Number getting hit with year-end tax calls for might soar to 2m, warns former minister Steve Webb

The number of people getting ‘simple assessment’ tax demands has surged, official figures show, as more breach the frozen £12,570 threshold – particularly pensioners with small private pensions.

When people have relatively straightforward tax affairs, HMRC does the calculation for you automatically and sends out a end-of-year demand. 

More than 1.3million received them in 2023/24, and the number will have risen since then and could soon pass 2million, according to former Pensions Minister Steve Webb who obtained the latest figures via a Freedom of Information request.

He says many state pensioners whose income is just above the personal allowance tax threshold, but who don’t have an employer tax code and don’t need to file a self-assessment return, are receiving these demands.

Some older people whose only income is the state pension might be let off tax in future – but this is controversial and could drive a wedge between the pensioners exempted and those still expected to stump up tax.

The number who received simple assessment tax demands a couple of years ago was nearly double the figure just two years before that, says Webb, now a partner at LCP and This is Money’s retirement columnist.

‘With the state pension having risen a further 13 per cent between April 2023 and April 2025, this suggests that the number of people receiving simple assessment demands is likely to have risen further and could pass the two million mark.

‘Many of these people will be pensioners whose only income is the state pension, and they now get an annual tax demand, with the amounts growing each year.’

The Government said in the Budget it is exploring ways to avoid pensioners having to pay a small amount of tax should the state pension start exceeding the personal allowance from 2027/28.

But Webb warns that excusing only some pensioners from paying income tax, if their only income is the state pension, ‘risks being unfair and unworkable’.

Many pensioners, like those who saved into private pensions or already qualify for higher state pensions, could still be on the hook for income tax – and workers earning the same amount wouldn’t be let off their tax bills either.

A row over this is looming because the annual full rate new state pension for those retiring since 2016 is currently around £12,000 a year, and will increase to £12,548 from next April.

That just nudges the threshold where people start being stung for income tax at £12,570, which is set to be frozen until at least 2030/31.

Under the triple lock the state pension is increased by at least 2.5 per cent a year, which would make it £12,862 in 2027/28. 

Someone with this income only would have taxable income over the threshold of £292 per year, and face a tax bill of around £58, according to LCP’s calculations.

‘For many people, having to deal with the tax office is a hassle they can do without,’ says Webb. 

‘But the continued freezing of the income tax personal allowance means that the numbers getting unwelcome end-of-year tax demands have soared.

‘Although the Government has indicated it may address this issue for a subset of pensioners from 2027, a much wider-ranging solution is needed.’

Webb says many of the year-end tax demands are for relatively small sums, with nearly a quarter for under £100, though nearly a quarter are over £1,000.

What is a ‘simple assessment’ tax demand: Steve Webb explains

For most taxpayers, the correct amount of income tax is collected over the course of a year via the use of PAYE tax codes, writes This is Money’s pensions columnist Steve Webb. 

These are used to deduct tax through the year from things like wages or private pensions.

At the other end of the scale are people with complex tax affairs such as the self-employed, private landlords, those with significant capital gains and other high earners. These people fill in a full ‘self-assessment’ return each year.

But there is a group in the middle who have relatively simple tax affairs so don’t need to file a tax return but where there is no PAYE code to be used to collect the tax due on their income.

An obvious example would be a state pensioner whose pension is above the tax threshold and who therefore owes tax, but who doesn’t have a private pension and hence no PAYE code.

In cases like this HMRC does the calculations – in effect, fills in a tax return for you – and sends an end year demand.