Self-Assessment – Simples!

Currently, there are approximately 11 million taxpayers who self-assess each tax year.

In the March 2015 Budget, the government announced its intention to remove the need to complete a self-assessment return for those where HMRC already hold the information to complete a tax return. This legislation was introduced in Finance Bill 2016 (Finance Act 2016, s.167 schedule 23) which took effect from 2016/17 tax year.

From September 2017, those who fall within the following two groups are not expected to complete a self-assessment return:

  1. New state pensioners with income in excess of the personal tax allowance (£11,000) in the 2016/17 tax year.
  2. Taxpayers who have tax deducted through PAYE and have underpaid tax and cannot have that tax collected through their tax code.

Existing state pensioners with income excess of the personal allowance will be removed from self-assessment with effect from the 2018/19 tax year.

Under the simple assessment rules, HMRC will produce a P800 or a simple assessment letter (PA302) which will include details of the income and gains assessed together with a calculation of the tax due. This will be sent direct to the taxpayer. The taxpayer is then required to check that the information is correct and pay the tax either online or by cheque before the deadline date. The deadline date will be no earlier than if a self-assessment return had been submitted.

If the taxpayer does not agree with the calculation, they have 60 days to contact HMRC to query the calculation. If HMRC require more time or further information, they can postpone all or part of the tax due under simple assessment and the taxpayer will be notified of this in writing.

If the taxpayer still does not agree with HMRC’s follow up response, they have 30 days to appeal against the decision.

HMRC can withdraw a notice to file a self-assessment return and issue a simple assessment instead. In this circumstance, the taxpayer will not be subject to a late filing penalty where a self-assessment return is not submitted.

It is expected up to 2 million individuals will benefit from the introduction of simple assessment.

However, there is concern that one in ten simple assessments issued will contain errors which will lead to taxpayers paying either too much or too little tax.

Whilst the concept of simple assessment is straightforward and logical, the execution may give rise to significant problems due to the complexity of the personal tax code. The most obvious concern is whether HMRC have all the information available to produce an accurate simple assessment?…time will tell.

If you require any further information on self-assessment or related matters, please ring the TaxDesk on 0845 4900 509 and ask for Reena Bhudia.