23 October 2009
According to report by the National Audit Office (NAO)
pensioners have overpaid around £250m in tax. The overpayment
calculates to an average of £171 each. Another 500,000 pensioners
underpaid tax by an average of £207 each. This they say is as a
result of discrepancies between HM Revenue & Customs records
and pension providers.
The report, "HM Revenue and Customs: Dealing with the tax
obligations of older people", also estimated that some 2.4 million
older people have paid around £200m more in tax because they did
not have their savings income paid gross.
Pensioners may also be paying more tax because they do not claim
additional age-related tax allowances. Older people may also be
paying more tax because they do not claim additional age-related
tax allowances. These allowances would boost their income by up to
4%. The current rates and allowances for income tax can be viewed
here: http://www.hmrc.gov.uk/rates/it.htm
The NAO blames HMRC's systems, which it says are failing to cope
with pensioners having multiple sources of income. The Revenue said
it had plans to cut out the number of mistakes. "We are determined
to reduce over and underpayments," it said. "During the last few
months we have significantly upgraded our computer systems to
improve accuracy and deliver a better service to older
taxpayers".
National Audit Office head Amyas Morse says: "Older people want
to pay the right amount of tax but too many pay more than they need
to because they do not claim allowances to which they are entitled
and because of errors. By providing a more coherent service, HMRC
could make substantial savings as the number of enquiries from
older people about their tax affairs would reduce. A win-win
situation for all."
But the Low Incomes Tax Reform Group (LITRG) said they were not
surprised. "The Low Incomes Tax Reform Group has written three
reports over the last 12 years identifying these problems and their
causes," said its chairman John Andrews. "In that time HMRC
have only paid lip service to correcting the fundamental faults in
their service strategy".
