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Taxpayers must not ignore HMRC’s simple tax assessments

Over half a million due to receive a ‘tax demand’

The more than half a million taxpayers due to receive HMRC’s simple tax assessments for the first time must not ignore them, or they risk penalties and missing out on tax deductions.

Robert Salter, Director said:

HMRC have recently announced that 560,000 individuals – including 140,000 pensioners – will receive simple tax assessments for the 2023/24 tax year in the coming weeks. Unfortunately, many taxpayers tend to automatically ignore all the correspondence which they receive from HMRC or just to assume that the ‘tax will take care of itself’ and be collected via PAYE or some other type of tax withholding.

However, these simple assessments are in effect a tax demand and will require the individuals concerned to pro-actively make a tax payment to HMRC. Otherwise, they will become liable to penalties and interest on their tax for not settling the tax position on a timely basis.

It is also important that taxpayers who receive these simple tax assessments check the calculations that HMRC have prepared and the income which they are capturing within their assessments. Experience shows that HMRC may not necessarily ‘pick up’ on the tax deductions which may be available to a taxpayer for things such as charitable gift aid contributions, pension contributions or professional subscriptions and similar costs.

If taxpayers just pay any tax demanded by the simple assessment without considering if there are any tax deductions available, they will end up ‘overpaying taxes’ to HMRC. Overall, this is really another of those cases where it can be sensible to spend 5 or 10 minutes assessing the Revenue’s figures.

HMRC have always issued a small number of simple assessments each year – they are designed to capture the tax due on income such as investment income, dividends and state pensions – that is, the income which isn’t directly subject to PAYE withholding tax or collected via a self-assessment tax return.

The number of such cases has increased for 2023/24 because of frozen tax bands (e.g. the personal tax allowance of £12,570 has been frozen since April 2021), while increases in interest rates also mean that more individuals with relatively modest savings may also now become liable to tax on such income. This means more individuals are at risk of tax penalties if they ignore HMRC, but those who are pro-active can benefit from tax deductions – in effect, a tax equivalent of the old phrase that ‘a stitch in time saves 9’.

Would you like to know more

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Robert Salter using the form below.

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Director
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