What is Simple Assessment? Who does it apply to?

This is a freeview 'At a glance' guide to Simple Assessment.

At a glance

In 2018 HMRC's plan to create 'Simple Assessment' was put on hold following a report to the House of Commons Public Accounts Committee. 

HMRC originally planned to start sending out Simple Assessment Calculations 'SAC' to taxpayers from September 2017: these set out their tax liability without the need for them to submit a Self Assessment return.

Simple Assessment is intended to be used for taxpayers with simple affairs, when HMRC believe that they have already received all of the information needed to calculate the taxpayer's liability either from the taxpayer themselves or from third parties. HMRC can issue one to individuals and trustees.

Simple Assessment initially applied to the following groups of taxpayers for 2016-17:

  • New state pensioners with income exceeding the personal tax allowance.
  • Taxpayers subject to PAYE who cannot have that tax collected through their tax code

State pensioners, who received state pension over their personal allowance and received a notice to file a Self Assessment for the tax year 2016-2017 were told to complete their return as usual. They should then have joined Simple Assessment in 2017-18.

HMRC are starting to use Simple Assessment for other taxpayers whose affairs are simple though the rollout remains deferred during the Coronavirus pandemic.

Key features

HMRC will send out a SAC, known as a PA302 calculation.

This will calculate an individual's tax liability based on their:

  • Earnings under PAYE, state pension, employer pension.
  • Benefits and expenses as reported by their employer.
  • Savings interest.

as reported directly to HMRC by their employer, pension provider, the state or the banks.

  • An individual who receives a SAC does not need to Notify HMRC of chargeability to tax unless there are chargeable income or gains which are required to be declared under Self Assessment (SA).
  • HMRC can withdraw a notice to file a Tax Return if they intend to issue a SAC.  
  • An individual will not be subject to a Late filing penalty if they have received a withdrawal notice.
  • The SAC will set out:
    • The amounts which are chargeable to Income Tax and Capital Gains Tax, taking into account any relief or allowance that is applicable. 
    • The amount payable.
    • How the amount has been calculated.
    • How the amount should be paid.
    • The payment due date, which will be no earlier than it would have been had a self-assessment return been submitted.
  • HMRC can withdraw a SAC once it is issued, and issue more than one SAC relating to the same tax year.
  • An individual who disagrees with a SAC should notify HMRC and provide reasons for their disagreement within 60 days of the date of issue. After 60 days, the SAC is automatically finalised. 
  • HMRC has until four years from the end of the tax year to issue a SAC.
  • The tax due date remains the same unless the SAC is issued after 31 October following the tax year, in which case it is extended to three months from the date of issue.

Commencement

The measure applies from the date of Royal Assent of the Finance Act 2016, 15 September 2016, and can be used for the 2016-17 tax year onwards. It has been delayed due to Brexit and COVID-19, other than as set out above.

Electronic communications

The Income and Corporation Taxes (Electronic Communications) (Amendment) Regulations 2023 provide that, from 6 April 2023, HMRC may digitally issue: 

  • Notices of simple assessment.
  • Withdrawal of notices of simple assessment.

Small Print

Legislation is section 167 and Schedule 23 of the Finance Act 2016.