Most doctors don't understand how their pay is calculated. This puts them at risk of being overtaxed, underpaid or not claiming back tax on GMC, BMA, exam & defence union fees.

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Above is a quick reference guide for you to share with colleagues. If you're not going to read this whole article (because let's face it, you're a busy doctor!), check out the last two paragraphs on "spotting an incorrect tax code" & "how to claim tax relief" - as these will likely benefit you the most!

Basics
  • NHS staff are usually paid once a month, for most trusts payday is the last Thursday of the month
  • Gross pay is what you earn before you pay tax and other deductions. Your take-home pay is also called "net pay"
  • Gross pay is basic pay plus any extras - banding (old contract) or allowances/premia (new contract)
  • Deductions include income tax, national insurance, pensions and student loans. These are automatically calculated & deducted on your behalf. This is called PAYE (pay as you earn) 
  • Your trust may also deduct other fees e.g. mess fees or a parking permit
  • Your payslip allows you to review your pay & deductions including cumulative amounts paid & deducted in the tax year. This is why it is helpful to save these slips for future reference.
  • At the end of the tax year (runs April-April), you will get a form known as a P60, this will show your total earnings and deductions over the year
How is pay calculated?
The calculations and amounts vary across the country (England, Scotland, Wales & Northern Ireland). They are subject to annual review (by the DDRB) and are published by NHS Employers Pay Circulars.

Your basic pay as an FY1
  • In England: Nodal point 1 £27,689/year
  • In Scotland: minimum £24,382
  • In Wales: minimum £23,553
  • In Northern Ireland: minimum £22,862
This is your minimum pay accounting for 40 hours per week. You will receive further pay for working nights, weekends or more hours per week - but exactly how this is calculated depends on the contract you are following. In England, the new contract (2016, updated in 2019) is being used whereas in Scotland the old contact (2002) remains in use.

New Contract (2016): Allowances & Premia
Gross pay is made up of basic pay & pay for additional hours, night duty & weekends. This is averaged over the rota, which means you earn a stable averaged amount each month. You should find the calculations & final amount in your work schedule that you should receive 8 weeks prior to starting work.

Separately, there is additional pay for working in London (£2,162 per year) & doing specialist training in a hard to fill specialty e.g. psychiatry or A&E.
  • Basic pay: the minimum salary for working a 40 hour week
  • Additional hours: pay for every hour beyond 40 hours you work (1/40th for each hour)
  • Night pay: 37% enhancement for each hour you work between 9pm & 7am
  • Weekend Allowance: in addition to being paid for the average number of hours you work, you're given a certain % extra basic pay depending on how frequently you work weekends e.g. for 1 in 2 weekends that is 10% and for 1 in 8 it is 3%
This is further explained by the BMA here with an example payslip below. Pay for LTFT trainees is also explained


An example of the monthly salary for a doctor working an average of 43 hours per week (with 7 hours overnight & 1 in 4 weekend frequency):


I have also included the salary for an FY1 working no additional hours beyond the standard 40 hour week. This is rarer in jobs after FY1.

Old Contract (2002): Banding 
For those on the old contract, banding increases your salary if you're working more than 40 hours depending on how many antisocial hours you do. Classically FY1s are on 1a or 1b banding leading to 50% or 40% increase on the basic salary. This is because bands 2 & 3 are for those working >48 hours which isn't permitted under the European Working Time Directive. 

If you are working more than this or you're not meeting the rest requirements, a review can be requested where you monitor the hours you work which may lead to a rota being re-banded and your pay being increased. 

Banding, hours monitoring & LTFT pay is explained here.

Deductions
Note that the financial year starts in April, whereas you will likely start in August. This means your usual tax-free allowance is spread over 8 months rather than 12, boosting your salary initially. Furthermore, fluctuations in your on-call pattern massively changes your monthly wage, therefore do not plan your entire year's finances on your first month's pay.

Student Loans
If you took a student loan, you begin repayment the following April after you graduate. However, a previous loan for a previous degree may mean you start paying back immediately. The amount depends on whether you have a Plan 1 or Plan 2 loan. Most graduates now are on a Plan 2 but you can find out which plan you are on here & how much you'll pay if you had a previous loan or a Plan 1 loan.
  • Your student loan will continue to gain interest. For a Plan 2 loan that is set at 6.3% (reviewed annually) and will continue as you repay depending on how much you earn
  • For Plan 2, you start repaying 9% on earnings above £2,214 per month (gross pay) e.g. if you earn £2500 that's £25.74 per month [(2500-2214)*0.09)]
Pension Contributions
You can read about what it is & how much you pay here & here. Classically you pay 9.3% of your basic pay & your employer also makes a contribution on your behalf. You also pay pension on any regular bonuses such as London Weighting. For LTFT trainees it'll be lower depending on how much you earn. This will increase to 12.5% if you earn beyond around £48,000 basic pay (usually ST3).

Income Tax & National Insurance
The amount of tax you pay is dependant on your tax code. To understand exactly what all the variations mean, check out this

In the UK, a certain portion of your income is not taxed. Currently, this is £12,500 but is reviewed annually. For certain people this amount is different
  • If you are claiming tax relief on professional subscriptions (e.g. GMC, BMA, Defence Fees)
  • If you're married you can donate/receive 10% of your spouse's personal allowance
  • If you have 2 jobs this is shared between them
  • If you earn more than £100,000 then this might decrease
  • If you have untaxed income, company benefits such as accommodation
To work out your personal allowance, multiple your tax code by 10. E.g. 1250L = £12,500. However, for example, it might be 1255L if you claim back tax on the £50 GMC fees. 

Currently in England, Wales & Northen Ireland you pay 20% on anything you earn from £12,500 to £50,000. In Scotland, you pay very slightly different rates. 

The easiest way to estimate the amount you'll pay is using the calculator provided by HMRC. This also includes National Insurance which entitles you to state benefits & the state pension (see the amount you pay here). 

Almost all FY1s do not need to send a self-assessment as classically they only have one job and a single source of income. Even if you do have more than one source of income, it may be easier to get these factored into your personal allowance. Once you are registered as doing self-assessment, every year HMRC will expect one (if it continues to apply) or you will be fined. You can find out more about self-assessment and who must complete a form here here

How to quickly spot an incorrect tax code
Usually, your tax code should end in L (but check out "tax code" above for other situations). If HMRC has insufficient data on how much to tax you, they may issue you an emergency tax code e.g. X, W1, M1. These aren't meant to be permanent tax codes as they don't adjust depending on how much tax you've paid. Another situation is a BR tax code, where they are assuming you have another job (occasionally occurs if you pick up a bank or locum shift). 

Usually this means you're overpaying and you can phone HMRC (0300 200 3300) to explain your situation and they'll send your updated tax code to you & your employer. 

How to claim tax relief
You can claim back tax relief on some things which are required for your job such as GMC, MDU/MPS, BMA. If the total was £200 and you were paying 20% tax, then you would get £40 back if you claim tax relief. 

The easiest way is to claim online using this form. Register an account by providing your details, fill in what you're claiming & the amounts they cost and you'll receive an updated tax code. It takes about 15-20 minutes the first time but then a few minutes each year after that. 

By Dr Emma King SHO
Updated by Dr Akash Doshi CT2