40% Taxpayers Who Aren't Required To Complete Self Assessment

fallen121

I am aware that some 40% taxpayers aren't required to complete an annual self assessment because they pay tax via PAYE and their tax affairs are fairly straightforward.

When did HMRC start doing this?

How many people in the UK are affected by this "waiver"?

Where can I get more information?

rs65

Has the 40% threshold ever been a trigger? I've never been asked for a tax return.

http://www.hmrc.gov.uk/sa/need-tax-return.htm

edit. Ah, just read on another thread that it was a trigger around 2002. The above link is the current requirements.

fallen121

Isn't the danger of not completing an Annual Assessment that HMRC will assume that your tax and dividends remain the same year on year?

The reality for most people is that their income from these sources has probably gone DOWN in the last five years or so. Perusal of one of my savings accounts with nowt much in it reveals that whatever the BoE rate has been, the rate the Bank has been paying has steadily fallen. An account which the Bank paid £9.29 interest in June 2010 only earnt £4.66 on the same amount of cash a year later.

Shares have fallen quite significantly, especially the Bank shares, and dividends on most of these types of shares haven't been paid in a long time.

Ok, so perhaps the solution is to advise HMRC of these changes, as they suggest you do. But won't telling them that your Bank interest has gone down from £9.29 to £4.66 trigger the issuance of a tax form? And is it really worth moving from not being required to complete one to having to wade through a 16 page form every year worth the hassle for the sake of £4.63?

AirlieBird

fallen121 wrote: »

Ok, so perhaps the solution is to advise HMRC of these changes, as they suggest you do. But won't telling them that your Bank interest has gone down from £9.29 to £4.66 trigger the issuance of a tax form?

No. You just advise them of a new estimate of interest for the tax year and they adjust your tax code. Simples.

jamesd

The number of people who are in the higher rate band has been increasing as the real value of the threshold has been decreasing. Since many of those people have simple and mostly PAYE tax affairs it would be a waste of HMRC resources to have them required to use SA. Better to concentrate HMRC resources on those with more complicated affairs. This trend is likely to continue.

Looking back to the time of the change the Institute for Fiscal Studies reported that "Thanks to fiscal drag and the freezing of the personal allowance this year, the effective higher rate threshold (i.e. the basic rate limit plus the personal allowance) has fallen from 161 percent of average earnings in 1996-97 to 143 percent in 2003-04, which has seen the number of higher rate taxpayers rise from 2.1 million to 3.3 million."

So even back in 2003-4 there were 1.2 million higher rate tax payers whose affairs hadn't become more complicated but had just been caught up in the decreasing threshold for higher rate.

One prediction is that there will be 5.5 million by 2015. And of those, just 2.1 would have been higher rate if the bands had remained the same in real terms, so potentially two and a half times as many tax returns to handle without much prospect of a gain in revenue but with increased costs.