A press release by the Office of Tax Simplification (OTS) has claimed reports of a tax on pensions are nonsense.
An article published by The Independent on Monday claimed that basic state pensions could be taxed at source, a measure the paper called ‘Granny Tax II’. The piece quoted John Whiting, Tax Director at the OTS saying “The obvious solution is to apply PAYE to the state pension.” but on Wednesday he published a press statement which rejected what he called ‘inaccurate press reports’.
Although briefly mentioning that taxing pensions was one of 12 options under consideration The Independent article primarily focused on the one solution and led to many ‘copy-cat’ articles jumping on the bandwagon.
Whiting’s press statement explained that applying PAYE to state pensions is only one of a number of solutions that the OTS is considering in order to make the tax system simpler for pensioners. He also highlighted that their aim is to get 1.5 million pensioners out of the self-assessment system. He also debunked the press theory that there would be a flat 20% tax deduction.
“PAYE aims to deduct the right amount of tax, which for 5 million state pensioners is nil because of the personal allowance.”