The UK's tax authority is posting letters to hundreds of thousands of households demanding payment of what experts are calling 'trivial' sums. New data reveals the scale of these small tax bills, sparking criticism over the cost and efficiency of the system.
Record Number of 'Simple Assessments' Issued
According to figures obtained through a Freedom of Information (FOI) request, HMRC issued a record 1.32 million 'simple assessments' in the 2023-24 tax year. This process is used to collect tax owed where it has not been deducted through the Pay As You Earn (PAYE) system.
Of these, a significant portion were for very small amounts. The data shows that 317,000 of the demands were for £100 or less, while a total of 647,000 were for £300 or less. In total, around 300,000 households are receiving these 'trivial' demands through the post.
Experts Criticise 'Costly' Bureaucracy
Former Liberal Democrat Pensions Minister Steve Webb, now a partner at consultancy LCP, condemned the practice. He argued that the cost of collecting and processing these tiny sums likely exceeds the revenue raised. "Far too many people are receiving demands for trivial amounts of money which in some cases probably cost more to collect and process than they raise in tax," he stated.
Webb highlighted a contradiction in government policy, noting that while the Chancellor promised not to collect small amounts from some pensioners, the 'simple assessment' process continues to target others with even smaller bills. "It is time the Government took a step back and assessed whether all the bureaucracy involved in this entire process represents unnecessary hassle for taxpayers and a waste of official time and effort," he added.
Frozen Thresholds and 'Fiscal Drag' to Blame
Financial experts point to 'fiscal drag' as the root cause of the surge in small tax bills. Ian Futcher of wealth management firm Quilter explained that tax thresholds have been frozen while incomes, pensions, and investment returns slowly rise. This pushes more people just over tax limits by modest amounts.
"Simple assessments are increasingly being sent to people who do not consider themselves 'taxpayers'," Futcher said. "Often because a rising state pension combined with even modest extra income has pushed them over frozen thresholds. For those affected, the bill can come as a shock."
An HM Treasury spokesman defended the government's record, stating: "The tax paid by a worker with a low or average income is at a historically low level and Britons benefit from the highest personal allowance among the G7." They also emphasised the government's commitment to the triple lock, which will increase state pensions for millions.
The rise of these nominal tax demands places an administrative burden on both HMRC and individuals, raising questions about the efficiency and fairness of the current system as frozen thresholds continue to affect more people.
