- Ignoring HMRC ‘tax demand’ risks penalties
- 560,000 to receive tax assessments soon
- 140,000 retirees expected to be affected
According to a renowned tax firm, ignoring a ‘tax demand’ notice from HMRC could result in significant penalties for over half a million taxpayers.
According to HMRC’s calculations, 560,000 people will receive straightforward tax assessments for the fiscal year 2023/24 in the coming weeks.
Simple assessment letters will be sent to those who owe income tax that cannot be automatically deducted from their earnings, owe HMRC £3,000 or more, or must pay tax on their state pension.
HMRC stated, ‘We’re writing to about 560,000 clients who have taxable income but are not in self-assessment or for whom we cannot automatically deduct the tax payable using a PAYE tax code.
The letter will include a thorough computation of any tax due on income received between April 2023 and April 2024.
As interest rates rise, more people with small savings may be subject to income tax.
Many seniors may also get their first tax demand, as frozen personal allowance thresholds have caused their state and private pension income to exceed the threshold.
It means that out of the half-million taxpayers expecting a tax demand letter, 140,000 will be retirees.
According to recent tax office numbers, more retirees than ever before are paying income tax on their state pension.
The number of people over the state pension age who pay income tax increased by 660,000, from 7.85 million in 2023/24 to 8.51 million in 2024/25.
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‘Unfortunately, many taxpayers choose to ignore all of the letters that they receive from HMRC or just expect that the “tax will take care of itself” and be collected via PAYE or some other sort of tax withholding,’ explains Robert Salter, director at Blick Rothenberg.
‘However, these simple evaluations are a tax demand, requiring the individuals involved to make a tax payment to HMRC proactively.
‘Otherwise, they will be subject to fines and interest on their taxes for failing to settle the tax position on time.’
Taxpayers typically have until next January to pay their bills, and they can pay in installments if necessary, as long as the amount is paid by the deadline.
However, double-checking HMRC’s estimates and the income captured in the assessment is essential.
‘Experience has shown that HMRC may not always “pick up” on tax deductions offered to taxpayers for things like charitable gift aid donations, pension contributions, professional subscriptions, and similar charges,’ adds Salter.
If taxpayers pay the tax requested under the simple assessment without considering any potential tax deductions, they will wind up ‘overpaying taxes’ to HMRC.
‘Overall, this is one of those occasions where it is prudent to spend 5 or 10 minutes reviewing the Revenue data.’
