Tax and Pension Related Challenges for UK Seniors

Tax code and general finance considerations become increasingly complicated as a person gets on in age. If you are over the age of 50 and approaching the age of retirement, make sure that you are aware of the following pitfalls and points of confusion faced by ageing citizens in the UK: 

Misunderstanding how pensions are taxed

You spend your whole life paying taxes on your income. Unfortunately, once you retire, this trend continues. However, the amount of tax that you owe on a pension depends on several factors, and it is easy to get confused regarding how much you owe – or even if you owe at all.

As an example, state pensions in the UK are not taxed below a certain level. You can read up on the specifics on how pensions are taxed on the HM Revenue & Customs website. However, the best way to proceed is to contact an accountant and have them assess your situation. Doing so ensures that you stay on the right side of the law without having to pay any more than is absolutely required. After all, every bit of savings counts when dealing with a fixed income. 

Finding the Right Forms

This is a problem that taxpayers of any age bracket can face. It is certainly not exclusive to seniors. The way in which tax forms are organised and prescribed is complicated to begin with, and anyone without a background in accounting or tax code law could be forgiven for being confused.

The problem is that filing an incorrect form can completely derail the tax return process. You may end up paying more (or less) than required. Likewise, filing an incorrect form could end up invalidating the entire return, subjecting you to further headaches (at minimum) or even fees.

Missing out on special credits and benefits

Every year, upwards of £5.5 billion in tax credits intended specifically for the elderly go unclaimed in the UK. These funds are made freely available by the government. However, the fact that their would-be recipients are unaware of them means that ultimately go unused.

These are a few common benefits that are often overlooked:

• Housing Benefit: This benefit is intended to help elderly persons pay for housing if they rent rather than own.
• Pension Credit: This benefit tops up your income to a guaranteed minimum level; roughly one in three eligible people fail to claim their pension credit. 
• Council Tax Benefit: This specifically applies to those who have disabilities or require special care.

Again, failure to understand what types of benefits are available to you could actually be costing you money in the long-run. With that in mind, seeking the services of a chartered accountant or financial advisor could actually end up earning you more money than you spent on the services to begin with. 

Mishandling your annuity

There have been a number of changes and revisions to the way annuities are handled in the UK. What many ageing Britons do not realise is that they are actually able to choose which firm they purchase the annuity through. Many are unaware that they can purchase an annuity from a firm aside from the one they have charged with taking care of their investments.

While it is refreshing to have more freedom and control over your financial future, this also exposes us to greater risk. Most importantly, long-term financial planning is not something that you want to attend to yourself if you do not have a background in finance. A single misstep could set you on track for financial ruin further down the road. With that in mind, consult the experts before you prematurely draw on an annuity. 

Counting on your pension before you qualify

Those who are nearing the age at which they qualify to draw a pension are likely to start making changes to the way they structure their budget, finances and assets. The problem here is that the government is constantly revising up the age at which a person qualifies. While new regulations are usually announced well before they are implemented, it is still possible that a person could end up banking on a monthly stipend that’s actually not even available to them for a few more years. Make sure that you know how the law applies to you before you make any major financial decisions.

Author: Kristen Rodrigues is a writer working on a freelance basis for Brebners, a company found in London and Kent that believes that they can help any business with their tax and accountancy matters.

10 Legal Problems That Could Change Your Financial Situation After 50's

Photo: aarp

Society is getting ruthless by the day and it takes no second thoughts for me to analyze that the elderly people are a vulnerable lot; they start to reflect on those vulnerabilities once they are into their 50’s. They have a lot to worry about, such as how to pay for health-care, how to protect assets, how to ensure good care for their spouse, how to get home care and a lot of other things besides these. To ensure protection of your rights, litigation may become necessary which involves long battles and a severe drainage of resources. But if you already have some idea about the legal problems and ways to deal with them, you can save yourself from a lot of hassle later on.

Disobeying the terms in your Advance Healthcare Directive

If you become incapacitated or paralyzed, you must have someone to communicate your wishes regarding the finances for health-care. You should get the health care that you desire to get in writing in advance healthcare directive or living will. Your kith and keen may be reluctant to adhere to the will since that may involve selling of assets or such other things. 

Continuance of treatment to terminally ill patients

There may occur a situation when your near and dear ones may be wanting to continue your treatment even when your quality of life and prognosis of disease is very poor. They may have interest in your survival; or just don;t have the strength to let go off of you. If you lay down strict terms in your Living Will that in such situations, treatment should be discontinued then you need not suffer along.

Asset protection

When all the resources for paying for your health-care are exhausted, your property is the last resort. What if the property itself is under litigation? Your spouse, children or others may have an eye on it and may prevent selling or mortgaging it. You would not want to think negatively of your family, but taking the point in consideration is of extreme importance to ensure you don;t end up n a difficult spot later on.

Wills and estates

All the money you have made and properties that you have acquired may be a source of litigation with even your near and dear ones. Even if you have made a will it may be a source of discontent for many and result in litigation. Ensure you are aware of such situations and have plans on tackling them sorted beforehand.

Long term care facilities

With increasing number of people claiming resident rights in Long Term Care Facilities, it may be a source of litigation too. 

Estate income

Income from the estates acquired or inherited by you may also be a source of acrimony between your siblings and others. This may give rise to legal problems.

Gift tax

People in their 50s should remember not to use gifting as a way of paying for nursing expenses. This is because the gift tax is applicable to the donor and not to the recipient. You may end up coughing up a large amount of tax or get involved in a court case.

Power of attorney

It is usual for elderly people to appoint Power of Attorney to take financial decisions on their behalf. But you can get involved in legal problem with him or her if he or she deviates from your principles. A mischievous power of attorney holder may also rob you off your resources.

Distribution of assets

Distribution of your assets between your spouse, children and other beneficiaries may be a source of legal conflict.

Financial transaction penalties

Quite a lot of interest may be due to the bank on your credit card transactions. If you are not able to pay the interest timely then it will amount to a huge sum due to accumulation of all the penalties and fines. This may be a source of bitter legal problem after 50s.

It is always a good idea to know what can cause you harm and take actions before that problem starts to engulf you. Like they say, Prevention is Better than looking for a cure.

Written By:
Adam Prattler blogs about attorneys and the best practises before hiring one. He has an extensive post on no win no fee specialists and when to hire such set ups on his website.