We are already several weeks into the New Year. The festive break feels like a distant memory, work has resumed at full pace, children are back at school (with mocks underway for some), and you are already feeling like you need another holiday.
A new year, however, is a natural opportunity to pause and check that your financial plans are still working as hard as you are. For doctors and dentists, long hours, complex pension rules, irregular income, and balancing NHS and private work mean financial housekeeping easily slips down the priority list.
Yet the start of a year creates an opportunity to review your finances, reset your goals, and ensure you’re making the most of the allowances and planning strategies. Focusing on the right areas now can help you reduce tax, make smarter decisions and stay on track for your long‑term goals. Just because your plans last year worked doesn’t mean they can’t be improved or that they will still fit your life in 2026 and beyond!
Here’s a clear guide to what a new year means for doctors and dentists in the UK, and the practical steps worth considering.
1. Income planning: avoiding costly tax traps
The beginning of the year is an ideal time to review your income structure, particularly with how income interacts with tax thresholds and pension contributions.
For many doctors and dentists, particularly consultants, GPs, and high‑earning locums, even when tax rules remained unchanged, your circumstances may not. Pay rises, additional sessions, private work, or locum income can all push you into higher tax bands without you realising.
A notable example of this is the £100,000 60% tax trap. Once your adjusted net income exceeds £100,000, your personal allowance is tapered away, creating an effective marginal tax rate of over 60% on income between £100,000 and £125,140. This is because you lose the benefit of your personal allowance for tax-free earnings up to £12,570, which means this income is now taxed at 20% in addition to your existing 40% headline rate.
To compound matters, exceeding £100,000 also means you will lose eligibility for:
- Tax‑Free Childcare
- 30 hours of free childcare
In some cases, taking on additional work can actually reduce your disposable income once higher taxes and lost benefits are taken into account. Refer to our previous article: £100k income: Navigate the 60% tax traps and childcare cost implications >
Reviewing your income structure, including NHS pay, private practice arrangements, locum work, and pension contributions, can help ensure your decisions remain tax‑efficient and aligned with your wider goals. A new year is the perfect time to check whether you’re making the most of available allowances and planning opportunities.
If you’re unsure where to start, your Legal & Medical Independent financial adviser can help you make sense of your position.
2. NHS pension scheme: Time for a fresh review
The NHS pension scheme continues to evolve, and many doctors are still navigating the personal implications of the McCloud remedy, Rollback, the 2015 scheme, and the removal of the Lifetime Allowance.
Even if you’ve reviewed your pension recently, a new year is a good time to revisit your position.
Key considerations include:
- Your pension input amount, which can change each year due to updated revaluation rates.
- The annual allowance remains a crucial factor for higher earners, especially those with significant NHS pension growth or those making personal pension contributions.
- Partial retirement and flexible retirement options are becoming increasingly popular, but require careful planning to avoid unintended tax consequences.
If terms like ‘pension input amount’ feel unfamiliar, that’s often a sign that further education and guidance would be valuable. Understanding how your pension actually works is essential to making informed career and financial decisions. Requesting a pension statement and reviewing your projected benefits is a strong starting point.
Go to: Legal & Medical NHS Pension Report >
3. The removal of the lifetime allowance: What it means now
For many of our clients, retirement isn’t defined by a fixed date, but by the point at which work becomes a choice rather than a necessity. Work can often feel very different when you know you can step back on your own terms.
The abolition of the Lifetime Allowance (LTA) in 2024 removed a significant barrier that had previously prompted some doctors to consider early or unintended retirement. However, important limits still apply.
Things to keep in mind:
- While the LTA charge has gone, the maximum tax-free lump sum (without protection) you can access in total between your NHSPS and any personal pensions is £268,275.
- Different pension protections may still be relevant depending on your history with the scheme and your personal pensions.
- Decisions around retirement timing, added pension, or early retirement reduction buy-out (ERRBO) should be made in the context of your full financial picture in mind.
Just as important as your pension income is your expenditure. As the saying goes, “it’s not your salary that makes you rich, it’s your spending habits.” Understanding your fixed and discretionary costs in retirement, alongside accurate pension projections, makes it far easier to identify the point at which work becomes optional. Your adviser has cash flow modelling tools to assist.
A new year is a great opportunity to revisit your retirement strategy and check whether your assumptions still hold.
4. ISA planning: A simple but powerful reset
ISAs are often overlooked by doctors who are already contributing heavily to pensions via the NHSPS, but they play a crucial role in a well-rounded financial plan.
Why ISAs matter:
- No income tax or capital gains tax on growth.
- Easy access to funds if needed.
- Ideal for medium‑term goals such as school fees, property plans, or a future career break.
If you didn’t make full use of your ISA allowance last year, now is the perfect moment to reset and plan. Due to the impending changes to the Lifetime ISA and cash ISAs, this may be a genuine ‘use it or lose it’ moment before the changes take place.
5. Locum and private practice income: Time for a business health check
Doctors with variable income, particularly locums, GPs with portfolio careers, and consultants with private practice, should use the new year as an opportunity to review their business structure.
Small adjustments now can make a big difference over the next 12 months.
Questions worth asking include:
- Is your current business structure still the most tax‑efficient?
- Are you setting aside enough for tax throughout the year?
- Are you making the most of allowable expenses?
- Does your pension strategy reflect your mix of NHS and private income?
A quick review can help you avoid surprises and ensure your financial planning reflects your real working pattern.
6. Protection policies: Do they still fit your life?
Financial independence relies on your ability to earn an income. If your income is taken away from you or dramatically reduced, it can have a long-lasting impact on your future and your family. Read our article: Why income protection remains a vital tool in your financial toolbox >
Many doctors take out income protection, life cover or critical illness early in their careers and then never revisit it. Yet as your income, responsibilities, and family circumstances change, your protection needs evolve.
Things to consider:
- Has your income increased?
- Have you taken on a mortgage or expanded your family?
- Are your existing policies aligned with your NHS benefits?
- Are there newer, more suitable products available?
A quick review can ensure you’re not under‑ or over‑insured.
7. Practical steps to take this year
Start the year on a strong footing. Consider the following actions:
- Review your income and identify any key tax thresholds.
- Check your NHSPS total rewards statement annually. The updated version should be available by the end of each year and correct up to the 31st of the previous March. Check yours here: My NHS Pension – Welcome to your NHS Pension Portal
- Assess your annual allowance position if you have several years of NHSPS membership under your belt and you want to start tracking your pension benefits.
- Plan your ISA contributions for the year ahead.
- Review your business structure if you’re a locum or consultant with private income.
- Update your protection policies to reflect your current circumstances.
- Revisit your long‑term financial plan to ensure it still aligns with your goals.
Final thoughts
Doctors and dentists operate in one of the most complex financial environments. The start of the new year is one of the best opportunities to regain clarity, reduce inefficiencies, and take control.
A small amount of planning can help you minimise tax, strengthen your long-term position, and feel more confident about your financial future.
If you’d like help reviewing your situation or understanding how these considerations apply to you, specialist advice can make all the difference. We are here to help guide you and put in place the best solutions for you, and to review your current arrangements expertly. A tailored plan ensures you’re not just reacting to changes; you’re using them to your advantage.
Are you ready to take control of your finances? Let us know in the comments below.
This article does not constitute specific advice. We would always suggest that you get specialist advice in this area.