On 23 October 2009 the National Audit Office (NAO) published a new report – HM Revenue & Customs: Dealing with the tax obligations of older people.
According to the report by March 2009 some 1.5m older people had overpaid tax by £171 on average, and around 500,000 had underpaid tax by an average of £207.
Overpayments of tax can have serious financial implications for the elderly, especially as older people have a low average income of around £16,000. This is around 25 per cent under the national average income. The NAO therefore feels that HMRC needs to do more to help older people get their tax right. It made a number of recommendations to help achieve this aim.
Older people represent 18% of taxpayers. Whilst they are generally more compliant than taxpayers as a whole they are often less aware of what they should do to comply.
Tax laws for pensioners are, in fact, fairly complex. This is evidenced by the fact that HMRC spends around £36m a year in staff costs on dealing with enquiries from older people . This is twice as much as it spends on enquiries from other taxpayers.
Some particular difficulties encountered by older people are:
- Complicated PAYE codes;
- Other PAYE problems;
- The failure of older people to claim refunds and /or allowances;
- The fact that some pensioners still need to complete a self-assessment return;
- Life changes, retirement and bereavement, which bring with them inevitable tax consequences; and
- Difficulties in contacting HMRC or getting information. HMRC tend to provide the majority of their guidance and forms online, which may not be suitable for all older people.
Amyas Morse, head of the National Audit Office, said: "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."
It is hoped a new computer system introduced this summer will reduce this problem.
Mr Morse said: "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."
Andrew Harrop, head of policy for Age Concern and Help the Aged, said the report highlighted the difficulties older people face with tax which means some are "losing out on money which is rightfully theirs".
"Unfortunately tax can become a lot more complicated when people retire and it is often the first time older people will have had any contact with the HMRC."
He added: "It’s important the HMRC starts addressing the problems older people face paying tax to start making the system easier for people to use."
An HMRC spokesman said: “We are determined to reduce over and underpayments. During the last few months we have significantly upgraded our computer systems to improve accuracy and deliver a better service to older taxpayers."
"We will shortly launch a publicity campaign designed to encourage older taxpayers to reclaim tax and have their investment income paid tax free.” he added.
Age Concern and Help the Aged have produced a free ‘Your tax healthcheck’ booklet. Those pensioners who are concerned about over- or underpayments of tax can get a copy of this booklet www.ageconcern.org.uk or by calling 0800 00 99 66 and should contact their local Citizens Advice Bureau if they require further help or assistance.
