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‘Crooked’ HMRC robbing pensioners for tax

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Pensioners around the UK have overpaid almost £450 million in tax and are struggling to understand ‘complex’ tax rules, a new report has revealed.

The Public Accounts Committee has accused HM Revenue and Customs (HMRC) of giving pensioners a “raw deal” and failing to simplify tax systems to accommodate those struggling to afford payments.

According to the Committee’s report, an estimated 1.5 million pensioners have collectively overpaid £250 million in tax because of discrepancies between HMRC’s records and those held by their employers and pension providers.

Additionally, around 2.4 million older people are also thought to have paid £200 million too much tax on their savings because they did not have interest paid in gross, while many are thought not to be receiving age-related allowances they are entitled to.

Where a pensioner’s overall income is lower than the starting threshold for income tax – currently £6,475 a year – getting interest paid net means that tax may be paid unnecessarily.

“The truth is that millions of older people are paying too much tax,” said Committee Chairman, Edward Leigh. “They often receive multiple tax-coding notices, making it difficult for them to check whether they are paying the right amount.”

The committee found that older people were more likely to comply with their tax obligations but were less likely to understand them than other age groups and called on HMRC to sort out the problem by simplifying its systems, so that older people could have peace of mind about their tax affairs.

Recently reported mishaps regarding tax code notices have done little to aid pensioners’ problems and, as the elderly begin to outnumber younger generations, the HMRC has been called upon to adjust its systems accordingly.

In 2007, the number of people over the state pension age was greater than the number of children in the UK for the first time, with around 5.6 million of these pensioners liable for income tax.

“The UK’s population is ageing, so it is only going to get harder to deal with the taxation of older people unless HMRC takes action to address these issues,” added Committee member and Conservative MP, Richard Bacon.

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Written by Andrew Hodges

March 5, 2010 at 11:29 am

Posted in Comment, LinkedIn

Tagged with , ,

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