Introducing Simple Assessment – who said tax has to be taxing?

image: hmrc sign
Thursday 28 September 2017 - 17:15

In a bid to reduce the number of taxpayers compelled to complete Self-Assessment tax returns HMRC has introduced Simple Assessments.

The plan is to remove two million taxpayers from the self-assessment system regime. The first tranche targeted are those who have PAYE income only modest forms of other taxable income, where HMRC has sufficient information to determine the tax position and issue a demand for payment.

The largest affected group are pensioners, who receive their state pension without tax deducted at source and who’s other pension income sources are insufficiently large to enable tax arising their receipt of the state pension to be collected from them.

From September 2017 this option will apply to two groups. 

  1. Those who are new state pensioners with income in excess of their personal tax allowance in the tax year 2016 to 2017; 
  2. PAYE taxpayers who have underpaid tax and who cannot have that tax collected through their tax code.

All existing state pensioners who complete a tax return because their state pension is more than their personal allowance will be removed from self-assessment in the tax year 2018 to 2019.

The first Simple Assessments (PA 302s) will hit those affected doormats very shortly.

Key points:

  • HMRC cannot issue a Simple Assessment for a tax year where a self-assessment tax return has been filed.
  • HMRC may, however, withdraw a notice to file a tax return where an issued self-assessment return has not been completed and returned and issue a PA 302.
  • A receiving taxpayer has only 60 days to ‘raise queries’ - after that an assessment becomes binding.

The due date for payment of a Simple Assessment is either 31 January following the end of the tax year to which it relates, or three months following the date of issue of the assessment (whichever is later)

Where an individual started to receive their state pension before 6 April 2016 and in the next tax year it exceeded the 2016/17 UK personal allowance (£11,000), they must continue to file a 2017 self-assessment tax return.

Brian Palmer is AAT's Tax Policy Expert