Your Guide to Simple Assessment Tax

Simple assessment is a method HMRC uses to collect income tax in straightforward cases where tax can’t be collected via PAYE, and where Self Assessment isn’t required.

Understandably, this can sound a bit confusing, so we’ll explain the difference, give examples of when simple assessment is used, how HMRC will let you know, and the overall process.

How do I know if I need simple assessment?

In a nutshell, HMRC will work out how much tax you should have paid, and send a Simple Assessment Letter (also known as a PA302) if they think you might owe more. You can also check your tax calculation in your personal tax account.

HMRC collates this information from:

• Your employer/s
• The Department of Work and Pensions (DWP)
• Other organisations (such as banks)
• Any income you report yourself

Who qualifies for simple assessment?

You might qualify for simple assessment if you:

• Don’t meet the criteria for Self Assessment
• Don’t pay tax through PAYE, or you only have a small amount of PAYE income that can’t be settled with a P800
• Owe HMRC £3,000 or more

Simple assessments are typically sent to people with just a state pension, or small amounts of savings interest.

Can I choose to be in simple assessment?

No – HMRC decide whether individuals need simple assessment, it’s not something you can opt into.

Are there any benefits to simple assessment?

Simple assessment is a much easier process than filing a Self Assessment tax return. If you’re eligible, HMRC sends you a completed return for you to check, confirm, and pay – which can save a lot of time, stress, and accounting fees.

For HMRC, using reliable data makes the system more accurate and efficient, reducing errors and fraud. Like Making Tax Digital, simple assessment uses automation to simplify the process and improve accuracy for everyone – but HMRC can only go on the data they have, so it’s important you ensure they’ve got records of all your taxable income.

What is the simple assessment process?

HMRC usually issue simple assessment notices in summer, after the end of the tax year in April. The notice is sent via post, and will show your reference number, tax code, income, tax already paid, and the amount you owe.

Check the calculation

It’s important to ensure it covers all your taxable income so as well as going through things like your P60, DWP letters, and bank statements etc. to check the calculation is correct, you might also need to contact HMRC if there’s any taxable income they need to be made aware of.

There’s a chance some bits may be overlooked. For example, whilst HMRC may have your pension and bank interest data, they may not know about any dividends you’ve paid to yourself, rental income, freelance income, or any overseas income you’ve made.

 
They’ll then issue you a revised version.

Do I have the right to appeal against simple assessment?

Yes – you have 60 days from the date it was issued to appeal your simple assessment decision. If you don’t object and 60 days passes, it’s automatically finalised which means you’ll need to pay any tax due by the deadline.

Confirm

Once you’re happy everything is accurate, you can approve it online or by contacting HMRC directly. They will then send you a payment request.

When will I need to pay tax on my simple assessment?

Any tax you owe under simple assessment is due either:

• 31st January (the same date as the Self Assessment) if you get your letter before 31st October following the end of the tax year it relates to
• Or within 3 months of the assessment date (if you get your letter on or after 31st October)

There are different methods you can use to pay, including online, via the HMRC app, by bank transfer, or by cheque. Your PA302 will list all the ways you can pay – as well as how to object if you think the information is incorrect.

Is it a legal requirement to keep records for simple assessment?

There’s actually no legal requirement to keep digital records for simple assessment – but it’s probably best practice for your own purposes to ensure everything is accurate.

We have a guide to bookkeeping that will give you an idea of how to record your taxable income.

 
Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.