Worried about a new tax bill? A guide for pensioners

If you are a pensioner, you might have been surprised to have received a tax bill for the first time recently.

This stems from H M Revenue & Customs (HMRC) decision to distribute letters to over 140,000 pensioners who have taxable income but are not filing a Self-Assessment Tax Return, in respect of the 2023/24 tax year. 

Why is this happening? 

The basic rate tax threshold has been frozen at £12,570 for three years, while state pensions have risen steadily in line with inflation.  

This means many pensioners now have incomes that are exceeding this threshold and generating new tax liabilities.  

If you are one of the 140,000 pensioners who have received a letter from HMRC, you are not alone. However, this may be your first encounter with the ‘Simple Assessment’ system. 

Simple Assessment is a way for HMRC to collect tax directly from those who do not file a Self-Assessment tax return. You may be affected if you

• owe Income Tax that cannot be automatically taken out of your income
• owe HMRC £3,000 or more
• have to pay tax on your State Pension

The letter you receive will include a Simple Assessment tax statement (form PA302), which details the tax you owe for income received between April 2023 and April 2024.  

Payment must be made online or via the HMRC app, with deadlines usually set for 31 January 2025 or otherwise three months from the date of the statement. 

How to manage an unexpected tax bill 

If you are a pensioner and you have received this unexpected communication from HMRC, we advise you: 

• Don’t panic: Receiving a tax bill for the first time can be daunting, but it is manageable. It is important that you read through the letter carefully. 
• Check the details: Review the calculation provided by HMRC. Ensure all your income sources are correctly listed, including state pensions, savings, and any other income. Look out for any deductions you might be entitled to, such as charitable donations, pension contributions, or professional subscriptions. 
• Seek help if needed: If you’re not comfortable using online services, ask a family member or friend to assist you. Alternatively, consider speaking to us.
• Make the payment: Follow the instructions in the letter to make your payment online or through the HMRC app. Ensure you do this by the deadline to avoid any penalties or interest charges. 
• Stay informed: HMRC has provided an online guide for Simple Assessment. While there’s no phone helpline, the online resources can be quite helpful. Familiarise yourself with these guides to better understand the process. 

Tax advisory and compliance support from trusted accountants

Managing an unexpected tax bill doesn’t have to be stressful and by carefully reviewing your HMRC letter, seeking help when needed, and making your payment on time, you can stay on top of your tax obligations.  

We recognise that this process can be complex, and it can be easy to overlook important details, which is why speaking to an accountant can simplify and streamline everything for you.  

We can help you to understand your tax bill, we can review the calculations HMRC has provided to ensure that these are correct and reflect your income accurately, and we can guide you through the payment process.  

Please contact our team of expert tax advisers for professional assistance – it can make all the difference to managing your obligations.