HM Revenue & Customs (HMRC) has caved in to pressure from charities after
successfully arguing it would not be fair to claim back tax from elderly people
who had not been made aware they should pay the tax and who had not budgeted for
the tax deduction.
Although the tax will still be payable from 2008-09, HMRC will not start
collecting it until next year and it will recover this year’s tax the following
year, in 2010-11, The Times reports.
HMRC has waived small amounts of pension income since 1988, presuming it was
insufficient to take pensioners over their personal allowances but as personal
pensions proliferated, many people received one or more small pensions as well
as a big pension, bringing them above the tax threshold.
Small pension income will be deducted 20% at source automatically under the
PAYE system from April 2009 for the 2009-10 tax year, while tax for 2008-09 will
be recovered in 2010-11. Those in the higher-rate band will pay 40%.
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