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Tax system for pensioners ‘should be simplified’

The Office of Tax Simplification (OTS) has called on the Government to make the tax system simpler for pensioners, and has suggested that the taxation of state pensions might end altogether.

The OTS is currently undertaking a review of pensioner taxation, with the aim of identifying ways to simplify the system.

The initial stage of the review gathered evidence of the tax complexity experienced by pensioners.

Around five million pensioners currently pay income tax, and the interim report from the OTS describes the current system as ‘overly complex’, and highlights the problems faced by pensioners as a result of a ‘maze’ of tax rules and complex administrative processes.

The report also calls for the reform of the married couples allowance, the taxation of savings, and age-related personal allowances for those aged over 65.

The OTS is due to publish its final report, complete with specific simplification recommendations, later in the year.

Commenting on the report, John Whiting, Tax Director at the OTS, said, ‘Too many people find the tax system gets more complex as they get older. We are aiming to make final recommendations that will mean pensioners can have a better understanding of a simpler tax system, and can deal with their responsibilities more easily’.

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