Tax Help for Older People

News, Staff Zone — By on December 23, 2013 2:07 pm

In this world nothing can be said to be certain, except death and taxes.”

Bereavement can be a difficult and often stressful time.  It’s an emotional rollercoaster, but as anyone who has been through this will also know, there is a staggering amount of paperwork to deal with too. In the circumstances, this can be quite mind boggling.  If you have a solicitor dealing with estate they are likely to make you aware of your obligations to the taxman, and should guide you through painlessly.

 “Tell us Once” is a service that helps people tell government departments just once about a death. Most counties run the service and you can find out about it when you register the death. Once you register for this service, all government departments will be informed; HMRC, Tax Credits, DWP, DVLA and the passport service to name a few. If the service is unavailable in your area you will need to contact each department separately.

When someone dies it is important to determine if too much or too little tax has been paid for the year, and HMRC will send out a form R27 to the person responsible for settling the estate.  It is important to check that any unused allowances for the year of death, such as married couples or blind person’s allowances are transferred to the survivor.

The death of a spouse will often make a difference to how the survivor is taxed. For example they may receive a new pension, start to receive a widow’s pension or find their State pension increased, in addition to the allowances that can be transferred to the surviving spouse.

HMRC may send out a pension coding form, P161W, asking for details of income.  It can be completed as soon as the survivor knows what their new pensions etc. will be and HMRC will use the information to work out how any tax due will be paid, and then issue new tax codes if required.

Please don’t forget savings income.  A person who becomes a taxpayer will have to revoke any election they made (on form R85) to receive gross bank or building society interest.

For example, a woman, who only has the married woman’s state pension of £66.00 a week, has never had to worry about tax and may have notified their bank for interest to be paid gross rather than net of tax. When her husband dies she inherits half of his occupational pension, gets an increased state pension based on his national insurance contributions, and may have more investment income. Suddenly she is a taxpayer. She is not on the HMRC computer system and probably is totally unaware that she will be liable to pay tax. At this very difficult time, when she is at her most vulnerable, she is supposed to know that she needs to complete an R27, inform HMRC of changes in her income, check any information that is sent to her in relation to tax codes and remember to revoke any R85s she has in place.

We find that it normally takes about six months to get everything in order, and we also recommend an end of year check, and review of the following year, to check that all is well.

This article is by Tax Help for Older People (operated by registered charity no 1102276), offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066

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