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HM Revenue & Customs have commenced the issue of approximately 146,000 tax calculations to pensioners who will be informed that they haven’t paid enough tax in the year 2010-11. The underpayments for 2010-11 had been previously announced, but are only now being issued. Repayments of tax which were due for 2010-11 had been dealt with initially as a matter of priority.

The underpayments of tax have arisen as a result of an error made by HMRC, who didn’t include the state pension when calculating new tax codes for 2010-11. Every person in the UK receives personal allowances, which include age allowances from age 65 and beyond. These allowances are increased when you reach age 75. The state pension yearly amount is deducted from these allowances, which ensures that tax is paid on the amount. As the state pension wasn’t deducted from the personal allowances by HMRC, tax due remained unpaid.

HMRC have announced that they will write to taxpayers and apologise for the error and explain how the amount owing will be collected, and how it occurred. During an interview with Which? Magazine, a spokesman for HMRC said:

“Where a pensioner has underpaid tax for 2010-11, we will automatically code out that underpayment over a period of three years from April 2012 without them needing to contact us.”

As the errors occurred last tax year, HMRC wrote off a number of underpayments through Extra Statutory Concession A19. However, due to relevant timescales not being met this year, the underpayments will be collected through the tax code for 2012-13 onwards.

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