Over the hill - and overpaying

One of the lesser known side-effects of getting older in the UK is that your tax affairs become unnecessarily complicated and you stand a greater chance of paying too much.

'It's not to do with age - but the change in your circumstances,' says Paddy Millard, chief executive of charity Tax Help for Older People, which advises people who cannot afford to pay for tax advice.

'You cease having one employer and land up with multiple sources of little bits of income, dealt with by two or three tax offices, which have inadequate information and don't talk to each other. And you don't have a payroll department any more that you can talk to.'

Hence a disproportionate number of older people are probably paying too much tax because they have been given incorrect tax codes or because they are taxed at source when they should not be.

Last year the Inland Revenue launched the 'Pensioners Tax Back Project' - an IT system that can identify pensioners who are paying tax on savings accounts when they should not be.

The Revenue has now written to 130,000 of these people - and 30,000 of them have so far claimed back an average of £376. If you are a middle income earner, you might regard this sum as rather small - but it works out at £7 a week, not far off the £10 average payment under the government's much-trumpeted savings element of pension credit.

The Low Incomes Tax Reform Group (LITRG) has congratulated the Revenue for launching the project last year, calling it 'a shining example of what the Revenue can do when they use their information sources in a pro-active way for their customers' benefit'.

But the tax infrastructure still has a tendency to work in a niggardly fashion towards older citizens. For instance, if you have had tax deducted on a savings account - usually at the rate of 20 per cent - you have a six-year time limit in which to claim it back. So the last day to claim for being overtaxed on savings income in 1998/99 is the last day of this month.

Mystery shopping exercises by the LITRG have shown inconsistent efforts by banks to alert low-income customers to the possibility that they can fill in form R85 to stop tax being deducted at source.

The image of retirement as armchair and slippers is clearly out of date: a tax manual and box of headache pills could be closer to the mark.

· Tax Help for Older People helpline 0845 6013321; LITRG website www.litrg.org.uk; Inland Revenue tax-back site http://www.claimyourtaxback.com