HMRC confirms introduction of Simple Assessment

HMRC has announced the end of the tax return as we know it!

HMRC has provided more details of the new Simple Assessment tax system, which is designed to end the tax return process as we currently know it. Tax returns will start to be pre-populated with existing data held by HMRC, such as PAYE details and bank interest.

From September 2017 the following groups will no longer need to complete a tax return:

  • New state pensioners with income in excess of their personal tax allowance in the tax year 2016/17
  • 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 for the 2018/19 tax year, onwards.

How Simple Assessment works

Previously, under the Self Assessment system, taxpayers would fill in a tax return themselves. For the groups listed above, HMRC will now use information it already holds to calculate what tax is owed. HMRC anticipates this should streamline the process and reduce the administrative burden for taxpayers.

Complex tax affairs

Taxpayers with more complex tax affairs should continue to prepare their Self Assessment tax returns. However, HMRC will populate the tax return with the information it holds automatically and taxpayers will only be asked for the additional information needed to assess their tax, benefits and credits. Further changes to digital record keeping will be introduced from April 2019.

What happens next

HMRC will start writing to taxpayers from this month with a tax calculation. This could be either a P800 or a simple assessment letter (PA302).

The letter will show:

  • Their income from pay
  • Pensions
  • State benefits
  • Savings interest
  • Employee benefits

Taxpayers should check the information is correct. If it is, they can pay online or by cheque by the deadline stated in the letter. Anyone who thinks any information is incorrect will have 60 days to contact HMRC.

Should a taxpayer miss the deadline, they will need to contact HMRC to discuss their circumstances, or they may be liable for financial penalties. If they are then not happy with the follow-up response from HMRC, they have 30 days to appeal against the decision.

If you have any questions on how this will affect your tax returns, please get in touch with our Tax Services Team on 01903 234094.