Taxing the elderly

D1zzy

Not sure where this should go so sorry if its in the wrong place and sorry for the essay.

My MIL is 90 has a state pension ; very small (£700 ish pa)BT company pension and income from savings. She should pay a small amount of tax - but because she has no way of claiming her tax allowance each year I submit a claim, on her behalf for a refund.

Until last year her tax was done in Belfast ; I was her agent - no problems. Then the Belfast office closed and she was transferred to Leicester, and they managed to lose the fact that I was her agent - that causes a whole load of problems last year which were eventually resloved, but they then sent a letter saying that they would no longer issue a tax return and her tax would now be dealt with by PAYE...

This year I requested a form which I duly completed, but being unsure where to send it I rang the help line and asked. I was told to send it anywhere and it would be forwarded to the correct office - I duly sent it to Leicester.

It has just been returned as it is "no longer dealt with" at the Leicester office as they deal with returns where the only income from state pension and savings. Aparently I should have sent it to the office which handles BT pensions Tax (N Wales I believe). I will give it a go more in hope than faith...
(good job she is not desperate for the refund!)

However, the whole saga raises a couple of questions for me even ignoring IR !!!!-ups.

1) How can taking tax up front from people in this position, and expecting them to claim it back be justified. (Yes I know the IR prefer us to be in their debt rather than the other way round - still seems criminal)?

2) MIL no longer gets an automatic tax return (even tho she's been claiming refunds for years) - if she did not have us she would have no idea that she needed to request one - how many others are in that position?

3) How much is the government making by overtaxing the elderly?

Thanks

jem16

D1zzy wrote: »

1) How can taking tax up front from people in this position, and expecting them to claim it back be justified. (Yes I know the IR prefer us to be in their debt rather than the other way round - still seems criminal)?

If your aunt (or you) fills up her form correctly tax will be taken via the BT pension. The tax code issued will take into account her BT pension, state pension and savings so should be correct.

Mikeyorks

D1zzy wrote: »

2) MIL no longer gets an automatic tax return (even tho she's been claiming refunds for years) - if she did not have us she would have no idea that she needed to request one - how many others are in that position?

You don't need a Return in order to request a refund ... so why ask for one? And if they're offering to d/w the entity of the liability via PAYE .... why not do it that way. They just code out the State Pension and estimated gross interest from savings .... from the BT pension.

Broadly the only 'elderly' who need to pay up front and then reclaim .... are those whose savings interest straddles the 10% entitlement. But that can be the case notwithstanding age.

D1zzy

Sorry - addled brain (too much Sancerre)- I do a refund claim not a tax return.

The pensions do not cover her personal allowance she only pays tax because of her investment income and 'cos its all taxed at 20% she pays way over the odds.
(should be about £1200 refund this year)

Are you saying she could get a -ive tax code applied to her BT pension?

System

Unfortunately because she is liable for some tax she cannot complete an R85 - http://www.hmrc.gov.uk/forms/r85.pdf
and give it to her bank/building societies.
Therefore her only option each year is to complete an R40 - http://www.hmrc.gov.uk/forms/r40.pdf
and claim back the excess tax which has been deducted via her savings.

Since her allowances are not fully used up by her pensions I see no point in her being PAYE as no tax would be deducted from her BA pension anyway. It would be far better for her to continue to be dealt with by Leicester Claims department and for her to ensure she makes maximum use of her ISA allowances to further reduce her taxable income.

D1zzy

Unfortunately they will not do it, and as I said have returned the claim form I submitted for the 08/09 refund. ISAs etc are all in place,
I'm sure we will sort hers eventually, but my wider point is that without assistance to make a claim she would lose out and there must be many elderly people in the same position who over pay their tax and never claim a refund. That just doesn't seem the right way round.

simpywimpy

My dad's pensions rose slightly with the budget increase - not a huge amount of course.

Problem arose however when the tiny pension he gets from my mums works was increased by pence and took him into the tax bracket. He now pays more in tax than all his increases added together.

What a farce!

D1zzy

jem16 wrote: »

If your aunt (or you) fills up her form correctly tax will be taken via the BT pension. The tax code issued will take into account her BT pension, state pension and savings so should be correct.

Her pensions do not utilise all her personal allowance so she wouls need a -ive tax code to compensate for overpayment of 20% tax on her savings. Is that possible?

jem16

D1zzy wrote: »

Her pensions do not utilise all her personal allowance so she wouls need a -ive tax code to compensate for overpayment of 20% tax on her savings. Is that possible?

Unfortunately no.

D1zzy

So the Leicester claims office have returned the claim and said it should be handled via PAYE at the office where the occupational pension is handled (N wales). Since it can't be handled via PAYE will the N wales office process it or will they tell us to send it back to Leicester?
Thanks

jem16

I would have thought the N.Wales office would handle the claim form for a refund.

I always had to help my teenage son get a refund each year and the tax office that dealt with his main tax code handled the refund.