Money
Tax and benefits
Tax help for older people
The Revenue often takes too much tax from older people. But because tax is so complicated, many do not realise they are paying the wrong amount, writes Paul Lewis
And even if they suspect their tax may be wrong, they do not know how to get things checked or put right. Those are the conclusions of a hard-hitting report by the Low Incomes Tax Reform Group (LITRG), which calls for 25 changes to make sure older people are taxed correctly and can understand the system better. It picks three areas for special criticism.
PAYE is the system which deducts tax automatically from our pay or pension - but errors are common. In particular, where there are several sources of income - for example two small pensions, some small earnings and the state pension - PAYE very often does not deduct the right tax.
One problem is that records are held in separate offices, making co-ordination more difficult. Another is that the amount deducted from the tax code to account for the state of the pension is not always correct. And when people become entitled to higher allowances at 65 and 75 the correct rate is often not applied. These errors can lead to people paying too much tax for years. In other cases they result in underpayments followed by demands for large sums, which people on low incomes cannot find.
The reform group also wants rules for Gift Aid donations to charity changed. Gift aiding enables charities to recover 28p tax for every pound given. But people who do not pay tax cannot Gift Aid as there is no tax for the charity to recover. LITRG wants all charitable gifts to qualify for Gift Aid - even from non-taxpayers.
Finally, the Group says the Blind Person's Tax Allowance - which can cut tax by £380 a year - is not claimed by many people who are blind or severely sight-impaired. Out of about 190,000 who could claim, only £50,000 do so. If their income is too low to use the allowance themselves it can be transferred to a spouse. LITRG wants the Revenue to promote it more.
Further information:
* Revenue blind person's claim line: 0845 366 7887
* Low Incomes Tax Reform Group - www.litrg.org.uk
* Tax Help For Older People - www.taxvol.org.uk - 0845 601 3321
