More than 1.3 million British households were hit with an unexpected end-of-year tax bill from HM Revenue and Customs (HMRC) in the 2023/24 financial year. This staggering figure, revealed through a Freedom of Information request, represents a near doubling of the number of people receiving such demands compared to just two years prior.
Who is Receiving These Tax Demands?
The data was obtained by former pensions minister Sir Steve Webb, now a partner at pension consultants LCP. The so-called simple assessment tax bills are issued when individuals owe tax that cannot be automatically collected via the Pay As You Earn (PAYE) system. This typically affects those with untaxed income from sources like savings interest, a second job, or if they owe HMRC £3,000 or more.
Sir Steve's analysis shows the scale of the issue is vast but varied. While a quarter of the demands were for sums under £100, nearly another quarter were for unpaid tax exceeding £1,000. The letters are generated automatically when HMRC receives data from employers, the Department for Work and Pensions, banks, and building societies.
Why Are So Many People Being Caught Out?
Sir Steve identifies the freezing of tax thresholds as the primary driver behind the surge in bills. The income tax personal allowance has been frozen at £12,570 and is set to remain at this level until at least the start of the 2031/32 tax year. As wages and pensions increase with inflation, more people are being pulled into the tax net or pushed into higher tax brackets, a phenomenon known as 'fiscal drag'.
Pensioners are particularly vulnerable. Many whose sole income is the state pension now find themselves receiving an annual tax demand, with the amount owed growing each year. "For many people, having to deal with the tax office is a hassle they can do without," Sir Steve stated. He warned that although the government has indicated a potential fix for some pensioners from 2027, a broader solution is urgently needed.
What Should You Do If You Receive a Bill?
If you receive a simple assessment letter, you have options for payment. The bill can be settled in full or via instalments before the deadline. Payments can be made through the HMRC app, online via GOV.UK, by bank transfer, or by cheque.
It is crucial to check the details carefully. If you believe an error has been made, you must contact HMRC to query the assessment within 60 days of receiving it. Understanding your tax code can also help you stay informed. The most common code for the current tax year is 1257L for people with one job or pension, reflecting the £12,570 personal allowance. You can find your tax code on your latest payslip or P45.
The sharp rise in these surprise tax bills underscores the growing impact of frozen allowances on ordinary households, turning what was once a routine process for a minority into a significant financial headache for millions.
