A Freedom of Information (FOI) request tabled by LCP partner Steve Webb has revealed a surge in the number of people receiving end year tax demands from HMRC.
The FOI shows that in 2023/24, over 1.3m people received such demands, nearly double the number just two years earlier. Many of these are for relatively small sums, with nearly a quarter being for under £100, though nearly a quarter are over £1,000.
The key figures from the FOI are shown below:
The issue relates to a process known as ‘simple assessment’. For most taxpayers, the correct amount of income tax is collected over the course of a year via the use of PAYE tax codes. 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. The numbers receiving such demands have fluctuated from year to year but averaged around 610,000 in the period 2017/18 to 2021/22 inclusive. However, the freezing of the personal tax allowance has led to a surge, with the number jumping from 758,000 in 2022/23 to 1,321,000 in 2023/24. (Note that self assessment demands for 2024/25 are issued during 2025/26, so final figures for 2024/25 are not yet available).
The two main reasons for the surge in numbers are:
- The freeze in the tax threshold, which has been £12,570 since 2021/22
- Large increases in the state pension, including an increase of 10.1% in April 2023
With the state pension having risen a further 13% 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 2 million mark.
Commenting, Steve Webb, partner at pension consultants LCP said:
“For many people, having to deal with the tax office is a hassle they can do without. But the continued freezing of the income tax personal allowance means that the numbers getting unwelcome end-of-year tax demands have soared. 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. Although the Government has indicated it may address this issue for a subset of pensioners from 2027, a much wider-ranging solution is needed”.
