A report by Parliament’s Public Accounts Committee into the way that older people, especially pensioners, are taxed has worryingly shown they could be on the receiving end of a very raw deal.
Constituting 18% of taxpayers, older people are more likely to abide by tax rules but are less likely to understand them, which means they will often pay more tax than is necessary.
Because, normally, older people have several sources of income and discrepancies often arise between employer’s, pension provider’s and HMRC’s records, this can lead to enormous overpayments: it is reckoned that around 1.5 million older people have paid some £250 million over and above what they should have.
£200 million too much paid in tax
Add to this the fact that 2.4 million older people have paid in the region of £200 million too much in tax because they their savings income was not paid gross of tax and the tax deducted at source was not claimed back; and that it seems too few are claiming the age’‘related tax allowances to which they are entitled; and it is easy to see why the issues have been labelled raw deal.
The fact is, older people are less likely to contact HMRC for help, despite their lack of understanding of the complex rules.
Geoff Charles of Bower says, ‘As if there weren’t enough financial issues to consider in retirement, now we learn that pensioners are getting a raw deal where tax is concerned. Naturally the right advice should be sought from appropriate professionals.’
Equity Release is Tax Free
One area in which retired homeowners will not have any concerns over tax is if they wish to release cash from their homes via a lifetime mortgage or home reversion plan so that they can supplement their income in retirement. All cash released from the property is tax free. Geoff Charles, his company specialising in award winning equity release advice, has this to say, ‘With the money released from your property presently tax free, at least this is one area of over taxation the retired population does not have to worry about.’
Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks, please ask for a personalised illustration.
Bower is an FCA regulated independent financial advice company that offers specialist advice on equity release throughout the south of England. For more information e-mail [email protected] or call [tel]. Bower offers a no obligation initial consultation to homeowners considering Equity Release.