More than 1.3 million people across the UK received unexpected tax bills from HM Revenue & Customs in 2023/24, almost double the number two years earlier, according to figures obtained through a freedom of information request by former pensions minister Steve Webb.
The sharp rise is attributed to the increasing use of the “simple assessment” system, which is triggered when someone owes £3,000 or more in income tax or when their income cannot be taxed automatically through Pay As You Earn (PAYE). Nearly a quarter of the bills were for less than £100, but a similar proportion exceeded £1,000, leaving many households facing unexpectedly large demands.
Steve Webb, now a partner at pension consultancy LCP, linked the increase to the long-term freeze of the income tax personal allowance at £12,570 until the 2031/32 tax year. He warned that the freeze is pushing more people into paying tax, including those whose only income is the state pension.
Unlike employment or private pension income, the state pension cannot be taxed at source. Consequently, retirees receiving only the state pension are issued a tax bill directly from HMRC if their income exceeds the personal allowance. The full new state pension will rise to £241.30 per week from April, amounting to £12,547.60 annually – just £22.40 below the tax threshold.
Mr Webb noted that while the government may address the issue for some pensioners from 2027, a broader solution is still needed to cope with the growing number of households caught by the simple assessment system. The data highlights how end-of-year tax demands have become an unwelcome reality for many British taxpayers.
