HMRC will issue a record 1.4 million simple assessments for the 2024-25 tax year, marking an 80,000 increase from the previous year. This represents the highest figure ever recorded and nearly twice the typical annual total over the past seven years.
The surge in unexpected tax bills is catching increasing numbers of pensioners off guard as frozen income tax thresholds pull more retirees into the tax system. Simple assessments allow HMRC to collect underpaid tax without requiring taxpayers to complete self-assessment forms, commonly used for pensioners who owe additional tax.
Threshold freeze creates tax trap
The personal allowance has remained frozen at £12,570 since 2021 and will continue at this level until at least 2028. Meanwhile, the state pension will rise under the triple lock guarantee, creating a narrowing gap that pushes millions more pensioners into the tax system.
Those without private pensions are particularly likely to receive simple assessment tax bills as their owed tax cannot be deducted automatically through employment tax codes. The number of simple assessments has doubled from 675,000 in 2021-2022 when thresholds were first frozen.
Expert warnings on stealth taxation
Jon Greer from wealth management firm Quilter said: "Simple assessment letters are a prime example of the consequence of stealth taxes in action. Much of this rise is down to how frozen tax thresholds and higher state pensions are creating more tax liabilities for older people."
He warned that "a lot of these people will not even be aware that they may owe some sort of tax on their income and can catch many off guard." Former pensions minister Sir Steve Webb said: "These figures highlight another casualty of the long-term freeze of personal tax thresholds."
Pension withdrawal complications
HMRC figures reveal that claims for overpaid tax on pension withdrawals have exceeded 500,000 since pension freedoms were introduced in 2015. The system applies emergency tax rates when savers make ad-hoc withdrawals, presuming one-off amounts will be repeated monthly.
This has resulted in widespread overtaxation, with nearly £1.5 billion clawed back by retirees who paid too much. The problem demonstrates broader pension taxation complexity affecting hundreds of thousands of savers.
Government defends pension policy
A Treasury spokesman said: "We are committed to help our pensioners live their lives with dignity and respect, which is why in April the basic and new state pension increased by 4.1 percent." The government claims pensioners will receive a boost of up to £470 to their income in 2025-26, with the triple lock meaning millions will see pensions rise by up to £1,900 this parliament.
Sources used: "PA Media", "Mirror", "Birmingham Mail" Note: This article has been edited with the help of Artificial Intelligence.
