PEOPLE who take early retirement and find other jobs while drawing their pensions may receive unexpected extra tax bills from the Inland Revenue.

The warning comes from the Association of Chartered Certified Accountants. ACCA accountants say they have already uncovered a number of cases where Inland Revenue offices have given separate personal allowances for pension and employment incomes -- instead of combining them and taxing them on any income over the normal annual allowance of £4,385. It means that people who are working and drawing pensions will not pay tax until they have received combined incomes of just over £8,600 in a year.

ACCA says it can lead to large under-payments of tax and bills of more than £1,000 if the Inland Revenue discovers the error at the end of the financial year. Chas Roy-Chowdhury, Head of Taxation at the ACCA, said: "ACCA accountants believe the problems are arising where one district of the Inland Revenue, which is dealing with an individual's pension, is not communicating with another district which may be dealing with that same person's earnings."