HMRC 'not coping' with older people's tax

Friday, 23 October 2009 07:25

The taxman is not coping well with the affairs of older people especially when they reach pension age, leaving many overpaying or underpaying tax.

A report by the National Audit Office (NAO) on the HM Revenue & Customs (HMRC) and how it deals with older people found it systems struggle with multiple sources of income.

It is estimated 1.5 million older people have overpaid tax by an average of £171 and around 500,000 older people had underpaid tax by an average of £207.

The effects are also disproportionate as older people have an every income of £16,000 - 25 per cent under the national average.

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."

Some 3.2 million older people do not claim the additional allowances - because they do not have sufficient income to pay tax or they do not realise they are entitled to them.

The NAO claims allowances would boost the average income of an older person by up to four per cent.

HMRC estimates that some 2.4 million older people have also paid around £200 million more in tax because they did not have their savings income paid gross.

It is hoped a new computer system introduced this summer will reduce the 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."

The report did find 80 per cent of older people were satisfied with the service from HMRC.

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."

Age Concern and Help the Aged have produced a free 'Your tax healthcheck' booklet available at ageconcern.org.uk or by calling 0800 00 99 66.

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