As millions prepare for unforeseen tax bills, a straightforward assessment is explained

Under a system called simple assessment, an increasing number of people may receive letters from HMRC stating that they owe more tax because of frozen thresholds

For you, this is what it means.

Under the taxman's simple assessment system, millions of savers and pensioners might have received an unexpected tax bill from HMRC over the summer.

Because of frozen tax thresholds, more people are being forced into higher tax brackets by their earnings and savings interest.

HMRC typically receives automatic reports of any untaxed income or savings interest through self-assessment or pay-as-you-earn.

Some people don't normally make enough money or meet the requirements for PAYE or self-assessment, such as if they are unemployed, retired, or don't own their own business.

All the same, more people are exceeding their tax allowances due to rising savings interest and state pension payments.

Simple assessment may be the only method available to HMRC in certain situations where an individual does not meet the requirements to file a tax return on a regular basis.

Over the course of the last month, the tax collector has sent 11.4 million basic assessment letters to overdue individuals.

The letters may cause confusion for many, leading them to doubt that they are from HMRC.

"You've been sent a letter for a reason if it falls on your desk or shows up in your online Personal Tax Account," cautions Myrtle Lloyd, chief customer officer at HMRC. It is recommended that anyone who receives a basic assessment letter and would like additional information visit GOV online. UK, where there is a wealth of advice available.

This is what you should know.

What is meant by simple assessment?

For individuals who may owe money to HMRC and have comparatively simple tax affairs, the simple assessment system is intended to make payments easier.

Letters are typically sent when your income surpasses your personal allowance and unpaid taxes cannot be automatically collected through self-assessment or pay as you earn (PAYE).

When HMRC gets information about a customer's income, it automatically creates and sends simple assessment letters. Employers, banks, building societies, the Department for Work and Pensions (DWP), and other financial institutions are some of the sources of this data.

Simple assessments are not automatically triggered by a fixed income threshold.

They are typically issued by HMRC when an individual owes over 3,000 in unpaid income tax and is not yet in self-assessment, when money cannot be collected through PAYE (for example, from the state pension), or when HMRC thinks it has sufficient data to determine the correct amount of tax owed.

Critics claim it makes public administration pointless and obnoxious.

Palantir Financial Planning's chartered financial adviser, Eamonn Prendergast, stated: "For many people, self-assessment is a complex, stressful, and antiquated process. It is a 20th century system for a 21st century issue; letters frequently arrive unexpectedly, phone lines result in hours spent on hold, and you cannot even email HMRC.

This is administrative drag as well as financial drag. Ordinary people will be shocked by unexpected tax bills, run the risk of paying the incorrect amount, and experience needless stress unless thresholds are unfrozen.

"But fundamentally this is a problem created by policy, not by savers," he said, adding that individuals can check tax codes and keep records to protect themselves.

Why did I receive a letter of simple assessment?

You should be able to see how much tax you owe and how it was determined in the straightforward assessment letter.

It details the sources of any extra revenue. There are several ways to earn money, such as having a second job, saving money, paying too little in taxes, or receiving pension income.

You have sixty days to contact HMRC and ask a question if you think the assessment is incorrect.

"Nobody enjoys receiving a letter from HMRC," said Rob Mansfield, an independent financial adviser at Rootes Wealth.

"It was hard to get over the threshold for a long time because interest was so low. More people are now impacted by higher interest rates and more stringent allowances. When you receive a bill, make sure it is correct because HMRC occasionally makes mistakes. Use tools like your ISA allowance to protect your money from the taxman if you don't want a bill in the future.

How to settle a basic assessment tax bill.

Using your Personal Tax Account or the safe HMRC app is the fastest method of payment.

GOV can also be used to collect payments. UK, via bank transfer, check, or phone and the number you provided in your letter. On GOV, a comprehensive list of payment options is available. the UK.

However, be wary of HMRC tax return frauds.

Lloyd went on to say: "Simple evaluation might give criminals a chance to try to commit fraud. Simple assessment customers will only be contacted by HMRC through their Personal Tax Account or by letter.

"Criminals attempt to steal information and funds from taxpayers through phishing and scam emails, phone calls, and texts.

Consumers should never divulge personal information, including their login credentials for HMRC.

Unless clients are provided with a different date in their letter, the 2024 - 2025 tax year payment deadline is January 31, 2026, which is also the online self-assessment deadline.

Before the due date, simple assessment payments can be made in full or in installments.

Find Out More about HM Revenue and Customs DWP.