What’s the difference between Simple Assessment and Self Assessment?

Article by Coconut

Simple Assessment was introduced in September 2017 as a “new way of collecting tax” intended to “make life easier for millions who have had to file Self Assessment tax returns in the past”.

It was made possible by UK tax authority HMRC making greater use of its tax data to find the information it needed without some taxpayers being required to complete a Self Assessment tax return. Among those first to benefit were pensioners receiving State Pension that was more than the Personal Allowance, as well as employees who had underpaid tax via PAYE and could not make up the difference via their tax code.

Making tax simpler 

So instead of asking some taxpayers to take the time to fill in a Self Assessment tax return, HMRC began using data it already held to calculate how much tax was owed. It began writing to relevant customers with a tax calculation letter (P800) or a Simple Assessment letter (PA302).

These letters set out the recipient’s estimated income from pay, pensions, state benefits, savings interest and (where relevant) employee benefits. Then all recipients needed to do was check that the information was correct, and if so, pay their tax bill before the deadline. Simple and much quicker.

If someone believed that any of the information was incorrect, they had 60 days to contact HMRC, for example, if they believed the income stated was too high or too low or that HMRC hadn’t taken into account information provided.

Simple Assessment

HMRC continues to send out Simple Assessment letters, in many cases to pensioners but others, too, those who owe HMRC £3,000 or more or need to pay tax on their State Pension. Letters go out by post or are sent electronically to a person’s personal tax account.

The letters show total taxable income, income tax paid and tax owed, based on HMRC’s records. Recipients need to verify the information against their own records (ie their P60, bank statements or letters from the Department for Work and Pensions). Those who do not understand any of the information they’re sent can contact HMRC for clarification.

If someone believes any of the figures are wrong, they still get 60 days to contact HMRC, to explain which figures are wrong and convey the correct figures. If HMRC accepts this, the taxpayer is sent a new Simple Assessment letter. If not, HMRC writes to explain why it disagrees, how the tax should be paid or appealed.

What is Self Assessment?

So, basically, Simple Assessment enables HMRC to collect underpayments of tax from those with relatively straightforward tax affairs. It means they don’t need to complete a Self Assessment tax return. Self Assessment is the system that HMRC uses to collect Income Tax.

Through Self Assessment, as the same suggests, sole traders, freelancers, small landlords and other Income Tax and National Insurance payers assess their own income and expenses and report summaries each year to HMRC, which uses the figures to calculate how much tax is owed. HMRC then writes to the taxpayer to tell them.

The SA100 main Self Assessment tax return is eight pages long, and there are many boxes to fill with information, while there can be other supplementary pages to complete and file. With all of the necessary information to hand, some people can complete their Self Assessment tax return in a few hours, but others struggle and take much longer. Those who lack experience often find it harder to complete their Self Assessment tax return. Simple Assessment is a far easier and less time-consuming option.

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