Budget analysis – The chancellor has neglected to help pensioners

The chancellor has not gone far enough to help old people cope with the tax system. The Low Income Tax Reform Group is pleased Brown has decided the poorest pensioners will receive more in their pockets through the benefits system. But there is disappointment he has not taken the opportunity to revamp the complex tax system which faces the elderly. This system causes distress to pensioners, quite disproportionate to the tax liabilities involved. The married couples’ allowance withdrawal for pensioners born after 5 April 1935 – and due to come into force from 6 April – will add further complexity to an already incomprehensible system. The withdrawal of the widow’s bereavement allowance, also with effect from 6 April, will also remove an allowance primarily received by those in retirement. It is also a pity that, as he raised the savings amounts pensioners may hold in order to qualify for benefits, he did not raise again the amount of savings income that pensioners may receive before being sent the dreaded self-assessment form. The rise in the age related personal allowances given to pensioners, from #5,720 to #5,790 for those under 75 and from #5,980 to #6,050 for those 75 and over, were the minimum required by legislation. We pressed the officials to include these levels in the codings issued to pensioners in January and February and due to be operative in April. But they refused. This means pensioners will be making interest-free loans to the government in April as the PAYE system deducts too much until the Revenue issues new code numbers for May, and pensioners have their loans repaid. John Andrews is chairman of the Low Income Tax Reform Group.

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