Join the campaign for warm homes

As energy suppliers once more hike up their prices, Age Scotland joins the call for action to keep our homes warm.

Fuel poverty is a national scandal, with more than half of single pensioners fuel poor.  At both Scottish and UK levels schemes have been established to tackle fuel poverty; the Scottish Government’s Home Energy Efficiency Programmes for Scotland (HEEPS) and the Westminster Government’s Green Deal and Energy Company Obligation. But there has been some slippage around implementing these, with the poor results so far for the Green Deal being particularly concerning.

Much of the cost of the UK Government’s schemes is levied as an added cost on household fuel bills, which means that those already struggling to pay their bills are disproportionately penalised.  This needs to change.

Part of the solution to fuel poverty is for the UK Government to use the money it gets from carbon taxes to help make homes super-energy efficient – with excellent insulation, renewable energy and modern boilers.  The UK Government taxes big companies for the damage their carbon emissions cause to people and the environment. These taxes are used by the Government to help combat climate change and wean the UK off dirty fossil fuels.  That’s a good objective, but the money the Government receives isn’t being used to help people use less energy to heat their homes – which would cut carbon emissions even further AND cut people’s energy bills.  The companies eventually pass these taxes on to consumers and they end up on our bills. Over the next 15 years Westminster will raise an average of £4 billion every year in carbon taxes.

Recycling carbon revenue to make homes super-energy efficient could bring 9 out of 10 homes out of fuel poverty. It could also be used to quadruple savings in carbon emissions compared to the Government’s new energy efficiency schemes and create up to 200,000 jobs – exactly what we need to support the UK’s economic recovery.

If you agree please send an e-message to your MP.

We can also make a difference by encouraging older people across Scotland to find out about, and take advantage of, existing help for cutting home energy bills.  Home Energy Scotland can carry out a free home energy check, no matter what your circumstances, or wherever you live in Scotland. 

TaxHelp for Older People: Easy money

This guest post is by TaxHelp for Older People, a charity offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321.

If you use a car for work, you may be able to claim tax relief.

Do you use your own car for work, wear a uniform that you repair and clean yourself or have to buy your own specialist equipment like protective clothing?  If yes read on, you may be able to claim tax relief. The form is simple and sometimes people can make a claim over the phone.

If you use your car for work you will probably be paid a mileage rate for doing so. If the amount you receive is below the tax free rates then you are allowed to claim back the difference between these rates and the amount you actually receive.

What are the tax free rates I hear you ask? An employee can receive 45p per mile for the first 10,000 miles and 25p per mile thereafter without having to worry about tax. If more than £8,000 is received in a tax year it becomes a taxable benefit and the employer should produce a form P11D at the end of the tax year. An example will better explain how it works.

Mrs H works as a carer and clocks up 24,000 miles a year. Her employer pays her 23p a mile and she hasn’t a clue if this taxable or not. She is allowed 10,000 miles at 45p and 14,000 miles at 25p, totaling £8,000 tax free,  but she only gets 23p x 24,000, or a total of £5,520, and so she doesn’t have to worry about paying any more tax. But she can in fact claim tax relief on the difference between the two, which is £2,480. This is known as mileage relief and if Mrs H is a basic rate taxpayer she can claim tax relief at 20%, worth £496 for the year or an extra £41 per month. Well worth the effort!

Had Mrs H been paid say, 35p a mile, for all of the 24,000 miles she would have received £8,400 which is £400 over the tax free limit. In this case her employer would report the £400 to HMRC after the end of the tax year on form P11D and they would arrange to tax it, costing her £80.

If you are expected to care for your work uniform, you could claim tax relief.

The other tax reliefs that are worth knowing about are called flat rate expenses. If you work anywhere where you have to wear a uniform, or protective clothing that you repair and clean or replace yourself or you have to buy, maintain or replace specialist tools to do your work you will be entitled to them. The rates differ depending on the industry you are in and are calculated to cover what is typically spent each year by an employee in the different trades.

For example, Mrs H is expected to wear a uniform when she is working and which she is expected to look after. This means that she can ask HMRC for a flat rate expense of £60. It sounds really good, but in cash terms she will only receive the tax relief of £12 (£60 x 20%), still enough to pay for the soap powder. Had Mrs H been a cabinet maker she would have been able to claim £140.

The first time you claim a flat rate expense you need to put it in writing to HMRC, you can use form P87. For future years and if the amount you are claiming is under £1,000 you should be able to claim over the phone. If the claim is over £1,000 but under £2,500 you use form P87 and for claims over £2,500 you have to be in Self Assessment.

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

TaxHelp for Older People: Keep on checking…

This guest post is by TaxHelp for Older People (TOP), a charity offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321. 

Last month we discussed the 2011/12 tax rates and allowances and we promised some more examples.

People often call our charity because a friend has told them that they shouldn’t be paying that much tax, our incomes are the same so it must be wrong. Our experience shows that you have to check very carefully because your age, marital status, eyesight and type of income can make a huge difference to the final tax to be paid to HMRC and in the way that it is collected.

The following examples using the proposed 2012/13 rates will give a taste of the issues that can affect your tax.

1. A person, 66 years old, who only has their state pension of £13,500 per annum has a personal allowance, PA (tax-free amount) of £10,500 leaving £3,000 to pay tax on at 20% – £600. Sound easy until you consider that they do not have any way of paying it because the state pension cannot be taxed at source under Pay As You Earn (PAYE). This person has to complete a self assessment each year and pay the tax in a lump sum by the 31st January after the end of the tax year.

2. Whereas another person, also 66 years old, who has the same income consisting of state pension £5,300 and company pension £8,200 will owe the same amount of tax but it can be paid under PAYE. This is done by removing their state pension from their PA. £10,500 less £5,300 leaves £5,200 tax-free allowance. Knocking off the final digit and adding a letter creates a code 520P which is sent to the pension provider who will remove £5,200 from the pension income before calculating the tax to be paid.

3. If the person above has a state pension of £12,050 and 3 small pensions instead, say    a) £500, b) £550 and c) £ 400 then the code of 520P will need to be split as no pension is large enough to pay the £600 tax. Pension providers are only allowed to take 50% of a pension which adds to the fun.

4. If we then consider the same income as example 2 but the person is 79 years old registered blind and married, it becomes more complicated. This time the PA will be £10,660 (75 and over) plus the married couple’s allowance of £3,853 restricted to 10% of its face value, giving  tax-free income of £14,513. This makes the person a non-taxpayer. But… the married couple’s allowance hasn’t been fully used and the blind person’s allowance has not been used at all. Both of these allowances can be transferred to the spouse, so it is important to check if this is possible.

You will be realising by now that tax really can be quite taxing. If you are unsure of anything it is worth asking someone who does understand and is able to explain it all clearly. TaxHelp for Older People (TOP) is a charity offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321.

Image: Matt Aeillo

TaxHelp for Older People: A new season begins

This guest post is by TaxHelp for Older People (TOP), a charity offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321. 

Photo - Darren Shaw

It’s coding time again, how fast the years fly by! It’s the time when you will be expected to read, understand and inform HMRC if they have got your tax codes wrong. This year HMRC tell us that their new computer system is now running at 98% accuracy. This is brilliant news and means that for most of us our tax affairs will be in order.

But hold this thought in mind… There are approximately 35 million people paying their tax under the Pay As You Earn method (PAYE) and another 5 million paying by both PAYE and Self Assessment. If you do the maths you will see that 800,000 people will still have problems.

You got it… You still need to check your coding notices and statements carefully, especially if you have multiple sources of income, have recently retired, been bereaved or had any change in circumstance.

Here are the 2012/2013 rates, allowances and reliefs (subject to the budget):

• Basic rate band (you will pay tax at 20%)                        £0 to £34,370
• Higher rate band (you will pay tax at 40%)                       £34,371 to £150,000
• Additional rate band (you will pay tax at 50%)                  Over £150,000

Personal allowances

• Age under 65                             £8,105
• Age 65 to 74                              £10,500   (Can be claimed at the start of the tax year if income for the year is less than £25,400)
• Age 75 and over                        £10,660   (As above)
• Married couples’ allowance      £7,705
• Blind person’s allowance          £2,100

The married couples’ allowance is only available if one of you was born before 6^th April 1935, it is restricted to 10% so you would expect to see half of this figure in your tax code (£3,853). You are able to share this allowance with your spouse and if you have done this check your coding notices very carefully.

You do not have to be totally blind to claim the blind person’s allowance but need to be registered with your local authority on the blind register (in England and Wales only). If you think you may qualify, ask your doctor to refer you to an eye specialist. This allowance can also be shared with your spouse; if your own income is low it may be beneficial to do this.

All you have to do now is match this lot to your own situation. For example:

Mrs A is 63 and still working, has deferred her state pension and doesn’t have any other income. She will have a personal allowance of £8,105 before she pays any tax. Her code will be 810L which will be sent to her employer.

Mrs B – also 63 – receives her state pension of £7,105, has a work’s pension and a part-time job. She has the same personal allowance of £8,105 but her state pension is taxable and can’t be taxed at source, so it needs to be subtracted from her allowance. So £8,105 minus £7,105 leaves £1,000. This will be sent to her pension as it is a continuing source as code 100L, as all of her allowance is used up any other income is taxed at basic rate (BR) 20%. Care has to be taken to make sure that income sources are large enough to operate the code.

Don’t fret. We will continue with more examples next month!

Managing later life on restricted means is a juggling act

Age Scotland’s Communications and Campaigns Manager, Lindsay Scott, discusses the recent findings of the “Living on a Low Income in Later Life” report commissioned by the Age UK family. 

A new report commissioned by the Age UK family covering the situation of older people in England, Scotland and Wales, shows that older people on low, fixed incomes are typically finding life tough but are ‘coping’.

The findings demonstrate the different forms of hardship that people in later life experience, highlighting the extent of the sheer hard work required in order to get by and just how constraining living on a low income can be.

A key conclusion is that, while dire material hardship may be less common in later life than it once was, the pressures associated with living on a low income have not gone away. Material hardship is still very evident; some of the people in the study had to economise on fulfilling basic needs, for example by, in winter, only heating part of their homes for part of the day.

The findings show how a combination of poor health and poor mobility and living in more isolated areas without accessible and affordable transport or social networks can result in some people becoming more disadvantaged than others. Where people are already on a restricted income, these factors make stretching their money further that bit harder, part of the problem being that if you are only just keeping your head above water, it is hard to deal with unexpected or additional expenses.

Planning finances carefully often doesn't account for emergency purchases

Someone who has planned their future outgoings carefully may find it nigh impossible to foot the bill for house repairs, to visit a sick relative at the other end of the country or to replace a broken appliance. Even where people we spoke to had a bit of ‘rainy day’ money put aside, they were reluctant to draw on it for fear of being unable to afford a more important expense in the future. Furthermore, the reluctance of many to get into any form of debt created an extra constraint.

Another issue arose where people did not always feel in control of their financial situation. In some cases, they were dependent on having things bought for them by family and friends and this made their financial comfort reliant on the goodwill of others.

Some people had done advance budgeting on the basis of a certain amount of interest on savings and when that dropped to a tenth of what it had been, found themselves with a problem. In other cases the ways in which organisations structured payments made things difficult for them, for example where their gas or electricity accounts were allowed to fall behind, causing large arrears or sudden increases in monthly payments.

Fuel price rises have severely affected older people's finances

What emerged right across Britain is that older people have been shaken rigid by the enormous fuel price rises we saw in the second half of last year and in combination with hikes in the costs of basic foodstuffs, those on low, fixed incomes have had the frighteners well and truly put upon them.

Finally, it is notable that for many of those who took part in this study, their limited incomes were not the most important factor in determining their quality of life. The closeness of their relationships, the quality of their local services and how they felt about their surrounding environment could often be more important.

However, this was often because they felt that they were currently ‘coping’ by paying bills on time, keeping relatively warm and buying the basics, and felt they could be philosophical about the limits to what they could buy.

Increases over the past decade in the real value of benefits, especially the Pension Credit, have undoubtedly contributed to this. The risk is that, if the buying power of incomes in later life declines, money will become more important as coping becomes ever more difficult. The most revealing fact to emerge from this study in our opinion is that many older people who are ‘getting by’ today are seriously worried that this will not last.

• View the summary of the report here. 
• View the full report here. 

If you are worried about making ends meet, phone the Age Scotland Helpline – 0845  125 9732. The service is free and confidential.