Understanding HMRC’s Simple Assessment
From June 2025, HMRC will begin issuing “simple assessment” letters, a new form of communication that is expected to catch many recipients by surprise. These letters are part of HMRC’s effort to streamline tax collection for individuals who aren’t required to complete a full self-assessment tax return.
Who Will Receive a Simple Assessment Letter?
Generally, you can expect to receive a simple assessment letter if you fall into one of the following categories:
- You owe income tax that cannot be automatically deducted from your earnings.
- You owe HMRC £3,000 or more.
- You have tax to pay on your State Pension.
- You either do not have a PAYE (Pay As You Earn) code, or HMRC is unable to collect the tax due through an adjustment to your existing code.
What the Simple Assessment Letter Contains
The letter you receive will cover the 2024/25 tax year and will provide crucial information:
- A detailed calculation of the tax you owe.
- The absolute latest date by which you must pay the tax (for the 2024/25 tax year, this is January 31, 2026).
- Clear instructions on how to pay the tax.
- Guidance on what steps to take if you disagree with HMRC’s figures.
Why These Letters Are Becoming More Common
HMRC acknowledges that while some individuals receive a simple assessment annually, for the majority, the letter will arrive unexpectedly. A significant reason for this growing trend is the ongoing freeze in the personal allowance. This allowance, which is the amount of income you can earn before you start paying income tax, has been fixed at £12,570 since April 2021 and is currently not scheduled to increase until the 2028/29 tax year.
The State Pension and Your Tax Liability
While the basic levels of both the old and new State Pensions are currently (2025/26) below the personal allowance threshold, certain circumstances can push your total State benefits into taxable territory. If you receive an additional State Pension (which saw a 6.7% increase in 2024/25), this could, when combined with your main State Pension, exceed the £12,570 limit. The same applies if you’ve deferred your State Pension(s), leading to a higher overall payment.
Potential for Multiple Assessments
To add a layer of complexity, if you owe tax on bank and/or building society interest, HMRC might send you two separate simple assessment letters for the 2024/25 tax year. This depends on when they receive the relevant interest information. In such cases, any amount due on the second assessment will be entirely independent of the first.
The Looming Tax Challenge for State Pensioners
What HMRC is likely concerned about is a significant increase in the new State Pension before the 2028/29 tax year. If the new State Pension rises by 5% or more from its current level (£230.25 a week), it could, by itself, exceed the personal allowance. This would potentially bring anyone receiving a full new State Pension into the income tax net. With current inflation rates above 3% and earnings growth around 5.5%, that 5% threshold could realistically be breached as early as the 2026/27 tax year.
For personalised advice on how simple assessments or changes to the State Pension could impact your financial planning, contact Chartwell Wealth Management today. One of our expert advisors will be in touch.
