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History repeating itself, again
Pensioners are being warned of unexpected tax bills from HMRC due to the reported crackdown by HMRC on undisclosed income from "odd jobs." Scores of pensioners who top up pensions with casual or freelance jobs could face huge bills unless they declare the extra income.
The real problem is that the threshold of income tax has been frozen at £12,570 since the 2021/22 tax year, so any additional income can quite easily put pensioners over into a taxable income band with even small amounts earned from part-time work or casual jobs. Those failing to realise these requirements could be hit with unexpected tax demands, penalties, and interest.
HMRC will use data matching and other sophisticated technologies in vigorous efforts to find people with undeclared income. It is all part of a plan to enforce compliance and reduce tax evasion right across the board—not just working-age individuals.
This might mean pensioners having to take a proportion of their state pension, or other source of income, that they will have to pay in tax. Independent financial advisers are warning retired people to be proactive about declaring all sources of income, however small. Failure to do so can put people under extreme financial pressure, especially if on fixed incomes.
It's an imperative obligation on the part of pensioners to keep detail records of extra earnings and declare them correctly in their tax return. Consulting with tax professionals can also help overcome such complexities and avoid non-compliance that might happen unknowingly.
The example could be very interesting considering how aware one has to be about tax liabilities and how something that one may not think about in one's income could really make a big difference. Staying informed and compliant is important to avoid any unforeseen financial burdens as HMRC presses ahead with its clampdown.
