Elderly Taxpayers Losing Out

A report last month from the National Audit Office confirmed that elderly taxpayers frequently pay too much tax as a result of HMRC inefficiencies. The report highlighted three findings:

• that approximately 1.5 million people had paid on average £171 too much tax (£250m in total)

• 36% of elderly people do not understand their tax obligations

• elderly people are less likely to contact HMRC to request help than other taxpayers.

Elaine Butler, head of personal tax at Barber Harrison & Platt, the region’s largest independent firm of chartered accountants commented “We have been well aware of this problem for a considerable time and actively advise older clients to ensure that they do not lose out. Obviously it is worrying for pensioners who typically have relatively low incomes and so the impact of these overpayments can be significant.”

In a welcome move, HMRC recently launched a campaign which aims to encourage pensioners to claim back overpaid tax on savings interest but this only addresses part of the issues.

Elaine explained that there are many tax rules which are specific to elderly taxpayers and these can make their tax affairs quite complicated. This, coupled with the fact that pensioners are often not required to complete tax returns, means that tax can be overpaid without being noticed by HMRC or taxpayers.

In Elaine’s experience the key reasons for overpayment are:

• pensioners have higher allowances than younger taxpayers. HMRC do not always automatically give these age-related allowances so care should be taken to ensure that they are fully claimed

• pensions are normally paid after deduction of basic rate tax. The tax deducted can be too great resulting in an overpayment. This should be reclaimed from HMRC because it will not always be automatically repaid. To avoid this problem application can be made to payers eg pension providers, for no tax to be deducted at source

• tax codes issued by HMRC to pension providers are often incorrect so these should always be checked to ensure that all allowances are being given. This is especially problematic where more than one pension is received.

Elaine concluded “It is essential that elderly taxpayers regularly check that they are not paying too much tax.”

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For further information please contact:

Elaine Butler (head of personal tax) 0114 266 7171 elaine.butler@bhp.co.uk

Scott Burkinshaw (tax associate) 0114 266 7171 scott.burkinshaw@bhp.co.uk

Notes to Editors:

Barber Harrison & Platt is one of the leading firms of independent Chartered Accountants in the North of England. It is the only independent firm in Yorkshire to be listed in Accountancy Magazine’s Annual Top 60 where it is currently placed 55. The firm has 15 Partners and 160 staff at offices in Sheffield and Chesterfield.

Barber Harrison & Platt provides the full range of audit, accounts and taxation services. It also has one of the largest corporate finance teams in the area and was recently named Corporate Finance Advisory Firm of the Year at the Insiders South Yorkshire Dealmakers Awards.

Accountancy is the journal of the Institute of Chartered Accountants in England and Wales and publishes the Top 60 league table annually in its July edition.