Widows hit by tax rule blow: Sue Fieldman reveals how the date of a husband's death can cost his wife hundreds of pounds in lost benefit

Click to follow
The Independent Online
THOUSANDS of widows are losing money on a tax benefit just because their husbands died at the wrong time of year.

Tax relief aimed at helping widows in the two years after bereavement is benefiting some and not others because of wording in the Inland Revenue rules.

At present the Revenue allows widows to earn an extra pounds 1,720 tax- free in the year of the husband's death and in the following year.

Many widows who are bereaved at the end of a tax year will lose out on one year's worth of allowance because the rules count the first year as being from the time of the husband's death until the end of the tax year.

Many will simply not earn enough in such a short period to benefit. For some the loss of income could be as high as pounds 688.

Margaret Latham is 77 years old and lives in Norfolk. Her husband died on 11 March, three weeks before the end of the 1993-94 tax year.

Mrs Latham's income for that year was very low. She could not, therefore, make use of the bereavement allowance in the year of her husband's death.

She believed, not unreasonably, that she would get the allowance in the year following the death and the year after. After all, a widow was entitled to the allowance for two years.

Mrs Latham said: 'When the Inland Revenue advised me that the two-year widow's bereavement allowance of pounds 1,720 per annum was for the year from death and the following year, I realised that I was to be allowed only one year's tax allowance, not two.

'The fact that I had only a small personal income for the year should not surely penalise me. I am 77 and can hardly go out to work to recoup the pounds 430 (25 per cent of pounds 1,720) that this ruling could cost me.'

Mrs Latham accepts that the Inland Revenue is applying the letter of the law, but she is incredulous at the effect on her and thousands of others.

She said: 'There must be many low-income widows who have experienced the same ruling. The months of January to March are the time when frequent deaths of old people occur.

'This allowance was introduced by the Chancellor to aid widows during the first two years of widowhood, not to be withdrawn wherever possible.'

Michael Norrie, of the chartered accountants Norrie Stokes & Perrett, of Tonbridge, Kent, agrees that the workings of the allowance are inequitable.

He said: 'What is the purpose of an allowance if you cannot use it? It should be there to help all widows.

'If it does not help, it has failed. The Inland Revenue is almost encouraging women to keep their husbands on a life support machine until 6 April in order to secure two years' relief.'

The allowance was initially introduced in 1980 just for the tax year of a husband's death.

An Inland Revenue spokesman said: 'It subsequently became clear that many widows whose husbands died late in the tax year did not have enough income in the rest of the year to benefit from the new allowance.

'It was for this reason that, with effect from 6 April 1983, the allowance was extended to the tax year following bereavement as well.

'The present arrangement means that all widows benefit from the special allowance for at least a year.'

Mr Norrie said: 'It has to follow the fiscal year, but why not apportion it? It would make simple sense and be easy to operate.'

An Inland Revenue spokesman said: 'The allowance is given only to widows because we believe that generally speaking the financial problems caused by bereavement are greater for a woman than a man because the husband is usually the main breadwinner.'

(Photograph omitted)

Looking for credit card or current account deals? Search here

Comments