Simple Assessment Explained
Important Note: Simple Assessment was halted in May 2018 as resources were reallocated to prepare for the United Kingdom’s exit from the European Union. Because of the coronavirus outbreak in 2020, the rollout is likely to be further delayed (factual as of May 2021) and so some of what follows is based on the intention of the scheme, not the way in which it is being implemented right now (May 2021)
Hear about Simple Assessments replacing Self Assessments but not really sure what that means? Here we are going to take a closer look.
Individuals in Simple Assessment are not required to file a tax return in order to pay tax on their taxable income. Rather, HMRC sends the individual a tax calculation for the tax year (PA302). This should be viewable in the taxpayer’s Personal Tax Account as well.
The Simple Assessment is based on data provided by the Department for Work and Pensions (DWP) and other organizations to HMRC. As a result, it’s critical to double-check the figures on the Simple Assessment calculation to make sure that HMRC has the right information and has made a fair assessment.
Who Will Simple Assessment Be Applied to?
For the 2016/17 tax year, HMRC introduced Simple Assessment for certain taxpayers with only a state pension. HMRC also plans to use Simple Assessment for other straightforward cases, such as certain individuals with multiple sources of income who would normally receive a P800 (a PAYE reconciliation).
If you have already received a P800 and the first letter requesting voluntary payment of the tax due, Simple Assessment is not used.
If HMRC needs to reconcile your income tax for more than one tax year, Simple Assessment is not used.
Individuals cannot register for Simple Assessment on their own behalf; HMRC uses Simple Assessment at their discretion and has sole power over who it applies to.
What Will Simple Assessments Look Like?
Simple Assessment is intended for taxpayers with straightforward affairs, where HMRC believes they have already received all the information required to calculate the taxpayer’s liability, either directly from the taxpayer or from third parties. Individuals and trustees can get one from HMRC.
Simple Assessment will be applied to the following taxpayer groups:
- New state retirees who earn more than their personal tax allowance.
- PAYE-eligible taxpayers who are unable to have the tax collected through their tax code
HMRC will issue a SAC, which will be in the form of a P800 or PA302 calculation.
This will figure out how much tax a person owes based on their:
- PAYE earnings, state pension, and employer pension
- As reported by their employer, their benefits and expenses
- Interest on savings
All of this will come from information as reported to HMRC directly by a taxpayer’s employer, pension provider, government, or banks.
Unless there is chargeable income or gains that must be declared under Self Assessment, an individual who receives a SAC does not need to notify HMRC of tax liability (SA).
- If HMRC intends to issue a SAC, they can withdraw a notice to file a Tax Return.
- If a person receives a withdrawal notice, they will not be charged a late filing penalty.
- The SAC will show the amounts that are subject to income tax and capital gains tax, taking into account any applicable relief or allowance.
Is it Possible to Appeal a Simple Assessment?
If you disagree with the Simple Assessment, you have 60 days from the date of the Simple Assessment to file an initial appeal.
If you do not object to the Simple Assessment within 60 days of receiving it, it will be finalized automatically. That’s why going over it as soon as it becomes available is important (unless you don’t mind potentially being taxed unfairly.)
When is a Simple Assessment Tax Payment Due?
Tax due under a Simple Assessment is due on the 31st of January following the end of the tax year – the normal Self Assessment income tax payment date – or three months after the date of the Simple Assessment, whichever is later.
Payment can be made online through your Personal Tax Account, or by mailing a cheque made payable to ‘HM Revenue and Customs only’.
On the back of the cheque, write the reference number from the Simple Assessment letter. There is no payslip to send with the cheque, but HMRC will send you one if you contact them as the lack of one can be disquieting. A lot of cheques are sent to HMRC, so this failure is a little puzzling.
Make sure you submit this request in advance to avoid being late with your payment. You could also enclose a brief covering letter with the check, explaining that the payment is being made to settle a Simple Assessment tax bill for the relevant tax year. It’s also a good idea to staple the check to the letter.
Do Simple Assessments Attract Interest and/or penalties from HMRC?
In the case of Simple Assessments, HMRC has the authority to charge interest and penalties for underpaid tax as well as penalties for late payment of tax.
They are currently not doing so, according to our information, as the program is on hold for most people. It’s almost a certainty that they will do so when it begins to roll out in earnest again, though.
What Records Should I Keep for Simple Assessments?
People in Simple Assessment are not required by law to keep records.
However, you may want to keep some records for your own purposes. Actually, you should, especially in the case of an appeal.
There is no announced date yet for the continued rollout of Simple Assessments. If you might be subject to them in the future, it’s a good idea to keep an eye on financial news about them so that you – and your accountant – aren’t taken by surprise by the change when it does apply to you.