Simple assessment explained: are you at risk of an unexpected tax bill?
Pensioners and savers could get shock letters from HMRC saying they owe more tax due to frozen thresholds, under a system known as simple assessment. Here is what it means for you.
Rising state pension payments could mean some pensioners and savers receive an unexpected tax bill under HMRC’s simple assessment regime – even if you thought you were exempt
Frozen tax thresholds are pushing more people into higher tax brackets as their income grows, meaning more money is owed to HMRC.
In some cases this would be collected through a self-assessment tax return or your pay-as-you-earn (PAYE) payslip.
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But some people don’t typically earn enough or fit the criteria for PAYE or self-assessment, such as if you don’t have a job, are retired and don’t run your own business. In this case, HMRC recoups this untaxed income through simple assessment.
The taxman writes to people who need to pay tax on income which has not been collected through PAYE or self assessment. Around 1.8 million letters were sent out in summer 2026.
The letters – known officially as PA302 – set out exactly how much tax is owed and why.
This could include savers who have earned interest above the personal savings allowance or pensioners whose state pension payments have pushed them into paying tax.
Pensioners whose sole income is the basic or new state pension and face paying "small amounts" of tax if the state pension exceeds the tax-free allowance from 2027/28 are set to be exempt from simple assessment.
But former pensions minister Steve Webb, now a partner at consultancy LCP warned that pensioners may still get letters even if they thought they would benefit from the upcoming changes next year.
Webb warned that these new rules appear to only apply to those who just receive the state pension without any extras that you may claim from deferring or contracting out.
Many may be confused by the letters and not believe it is from HMRC.
But HMRC’s chief customer officer Myrtle Lloyd says it is important to not ignore it, adding: “If you receive a simple assessment letter and have tax to pay, please don’t ignore it. It is quick and easy to pay any tax owed via the HMRC app.
“If you need extra support, or want to find out more, search ‘simple assessment’ on GOV.UK.”
What is simple assessment?
The simple assessment system is designed to simplify payments for those with relatively straightforward tax affairs who may owe money to HMRC.
The letters are usually sent if your income exceeds the personal allowance and the unpaid tax cannot be collected automatically through pay as you earn (PAYE) or self-assessment.
Simple assessment letters are automatically generated and sent to customers when HMRC receives information about a customer’s income. This information can come from a number of sources including employers, the Department for Work and Pensions (DWP), banks, building societies and financial institutions.
There is no fixed income threshold that automatically triggers a simple assessment.
HMRC generally issues them when a person owes more than £3,000 in unpaid income tax and is not already in self-assessment, if tax cannot be collected through PAYE, such as from the state pension, or if HMRC believes it has enough information to calculate the tax due accurately.
Critics say it creates unnecessary and annoying administration for the public.
Eamonn Prendergast, chartered financial adviser for Palantir Financial Planning, said: “For many, it’s their first encounter with self-assessment, and the experience is confusing, stressful, and outdated. Letters often land without warning, phone lines mean hours on hold, and you can’t even email HMRC; a 20th century system for a 21st century problem.
“This isn’t just fiscal drag; it’s administrative drag too. Unless thresholds are unfrozen, more ordinary people will face surprise tax bills, the risk of paying the wrong amount, and unnecessary stress.”
He said people can protect themselves by checking tax codes and keeping records, adding: “But fundamentally this is a problem created by policy, not by savers.”
Why have I received a simple assessment letter?
The simple assessment letter should provide you with an assessment of any tax you owe and how it was calculated.
It shows in detail where any additional income has come from. Income may come from a number of sources including savings, a second job, paying too little tax as well as income from pension.
If you believe the assessment is wrong, you need to get in touch with HMRC within 60 days to raise a query.
Rob Mansfield, independent financial adviser at Rootes Wealth, said: "Nobody likes getting a letter from HMRC.
"For a long time interest was so paltry that it was difficult to gain more than the threshold. Higher interest rates and tighter allowances mean that more people are now affected. If you get a bill, check it and make sure it's right as HMRC do make mistakes. If you don't want a bill in future years, make sure you use things like your ISA allowance to shield your money from the taxman.”
How to pay a simple assessment tax bill
The quickest way to pay is by using the secure HMRC app or through your Personal Tax Account.
Payments can also be taken via GOV.UK, by bank transfer, by cheque or over the telephone using the contact number in your letter. A full list of payment methods can be found on GOV.UK.
But watch out for HMRC tax return scams.
Lloyd added: "Simple assessment may well provide criminals with an opportunity to attempt to commit fraud. The only way HMRC will contact simple assessment customers is via a letter or through their Personal Tax Account.
“Criminals use phishing and scam emails, phone calls and texts to try to steal information and money from taxpayers.
“Customers should never share personal details including their HMRC sign-in details.”
The payment deadline for the 2025/26 tax year is 31 January 2027, similar to the online self-assessment deadline, unless customers are given an alternative date in their letter.
Simple assessment payments can be made in full, or in instalments, before the deadline.
