HMRC simple assessments hit record high – what to do if you get one

The number of 'simple assessment' tax bills sent by HMRC has doubled since income tax thresholds were frozen, with many pensioners likely receiving one for the first time.

Data obtained by wealth management firm Quilter shows a steep rise in the number of taxpayers being automatically assessed in this way. One key driver appears be the freezing of tax thresholds since April 2021, pushing more pensioners over their personal allowance.

Here, we explain what simple assessments are, what you should do if you receive one and three ways pensioners can cut their tax bills. 

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How does a simple assessment work?

HMRC uses simple assessment to collect tax without requiring the taxpayer to complete a self-assessment return. 

The tax bill is calculated based on details about income supplied by banks and building societies or state pension earnings automatically sent to HMRC by the Department for Work and Pensions. 

HMRC's website gives the following examples of when underpaid tax could trigger a simple assessment:

• Pensioners who receive income from state pensions, occupational pensions, employment pensions, and most taxable state benefits.
• Pensioners with up to £10,000 of untaxed income (for example, from savings or investments).

Find out more: important tax deadlines for 2025

Simple assessments hit record high

The tax office issued a record 1.32 million simple assessments in 2023-24, according to figures obtained by Quilter under the Freedom of Information Act (FOI). That's up 74% from 757,745 the year before and is nearly triple the 486,340 issued in 2017-18.

The graph below shows how the number of simple assessments has increased between 2017-18 and 2023-24:

• Find out more: pension tax calculator 

Why are they on the rise?

There are a few compelling reasons why the number of simple assessments issued have shot up in the last few years. 

The first is a government freeze on income tax thresholds, which came into force on 6 April 2021 and isn't due to end until 2028. 

At the same time, state pension income has risen sharply thanks to the triple lock, which ensures the state pension increases each year in line with the highest of inflation, average earnings or 2.5%.

As incomes rise, more people are pushed over the personal allowance and become liable for income tax. This phenomenon, called fiscal drag, is often referred to as a 'stealth tax'.

The tax office claims it could also be down to the number of state pensioners receiving other income in retirement, whether that's from a private pension or work. 

Jon Greer, head of retirement policy at Quilter, said: 'The sharp rise in simple assessments reflects how frozen tax thresholds and higher state pensions are creating more tax liabilities for older people. Many of them may not even realise they owe anything until HMRC’s letter arrives.'

• Find out more: how to calculate your tax bill 

What to do if you receive a bill

Simple assessment letters are usually sent out between July and August after the end of the tax year, although they can be sent at any time as information becomes available.

If you owe tax, you’ll need to pay it by the deadline stated on the letter (usually 31 January or three months from the date of the letter).

Unexpected tax bills can be scary, especially if you are already struggling with your finances. Here are few simple steps to take if you get a letter:

1. Check all the information on the simple assessment letter carefully, including personal details such as your address.
2. Next, follow the instructions in the letter on how to pay your assessment. You can pay online, by using the HMRC app, via bank transfer or by cheque.
3. If the information is incorrect or you have additional untaxed income, you’ll need to contact HMRC within 60 days.

Get help if you need it

If you're finding any part of the process difficult or need to ask a question about simple assessments, you can call HMRC on 0300 200 3310. The tax office also has a handy online guide to help.

If you're struggling to pay, you can also set up a payment plan online. To be eligible, you'll need to owe between £32 and £50,000, not have any other payment plans or debts with HMRC, and plan to pay your debt off within the next 36 months.

3 ways pensioners can cut their tax bill

Whether you already pay income tax on your pension or are looking to pay less in future, there are ways to reduce your tax burden as a pensioner: 

1. Access pension cash gradually

You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. The most you can take is £268,275.

However, this can also be accessed incrementally, with 25% of each withdrawal taken tax free. This strategy can be useful in minimising the overall tax burden. 

What you don’t take out can be left invested in your pension, where it can grow tax free – and then give you chunks of tax-free cash when you need it. 

• Find out more: should I take a lump sum from my pension?

2. Make the most of your allowances

Those on low incomes can access a special ‘starter rate’ for savings, which allows them to earn interest up to £5,000 without paying tax. Every £1 of other income (for example, your pension) above your personal allowance reduces your starting rate for savings by £1. 

You may also be able to earn up to £1,000 in interest before paying tax on your savings if you’re a basic-rate taxpayer, and up to £500 if you’re a higher-rate taxpayer under your personal savings allowance. Additional-rate taxpayers have no personal savings allowance. 

• Find out more: tax on savings interest and investment income explained

3. Open an Isa

For those with larger savings pots, or additional-rate taxpayers, an Isa is a great way to save paying tax on savings interest or investment income.

You can put up to £20,000 in a cash and/or stocks and shares Isa, and any income generated can grow completely tax-free, protecting your savings now and in the future.

• Find out more: best Isa rates 2025