1 in 5 pensioners face tax return ‘misery’
We all know that filling out a tax return can be painful, but while you might have thought that retirement would release you from HM Revenue & Customs’ clutches, that no longer seems to be the case.
The number of pensioners who filed a tax return last year hit 1.7m, a figure that has jumped significantly in the last two decades.
Figures obtained from HMRC by insurance company Royal London show that in the 2015-16 tax year, 1.7m of the 10m who completed an individual tax return were aged 65 or older.
More than 250,000 of these tax return pensioners were aged 80 or over.
Sir Steve Webb, director of policy at Royal London said: “It is clear that even retirement does not mean freedom from the misery of the annual tax return.”
The response to the company’s Freedom of Information request also showed that the number of pensioner taxpayers had increased in proportion to the rest of society, from one in nine in the early 1990s to one in five last year.
The numbers indicate that older people have more sources of income that are not taxed directly at source. This could include income from buy-to-let properties, dividends from investments and interest on high personal savings.
It may also reflects higher levels of old age self-employment and a growing trend for workers to use self-employment as a stepping stone to retirement.
If a retiree has modest investments or carries out a few self-employed jobs each year, then their tax burden may be very low. But that does not make completing a tax return is no less irksome.
Some retirees can struggle to carry out the necessary paperwork for filing a self-assessment tax return. Paddy Millard, co-founder of charity Tax Help for the Elderly, said there are a number of reasons that this might be the case.
“As you get older you get less confident and competent, particularly with tax,” he said. “Many older women outlive their husbands and are less likely to have ever handled tax.”
HMRC is working to make the tax system easier for everyone, in part through their Making Tax Digital campaign. But there are things that you can do now to make tax returns less taxing.
One of the big ones is to use a cloud-based accounting package such as FreeAgent or Xero.
How cloud accounting makes tax returns simpler
Cloud based accounting systems like Xero and FreeAgent make filing tax returns easier than ever before.
Filling out a tax return requires lots of different records and documents that you need if you are to complete it quickly and accurately. Cloud-based accounting systems such as Xero and FreeAgent give you easy access to your financial records and can prove invaluable in filling out tax return information.
FreeAgent even allows you to file your tax return directly through their software.
This will become particularly useful from 2019 when quarterly tax reporting becomes mandatory for some individuals through the Making Tax Digital reforms.
Cloud Accountant offers supported FreeAgent and Xero packages to help you keep on top of your taxes. If you have any questions about the systems, or you need help filing a tax return, one of our qualified accountants will be happy to help.
Get in touch with www.cloudaccountant.co.uk today to learn more about the systems. Call: 0808 281 0303.