More than 1.3 million people received tax demands from HM Revenue and Customs (HMRC) in the 2023-24 financial year, double the number two years earlier, as frozen income tax thresholds drag more low earners into the tax net. The figures, obtained via a freedom of information request, show that 1.32 million 'simple assessment' letters were issued, up from 675,000 in 2021-22.
The tax threshold freeze, initiated by the Conservatives in 2021 and extended by Chancellor Rachel Reeves until 2031, means the personal allowance has remained at £12,570 since April 2021. With wages and the state pension rising due to inflation, more people are being pulled into paying income tax for the first time. The full state pension will increase to £12,548 in April, just £22 below the tax-free allowance, and is projected to exceed it by 2027.
Simple assessments are sent to individuals who owe tax but no longer have a PAYE code, often pensioners or savers whose interest exceeds the £1,000 personal allowance. Most bills are small: nearly a quarter were under £100, and half under £300. However, former pensions minister Steve Webb warned that the numbers receiving these unwelcome demands have 'soared' and predicted they would exceed two million when 2024-25 figures emerge.
In her autumn budget, Reeves announced that from April 2027, those whose only income is the full new state pension will be exempt from income tax. But details of how this will be implemented remain unclear. Personal finance expert Martin Lewis questioned the Chancellor about pensioners just above the threshold, noting that the full new state pension is £12,558 while the personal allowance is frozen at £12,570 until 2031.
HMRC said the matter was for the Treasury, which was contacted for comment. The tax threshold freeze, known as fiscal drag, has been criticised for pulling millions more people, including the lowest earners, into paying tax.
