Summary
In this report, 'Dealing with the Tax Obligations of Older People: HM Revenue and Customs (HC 961)', the NAO finds that a significant number of older people pay too much or too little tax. Errors occur because many people's tax affairs become more complicated when they reach pension age and HMRC's systems do not cope well with their multiple sources of income.
The NAO estimates that, by March 2009, some 1.5 million older people had overpaid tax by an average of £171 (£250 million in total), and around 500,000 older people had underpaid tax by an average of £207 (£100 million in total). These errors can have a disproportionate effect on older people as their net average annual income of £16,000 was around 25 per cent below the national average in 2006-07.
The Department expects a new computer system introduced in June 2009 to reduce the level of errors. Older people may also be paying more tax because they do not claim additional age-related tax allowances. The NAO estimates that some 3.2 million older people do not claim the additional allowances. 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.operties vacant. Each percentage point reduction in the number of empty properties could reduce costs and free resources by over £2 million.
HMRC spends around £36 million per year in staff costs on dealing with enquiries from older people which tend to be more complicated than normal. Demographic changes are likely to increase the pressures and costs for HMRC. The Department should rethink its approach to ensure that older people get the financial support to which they are entitled.
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