Simple Assessment for elderly dm

[ByTaupeScroller]

Has anyone else's elderly dp suddenly started receiving these?
My dm has suddenly received a tax bill for 22/23 & 23/24. Of course I understand state pension is taxable but I can't understand why they've suddenly started to send her a bill instead of taxing her at source. Her income hasn't changed from the years previous to this.
My df died at the end of 2020. Since then she's received his private pension & her private pension. Both are small & neither have increased over the years since he died.
Then since he died she's had her own state pension plus whatever she's entitled to from his state pension. No assessments were sent for the 2020/2021 & 2021/2022 but suddenly she's receiving these Simple Assessments. Are these a new thing? It's a good job I can check these figures & pay it for her. Someone who maybe vulnerable with less support would understandably go into a panic over these & would maybe not understand why they've been sent them. Surely HMRC/DWP could work out from the figures being paid out, & submitted from the private pensions that the recipient of the state pension would be over the personal allowance & therefore tax them at source.

A lot of older people are entering self assessment where they haven't been in it before due to interest rates rising mean they are earning over their savings allowance in bank interest. Also state pensions aren't taxed at source so once that goes over £12570 tax needs to be paid on that as well.

Has state pension been taxed at source in recent years? Maybe your DF was filling in tax returns for the two of them.

The State Pension is a taxable income, but it is not taxable at source through PAYE.

If a pension (due to deferments, or other protections like widow's relief in the old style pension) goes over the personal allowance there is no other way to collect tax owed. However, most people receiving the State Pension alone would not receive a bill. Where HMRC can tax through PAYE they will (for example, via a private pension). But there are some incomes (like savings interest) where this is also not possible.

In these instances a Simple Assessment letter is issued.

There's more info on GOV.UK about this: https://www.gov.uk/simple-assessment

The BBC covered this around this time last year: https://www.bbc.co.uk/news/articles/cz74yw87jygo

Also to be aware, if the tax owed exceeds a certain percentage of a private pension, then it will need to be collected in another way.

Simple Assessment is a different income tax regime to Self Assessment. HMRC issues a letter explaining the amount owed. You do not need to file a Self Assessment form. They have the same payment deadline (31 Jan).

They can’t deduct tax of more than 50% from her private pensions if I remember corrrctly. So this is quite common for people where the state pension is by far the biggest source. She’ll get a Simple Assesmemt bill/calculation and instructions about how to pay it every year from now on unless tax rules change significantly.

You've worked it out for your mum but for others who’ve received these assessments :

Example -
state pension £14500
small private pension £1000
tax liability would be £586 but the small pension would only collect £500 at source. Liability would therefore be £86

It’s the 50% rule that’s the problem I think.

Sorry yes I didn't mean self assessment I meant simple assessment. All the allowances and thresholds and tax rates are the same. The only real difference is HMRC work it out for you rather than ask you to send them the information.

They do make mistakes though so double check all the income they have used on the simple self assessment is correct and if so you are all good, if not make sure to call and get it put right.