take, the charge still has to be reported on your Self Assessment return, showing both the charge and any amount the scheme is settling, and leaving it off the return causes problems later.
Because an election can be amended but never revoked, it is better to elect on the best figure available than to miss the date waiting for a perfect one. Get the statement, the split between schemes and your own deadline in front of an accountant who has done this before, and have both settlement routes costed on your figures.