Since the early 1980s, with the agreement of the Inland Revenue (now HMRC), pension providers were not deducting tax from some small pensions, with the result that a large number of pensioners have been undertaxed (see our previous articles). Although, tax for earlier years has been waived, tax for the current year has to be collected.
After the agreed waiver of past debts it was agreed that LITRG would continue to meet with HMRC and assist in the process of reaching out to pensioners in the best way possible.
The good news is that the original estimate of the pensioners affected at 420,000 has now been scaled back due to a number of factors and might now be something around 250,000.
The bad news is, of course, that the tax for the current year still has to be paid by those pensioners who are still in the dark about this potential liability for the current tax year. However, HMRC are close to identifying who they are and being in a position to write to them. This is helpful in that the correct tax will be collected from regular pension payments as soon as practicable and any arrears from the first part of this tax year (2008/09) will be similarly kept to a minimum. No attempt will normally be made to collect those arrears until the tax year starting April 2010.
We will report back again before pensioners are written to by HMRC.
Contact: John Andrews (Tel: 0844 579 6700 Fax 0844 579 6701)