200,000 pay too much tax on RACs

From April 2007, all income from RACs, except purchased life annuities, will be classed as pension income and taxed under the Pay As You Earn (PAYE) system in the same way as personal and occupational pensions. At the moment, unless the annuitant has completed a form confirming they are exempt from tax annuity providers deduct the basic rate of tax at 22% from the RACs at source, which HMRC says means some pensioners pay too much. It says there are around 1.2 million individuals receiving income from RACs, with about half of these claiming tax exemption and receiving their payments gros...