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Pensioners Warned Over Tax Codes

Millions will need to check their coding notices carefully

Pensioners have been warned to look out for mistakes in the millions of tax code notices being sent to them by HM Revenue & Customs (HMRC).

The Low Incomes Tax Reform Group (LITRG) says at least seven different errors have already come to light with pensioners' new coding notices.

The codes determine how much of their income is taxed each year.

The mistakes could lead, at worst, to people paying £108 extra tax per month, while some may not pay enough tax.

HMRC has already explained that mistakes are emerging because a new computer system, introduced last year, is bringing people's tax and national insurance records together for the first time.

In the process it is trying to reconcile different sets of data about past and present employment, which may not match each other.

"We accept and very much regret that errors have occurred in some of the notices that have issued but the majority of codes are right," said an HMRC spokesman.

"We recognise that some of the data brought forward from previous systems may be inaccurate and we are taking every opportunity to correct that."

Fresh mistakes

According to the LITRG, among the mistakes that are affecting some pensioners' tax codes are:

• coding notices for pensioners who still have some employment, or income from non-state pensions, may not have included their state pension - which could lead to a big underpayment of tax.

• the married couple's allowance, where one pensioner is aged 76 or over, has not been included

• personal allowances have been incorrect or left out altogether

• the figure on the notice for "other income" has been incorrect

• An "0T" code has been given incorrectly, indicating no allowance should be given at all

• codes issued for the first time to claimants of incapacity benefit, and the newer employment and support allowance, have been added to codes issued for sources of income which have now stopped

• the blind person's allowance has been omitted.

More problems?

John Andrews of the LITRG said these problems had emerged from people seeking advice from the website TaxHelp for Older People, and appeared to be affecting those pensioners whose main income was from sources other than their pensions.

But he explained that people whose main income was in fact from occupational and private pensions, as well as the state pension, would soon receive their coding notices too.

"I think the problems could affect hundreds of thousands of people," Mr Andrews said.

People who rely exclusively on the state pension for their income are in the self-assessment system and are not sent coding notices at all, so they are not affected by these emerging problems.

The Revenue has already advised people to check with their tax office to let them know if a code seems to be wrong, or ring 0845 3000 627, so it can be corrected before 6 April 2010.

All News supplied by the BBC