Pen­sion­ers’ tax re­turn bur­den

The Daily Telegraph - Your Money - - YOUR MONEY -

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.tele­

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.