PolicyLens

Methodology note

Remove basic tax for NHS staff: calculation note

Assumptions behind the Remove basic tax for NHS staff scenario. Implementation detail is incomplete, so uncertainty is explicit.

View main policy page: Remove basic tax for NHS staff

Central fiscal result

+GBP 8.0bn - Net fiscal impact in 2027-28

Low case: +GBP 4.0bn. High case: +GBP 14.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Eligible frontline NHS and social-care workers pay no basic-rate income tax.
  • The relief lasts three years.
  • Higher-rate tax above the basic band remains.
  • Eligibility is narrower than all health and care employment.

Affected population

  • Affected units are employee taxpayers in NHS and social care.
  • NHS England HCHS headcount is about 1.54m.
  • Adult social care has about 1.60m filled posts in England.
  • Low-paid workers below tax thresholds gain less.

Gross impact

  • Central case assumes about 2m eligible taxpayers after exclusions.
  • Average tax relief is around GBP 4,000 per eligible worker.
  • Central cost is GBP 8bn.
  • Retention savings are not fiscal-scored.

Fiscal build-up, central case

  • Income tax receipts lost: +GBP 8.2bn
  • Higher hours and retention receipts: -GBP 0.3bn
  • Administration and payroll changes: +GBP 0.1bn
  • Administration and uncertainty: +GBP 0.0bn

Central net impact: +GBP 8.0bn in 2027-28.

Behaviour and pass-through

  • Low case assumes narrow eligibility and some retention benefit.
  • Central case assumes broad frontline coverage and limited offset.
  • High case includes agency staff, devolved spillovers and classification pressure.
  • Tax relief does not train new workers quickly.

Phasing

  • 2026-27: +GBP 2.0bn. Preparation or partial implementation.
  • 2027-28: +GBP 8.0bn. Main scenario year.
  • 2028-29: +GBP 8.5bn. Behaviour and pass-through develop.
  • 2029-30: +GBP 8.5bn. Steady-state uncertainty persists.

Main source groups

  • S1: Reform Contract defines the three-year tax relief.
  • S2: NHS Digital gives NHS workforce counts.
  • S3: Skills for Care gives social-care filled posts.
  • S4: HMRC ready-reckoners frame income-tax receipt effects.
  • S5: Health evidence cautions capacity gains are not automatic.
  • S6: Health-system and tax-response studies inform retention and labour-supply caution.