CIOT: Campaigners welcome proposals to simplify tax for pensioners
The Low Incomes Tax Reform Group (LITRG) has welcomed the Office of Tax Simplification’s (OTS) final report on pensioner taxation – published today – and hopes that its recommendations will deliver real improvements.
Since its earliest days, LITRG has been concerned by the complexities of the tax system faced by pensioners and how those on fixed and often very low incomes navigate their way through it. Many of the things the Group has campaigned for are reflected in the OTS’s report.1
LITRG’s Chairman, Anthony Thomas, commented:
“Pensioners on low incomes need far more support than they are currently getting to navigate what has become a highly complex tax system.
“In this report, the OTS has produced some well thought-out recommendations which should simplify the tax system for many pensioners. We welcome the recommendation of a ‘DWP60’.2 Coupled with a single notice of PAYE coding instead of the multiple papers that pensioners currently receive, this should greatly improve people’s understanding of how their pensions are taxed – something which has bewildered many for years.
“Pensioners are also amongst a significant number of low-income savers who pay the wrong tax by misunderstanding the ‘Form R85’ process for getting their interest paid without tax taken off. The OTS report reflects our own thinking in this key area.3 In the light of enhanced data capture from banks and building societies, now is an ideal time for HMRC to be considering how they can identify overpaid tax on savings by matching data to taxpayers’ records, something which would be of huge benefit to low income pensioners.
“We also fully support simplification of tax reliefs and allowances such as the blind person’s allowance, married couple’s allowance and 10% savings rate as the OTS report recommends. This is though with the proviso that any savings are reinvested to benefit older and disabled taxpayers who most need the help those systems are currently intended, but largely fail, to provide.
“LITRG is delighted to have supported the OTS’s review. We hope that the hard work and time invested by the review team and members of the Consultative Committee will be followed up by HMRC and the Government delivering on its carefully thought out and considered recommendations.”
Notes for editors
1. LITRG’s first report on pensioner taxation, published in 1998, outlined the case for a friendlier tax system for pensioners. This was followed up by further reports in 1999 and 2007. Meanwhile in 2001 LITRG piloted ‘Tax Help for Older People’, an advice service subsequently established as a separate charity which continues today to support many thousands of low-income pensioners.
Links
1998 report – ‘Older people on low incomes – Case for a friendlier tax system’ (http://www.litrg.org.uk/reports/2004/older-people-on-low-incomes-case-for-a-friendlier-tax-system)
2004 report – ‘Older people on low incomes – The Taxman's Response’ (http://www.litrg.org.uk/reports/2004/older-people-on-low-incomes-the-taxmans-response)
2007 report – ‘Older people on low incomes -The case for tax reform’ (http://www.litrg.org.uk/reports/2007/older-people-on-low-incomes-the-case-for-tax-reform)
2. The ‘DWP60’ is an equivalent to the P60 letter, which would be issued by the Department for Work and Pensions at the end of the tax year showing taxable state pension, in order to make it easier for older people to fill in their tax return and understand the annual amount as against weekly/4-weekly payments.
3. Earlier this week, LITRG also released its latest report highlighting the difficulties low-income savers experience in understanding how to get interest paid without tax being taken off. Many of those savers are pensioners and the LITRG report issues a plea for better service from banks, building societies and HMRC. We are delighted that many of its recommendations are echoed in the OTS report.
The report, ‘Banks, building societies, HMRC and their low-income customers – a plea for better service’, can be read at http://www.litrg.org.uk/reports/R85_report_Jan2013
4. The OTS report on pensioner taxation can be read here: http://www.hm-treasury.gov.uk/ots.htm
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities. The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.
George Crozier
External Relations Manager
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The Chartered Institute of Taxation
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www.tax.org.uk
The Association of Taxation Technicians
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www.att.org.uk
Low Incomes Tax Reform Group – an initiative of the Chartered Institute of Taxation
www.litrg.org.uk
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