HMRC Simple Assessment: The Hidden Tax Bill

When HMRC Calculates Your Tax for You

Most UK taxpayers are used to filing their own Self Assessment tax return or having tax collected through the PAYE system. But there’s a third route that catches many off guard — Simple Assessment.

This method allows HMRC to calculate your tax bill automatically and send it straight to you, without any action on your part. On the surface, it sounds convenient. In reality, it can be a double-edged sword — helping some taxpayers avoid the hassle of returns, while leaving others facing unexpected bills, missed deadlines, and even penalties.

What Is a Simple Assessment?

Simple Assessment is HMRC’s process for directly issuing an income tax calculation to individuals who:

• Owe income tax but do not need to complete a Self Assessment return.
• Cannot have the tax collected via PAYE.
• Receive income such as the State Pension that exceeds the personal allowance, without sufficient PAYE tax deductions to cover the liability.

You don’t apply for the Simple Assessment. HMRC issues it automatically, usually after the end of the tax year, once it has gathered data from employers, pension providers, and other financial institutions.

Who Gets a Simple Assessment?

You may receive a Simple Assessment if:

1. You’ve started receiving the State Pension, and your total income is above your personal allowance.
2. You owe more than £3,000 in tax that can’t be collected through PAYE.
3. You have income from multiple sources that leaves a shortfall after PAYE deductions.
4. You have underpaid tax from earlier years and are no longer in Self Assessment.

The Legal Position – Your Duty to Notify HMRC

Under TMA 1970 Section 7, if you owe income tax and are not already in Self Assessment, you must notify HMRC by 5 October following the end of the tax year.

However, you don’t need to do this if:

• All your income is taxed through PAYE or at source.
• You receive a Simple Assessment that fully covers your liability.

This exemption — often called the “let-out” — can be a blessing, but only if the Simple Assessment is accurate. If HMRC misses some income, you’re still legally responsible for declaring it, even if they’ve sent you an assessment.

When Simple Isn’t Simple

While the name suggests ease, the process has pitfalls:

• Timing Issues: Simple Assessments often arrive in September or October, but the legal deadline to notify HMRC is 5 October. This mismatch means you could technically breach your duty to notify if the Assessment arrives late and you haven’t already declared your income.
• Incomplete Data: HMRC’s calculation is only as good as the information it holds. They may have data for pensions and bank interest, but not for dividends, freelance work, or overseas income unless you’ve told them. Missing income can result in underpayment — and penalties for you.
• Errors in the Calculation: The software HMRC uses for Simple Assessments isn’t always as robust as the Self Assessment system. Some taxpayers have reported incorrect figures, which can lead to overpayments or underpayments.
• No Clear Rules for “Small” Liabilities: HMRC has suggested they won’t issue Simple Assessments for very small amounts of tax, but hasn’t defined what “small” means. This creates uncertainty for people who technically have a duty to notify but don’t know whether to act.

How the Process Works

1. HMRC Gathers Data: Information flows in from employers, pension schemes, banks, and government departments.
2. They calculate the Tax Due: Using this data, HMRC works out what you owe for the tax year.
3. You receive a P800 or PA302 Notice: This sets out the tax calculation and payment deadline.
4. You Pay or Appeal: Payment is usually due by 31 January after the tax year. If you disagree, you have 60 days to appeal or request a correction.

What to Do If You Receive a Simple Assessment

1. Check Every Detail

• Compare the income listed with your records.
• Look for missing income (dividends, self-employed work, rental income).

2. Watch the Deadlines

• Payment deadlines are strict.
• Appeals must be lodged within 60 days of the notice date.

3. Correct Any Omissions Immediately: If HMRC’s version misses income, inform them before the payment date to avoid penalties.

4. Keep Documentation: Store bank statements, pension slips, and dividend vouchers to back up any challenge you make.

Avoiding Penalties

You can be penalised if:

• HMRC issues a Simple Assessment, but it misses some income, and you don’t tell them.
• You rely solely on HMRC’s data without checking it.
• You miss the appeal or payment deadlines.

Penalties can include interest charges and fixed fines, so proactive checking is essential.

Advantages of Simple Assessment

• No Tax Return Needed – Saves time for those with straightforward finances.
• Automatic Processing – HMRC initiates it without you having to register.
• Clear Payment Instruction – The notice sets out exactly how much to pay and by when.

Disadvantages of Simple Assessment

• Potentially Late Notices – Risk of missing legal deadlines.
• Incomplete Income Records – Especially for investments, overseas income, or self-employment.
• Limited Opportunity for Pre-emptive Correction – You often can’t tell HMRC about additional income before the Assessment is issued without phoning or writing.

Practical Tips for Managing Simple Assessment

1. Maintain a Year-Round Income Log: Track all income sources monthly to compare with HMRC’s data later.
2. Set Reminders for Key Dates: Put 5 October and 31 January in your diary — these dates matter whether you’re in Self Assessment or Simple Assessment.
3. Appeal Early: If you spot a mistake, don’t wait — file an appeal or contact HMRC well within the 60-day window.
4. Seek Advice for Complex Income: If you have multiple income types or international earnings, a tax adviser can ensure you don’t under-declare.

Simple Assessment was designed to make life easier for taxpayers with straightforward affairs, but in practice, it can be a trap for the unwary. The key is to treat it as a starting point, not the final word. Always check the figures, confirm all your income is included, and act quickly if there are errors. A “simple” system doesn’t remove your legal responsibility — it just changes how HMRC communicates your bill. Staying alert could save you from unexpected costs and penalties.