UK Pensioners Overpaying Taxes

October 23, 2009 Taxation in UK  No comments

Figures have shown that millions of United Kingdom’s elderly are over-paying on their taxes.

In a report published on October 22nd, the National Audit Office (NAO) released figures indicating that the UK is seeing gross-overpayment of tax by pensioners. According to the NAO, overpayments by the elderly have an especially exasperating economic effect as the income of the average pensioner is approximately 25% less than that of the rest of the population, sitting at £16,000.

The NAO report claimed that due to processing errors and discrepancies between pension providers and HM Revenue & Customs records, an estimated 1.5 million pensioners have over paid their taxes by an average £171 each, or a total of £250 million. Pensioners are entitled to various additional allowances which would reduce their total tax liability, according to the NAO 3.2 million elderly did not take advantage of these entitlements. Overpayments from investment and savings income not being paid in gross effects 2.4 elderly annually, amounting to £200 million nationally. Conversely, approximately 500,000 pensioners underpaid their taxes by an average of £207, totaling £100,000.

The HM Revenue & Customs (HMRC) attributes this situation to the increased complexity of the taxation arrangements of the elderly, especially in regards to multiple income sources. According to previous figures, the HMRC spends approximately £36 million annually on staff costs associated with enquiries from the elderly, amounting to an average expense double that of any other member of the population.

Commenting on the findings, 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. 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.”

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