Pensioners’ tax return burden
Filing an annual tax return is irksome at the best of times. But for elderly people who may in any case have very little tax to pay, the process is a burden. Official figures show 1.7 million pensioners are still required to file a return.
Of those pensioners 275,000 are over the age of 80, according to a Freedom of Information response obtained by mutual insurer Royal London.
Self-assessment tax returns are filled out by those who do not satisfy the standard criteria for pay-as-youearn (PAYE) taxable income, such as those who are self-employed. Pensioners will be liable to fill one in if they continue working on an ad-hoc basis or have another source of income, such as rent or dividends.
Around 27,000 people receiving the state pension also need to fill in a return as the amount they receive is above the personal allowance of £11,500.
The elderly represent a growing portion of income taxpayers, and pensioners now account for 21pc of the 30m eligible to pay in Britain, up from just 12pc in 1990.
Former chancellor George Osborne announced the Government’s intention to scrap the self-assessment returns altogether in the 2015 budget as part of a roll-out of a digital taxation system. But critics say this was never going to solve the issue of too many elderly people having to submit a return.
Steve Webb, former pensions minister and a director at Royal London, criticised delays.
“It’s clear that even retirement doesn’t mean freedom from the misery of the annual tax return,” he said. “It’s shocking that over a quarter of a million people aged over 80 are still being asked to deal with this paperwork each year.
He added: “HMRC should prioritise getting older pensioners out of the system, the idea you are over 80 and you still have to go through what we all find a bit of a nightmare is not good enough.”
A spokesman for HMRC said pensioners “would not welcome” changes to the system– but that the tax office is taking steps towards making the whole process far simpler for the majority.
Paddy Millard, one of the founders of charity Tax Help for the Elderly, said there are a number of reasons the older generation might struggle.
“As you get older you get less confident and competent, particularly with tax,” he said. “Many older women outlive their husbands and are less likely to have ever handled tax.”
“I’ve only had one man come to us for advice and say my wife handled all the paperwork: mostly it’s women saying ‘my husband did it all’.”
Mr Millard said HMRC could do more to make the process simpler for those who have “predictable untaxed income”.
For example, a foreign pension cannot be taxed at source as it originates in another country and a pensioner receiving one is expected to fill in a return. However, their income remains predictable and Mr Millard said this should be made easier.
The spokesman for the tax office said: “The vast majority of pensioners do not need to fill in tax returns, and we are taking thousands of them out of self assessment every year.
“We offer a wide range of support for those who need to complete a tax return through our website, helplines and home visits.” In addition to pensioners with extra income, around 27,000 of those receiving the state pension only are currently required to fill in a tax return – despite HMRC already holding their data.
Caroline Miskin, a tax expert at the ICAEW, said those with a state pension above the tax-free personal allowance, currently £11,500, were currently required to fill in a return as the Department for Work and Pensions has no way to tax their income at source.
HMRC has plans to lift these pensioners out of the self-assessment system, but the chaotic introduction of the new “simple assessment” process has left many scratching their heads. HMRC began publicising its simpler system in March, telling thousands of pensioners they would no longer fill in a return.
But the tax office still sent them letters requesting a return in April. A spokesman for HMRC said it could be “four or five months” before it announces the introduction of simple assessment and anyone who has received a letter requesting a tax return should fill one in as normal.
Simple assessment should mean in cases where information is already held by HMRC, it will send taxpayers an estimate of their income. The taxpayer will only have to contact the taxman if there is a mistake.
Almost 300,000 people aged over 80 must file a return, reports www.telegraph.co.uk/funds