How NHS doctor pay rises could actually lose them money

Top NHS doctors face losing childcare benefits worth thousands of pounds as a result of June’s pay rises, according to analysis.

Doctors are receiving a 3.5 per cent headline pay rise in their June pay packets, backdated to April.

But many consultants – senior specialist doctors – risk being dragged over a pay threshold at which they lose certain benefits, unless they act.

Once a worker receives what’s known as an adjusted net income of over £100,000 for a tax year, they lose all their tax-free childcare, worth £2,000 a year, all of the 30 hours funded term-time childcare for 9-month to 3-year-old children, and half of the 30 hours for children aged between three and four.

The £100,000 threshold is calculated once pension contributions, gift aid donations, plus some other adjustments, are deducted, but also after other income, such as rental income or savings interest, is added.

After this month’s pay rise, a newly appointed consultant now earns £113,565.

After NHS pension contributions, their taxable income is around £99,369, leaving just £631 of headroom before they breach the threshold.

As a result, relatively small amounts of additional income, such as savings interest, dividends, private practice income or overtime, can result in the consultant exceeding £100,000. More experienced consultants will be over the threshold already.

The loss of benefits can be significant. Calculations by AJ Bell suggest that the main earner in a family of two young children aged nine months and two years old would need to see their income increase to around £156,000 before the family got back to the same total disposable income as when they were earning £99,000.

What pay rise are doctors getting?

The new 2026/27 NHS pay uplifts of 3.5 per cent for most doctors are set to hit June pay packets, backdated to April.

The pay rises will be given to resident doctors – formerly known as junior doctors – even though members of the British Medical Association (BMA) union are striking over their most recent pay deal.

Consultants could end up cutting work to get under the threshold

Experts warned that some senior doctors may end up refusing overtime if it were to drag them over the £100,000 threshold.

Graham Crossley, an NHS pension specialist at Quilter, called this a “perverse incentive”.

“Rather than encouraging additional NHS work, the tax system can actively discourage it. In some cases, consultants may conclude they are better off overall by declining extra sessions, reducing on-call commitments or even reducing contracted hours in order to keep their adjusted net income below £100,000,” he said.

The £100,000 threshold at which the loss of benefits kicks in has not been adjusted for 16 years. If it had been uprated along with inflation, it would sit at nearly £160,000 today.

Crossley said: “What was originally intended to affect a relatively small number of very high earners is now increasingly capturing mainstream NHS consultants.”

How to cut your ‘net adjusted income’

One key way to reduce your net adjusted income if it is over £100,000 is to increase your pension contributions.

With most private sector pensions, this is relatively simple, but it’s a bit more complicated for schemes like the NHS pension, because you’re building up entitlement to an annual payment for life, rather than saving into an investment pot.

One option is to buy an “additional pension” in units of £250.

There are other options, including making charitable gift aid donations.

“Depending on an individual’s circumstances, employer schemes such as Cycle to Work or car lease schemes may also have an impact, but these will also reduce pensionable pay, which means less NHS pension accrued,” says Alec Collie, medical financial specialist at Wesleyan financial advisers.

“It’s also important to remember that adjusted net income is not simply salary. Interest on savings outside of ISAs, rental income and other taxable investment income can all affect the calculation. By contrast, income and gains generated within an ISA do not count towards adjusted net income,” Collie explains.

Taxpayers can put £20,000 a year into ISAs – currently into either cash or stocks and shares – and all their gains are free of tax.