Half a million taxpayers will soon receive a ‘tax demand’ letter from HMRC: here’s what to do if you receive one

More than half a million taxpayers risk heavy fines if they ignore a ‘tax request’ from the tax authorities, according to a leading tax consultancy.

According to HMRC’s own figures, 560,000 people will receive a simple tax bill for the 2023/2024 tax year in the coming weeks.

Simple assessment letters are sent to people who owe income tax that cannot be automatically deducted from their own income, who owe £3,000 or more to the Inland Revenue, or who have to pay tax on their state pension.

HMRC said: ‘We are writing to around 560,000 customers who have taxable income but who do not self-declare, or for whom we cannot automatically deduct the tax due via a PAYE tax code.

‘The letter contains a detailed calculation of the tax you must pay on your income between April 2023 and April 2024.’

A rise in interest rates means that more people with modest savings now have to pay tax on their income.

It is also the first time that many pensioners have been hit because their state and private pension income is above the threshold due to frozen personal exemption thresholds.

This means that of the half a million taxpayers expected to receive a tax notice, 140,000 will be pensioners.

Recent figures from the Tax Authorities show that more pensioners than ever before pay income tax on their state pension.

The number of people above the AOW retirement age paying income tax rose from 7.85 million in 2023/24 to 8.51 million in 2024/25. That is an increase of 660,000.

‘Unfortunately, many taxpayers automatically ignore all correspondence they receive from the Tax and Customs Administration, or simply assume that tax will ‘take care of itself’ and be collected via PAYE or some other form of withholding tax,’ said Robert Salter, director of tax consultancy Blick Rothenberg.

‘However, these simple assessments are in fact a tax claim and require the persons concerned to proactively make a tax payment to the Tax Authorities.

‘Otherwise they will be held liable for fines and interest on their taxes, because they have not arranged their tax position in time.’

Taxpayers usually have until January of next year to pay their bill. If necessary, they can pay in installments, as long as they pay by the deadline.

However, it is worth double checking the calculations HMRC have made and what income is included in the assessment.

“Our experience shows that the IRS does not necessarily ‘notice’ tax deductions that a taxpayer may have for things like charitable contributions, pension contributions or professional subscriptions and similar expenses,” Salter said.

‘If taxpayers simply pay the tax levied in a simple assessment, without thinking about possible tax deductions, they will ultimately pay ‘too much tax’ to the Tax Authorities.

‘Overall, this is really another case where it might be useful to spend 5 or 10 minutes assessing the Tax Authorities’ figures.’