Pensioner P60 'will simplify tax', Treasury told

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Pensioners should receive an annual summary of their income and the tax they pay - the equivalent of a P60 - an advisory group has proposed.

The Office of Tax Simplification (OTS) has suggested a number of changes to simplify the tax system, which is said to be more complex as people get older.

It has also suggested that allowances and savings incentives are reformed.

The government said it would respond in due course, while one tax lobby group has welcomed the proposals.

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The OTS was set up by the government in July 2010 and has reported to Chancellor George Osborne on various proposals to simplify the UK tax system.

Ultimately, it wants to see consideration of a merger of income tax and national insurance contributions.

However, in its latest report it has concentrated on the tax affairs of pensioners.

"We think our recommendations could make a real difference in stripping away complexities and giving pensioners information that will help understanding and make it easier for them to deal with their obligations," said John Whiting, tax director of the OTS.

Among the suggestions are:

<ul> <li> A DWP60 - the equivalent of a P60 - that outlines a pensioner's annual income through the state pension and benefits</li> <li> Revising allowances for married couples and blind people</li> <li> Abolishing the savings incentive included in the income tax system, but using the money saved to increase the amount that can be put into a tax-free Individual Savings Account (Isa)</li> <li> Putting all tax coding notices into one document, rather than lots of paperwork</li> <li> Asking banks and building societies to cross-check whether the tax status on pensioners' savings accounts are correct every year</li> </ul>

The Low Incomes Tax Reform Group (LITRG) welcomed many of the recommendations.

"This should greatly improve people's understanding of how their pensions are taxed - something which has bewildered many for years," said Anthony Thomas, chairman of LITRG.

Treasury Minister David Gauke said: "The government will make its response to this report at the appropriate time."