Millions of people could be freed from the hassle of submitting a tax return, as HMRC begins its roll out of a simplified system for some taxpayers.
Around 11 million people have to complete a self assessment return each year, including company directors and the self-employed, people with large investment incomes, and those instructed to do so by HMRC.
The introduction of Simple Assessment will mean that new state pensioners in the 2016-17 tax year with incomes above the £11,500 personal tax allowance will no longer need to submit a full return, and nor will PAYE taxpayers who need to make up a shortfall in the taxes they have paid.
Instead, HMRC will estimate the taxes they need to pay using data it already has from other sources.
Existing state pensioners who complete a tax return because their state pension is worth more than the annual allowance will be switched to the Simple Assessment system in the 2018-19 tax year.
- Use our jargon-free tax calculator to work out what you owe and submit your return to HMRC
How will Simple Assessment work?
People who are eligible for Simple Assessment will receive a letter from HMRC with their tax assessment. This could be a P800 form, if you’ve switched jobs, have started receiving a pension at work, or have received employment and support allowance, or jobseeker’s allowance.
Other eligible taxpayers will receive a Simple Assessment letter – which is likely to be the case if you owe more than £3,000, have to pay tax on the state pension, or owe taxes that can’t be automatically paid through PAYE.
The letter will show your income from pay, pensions, state benefits, savings interest and other employee benefits.
If the information HMRC holds is correct, you’ll simply need to pay the bill online or by cheque. The deadline will be specified in the letter.
Otherwise, you’ll have 60 days to contact HMRC to correct any errors, or flag information that hasn’t been taken into account. If you aren’t happy with HMRC’s repsonse, you’ll have 30 days to appeal the decision.
What happens if I miss the deadline?
You can be fined if you don’t provide information to HMRC within the deadline, or don’t pay your taxes on time.
Miss the deadline by a day and you’ll be slapped with a £100 fine. Leave it longer, and the cost will rise by £10 per day, up to a maximum of £900. After 6 months, the penalty increases by a further £300, or 5% of the tax you owe, whichever is higher. If you still haven’t settled your taxes after 12 months, you’ll receive another £300 fine, or 5%, again, you’ll owe the larger amount.