140,000 Pensioners to Receive Surprise Tax Bills as Incomes Exceed Frozen Threshold

In the coming weeks, around 140,000 pensioners will receive unexpected tax bills from HMRC due to incomes exceeding the frozen allowance threshold.

Thousands of Pensioners to Receive Surprise Tax Bills as Incomes Exceed Frozen Allowance Threshold

In the next few weeks approximately 140,000 pensioners will be surprised by tax bills from HM Revenue & Customs (HMRC) because their incomes surpass the frozen personal allowance threshold of £12,570. This will mark the first instance for many of these retirees who are not within the Self Assessment system or cannot have taxes automatically deducted through PAYE, to receive a tax demand since their retirement. The “triple lock” policy’s boost to state pensions along with small private pensions has resulted in more retirees falling into the tax net, with HMRC issuing these bills through a “simple assessment” process, according to the report of Telegraph.

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(photo: CGWALL)

Calls for Review of Policy to Protect Those with Limited Retirement Incomes

As the policy of freezing tax thresholds continues until at least 2027-28 and the number of these tax demands is expected to grow. Steve Webb, a former pensions minister and current partner at pensions consultancy LCP, cautions that these letters will be distressing for pensioners with limited financial means potentially pushing them below the minimum income required for a basic quality of life. The Institute for Fiscal Studies reveals that over 60% of those over 65 now pay income tax, up from around 50% in 2010 with even more projected to start paying taxes in the coming years.

There are fears that scammers might take advantage of this situation by sending fraudulent tax demands to pensioners. Webb calls on the government to reevaluate the policy of taxing individuals with modest retirement incomes and to establish a more equitable system. Research shows that between 1.4 million and 1.6 million pensioners are expected to be paying income tax by 2027-28 emphasizing the necessity of reviewing these policies to safeguard those with limited retirement incomes.

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