Many still pay too much tax
Personal tax-free allowances for pensioners have gone up for the first time in three years, from £4,200 to £4,630 for those 65 to 74, and from £4,370 to £4,800 for those over 75. Help The Aged says the extra £430 of tax-free personal allowance will save £107.50 a year each for men and women who pay tax at standard rate. The married couple's allowance for pensioners also goes up from £2,665 to £2,995, if the older partner is aged 65-74, and from £2,705 to £3,035 if one is over 75. But the whole of this allowance will receive tax relief at only 15 per cent this year instead of 20 per cent, reducing the tax saving by about £86 and £88.25 respectively.
Quite apart from the reduced value of the allowance, the reduced rate means the allowance cannot simply be deducted from taxable income on a pound for pound basis in order to calculate tax codes. One in two pensioners may find their tax codes are incorrect, says Help The Aged.
Three out of four pensioners should not pay tax on their income anyway, it claims, and many pensioners on very low incomes will pay unnecessary tax again this year because they still have not exercised their right for interest on bank and building society accounts to be paid gross.
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