HMRC Scraps Tax Returns For Thousands: New Rule Changes Explained

Hugo van Dijk

5 min read

Post on May 20, 2025

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Who is Affected by the HMRC Tax Return Changes?

HMRC's new rules significantly reduce the number of individuals required to file a self-assessment tax return. The changes primarily target those whose income is straightforward and already reported to HMRC through other channels. This streamlined approach simplifies tax filing for many UK citizens.

• Individuals whose income is solely from employment and comes within the PAYE system: If your only income source is employment and your tax is handled through the Pay As You Earn (PAYE) system, you likely won't need to file a self-assessment. Your employer automatically reports your earnings and deductions to HMRC, eliminating the need for a separate return.

• Those receiving only state pensions and other benefits reported directly to HMRC: Individuals whose income is solely comprised of state pensions, benefits like Jobseeker's Allowance or Universal Credit, and other government payments reported directly to HMRC are also exempt from filing a self-assessment. HMRC receives this information directly, enabling automated tax calculations.

• Taxpayers whose only additional income sources are reported automatically through the Real Time Information (RTI) system: This includes rental income reported directly by a letting agent. The Real Time Information (RTI) system provides HMRC with up-to-date income and tax information, automating the tax calculation process for these individuals.

However, it's crucial to remember that many income sources will still require a self-assessment tax return. These include:

• Income from self-employment: If you're self-employed, you are still required to file a self-assessment.
• Capital gains: Profits from selling assets like property or shares will trigger a capital gains tax liability and necessitate a self-assessment return.
• Untaxed dividends: Dividends received from investments that haven't already had tax deducted at source will need to be reported on a self-assessment.

Understanding the Simplified Tax System

For those no longer required to file a self-assessment, HMRC will automatically calculate their tax liability. This automated system relies on the data received through PAYE, RTI, and direct benefit reporting.

• HMRC's automated tax calculation process: HMRC uses sophisticated algorithms to process the data received from employers, letting agents, and benefit providers. This data forms the basis for calculating your tax owed or any tax refund you are due.

• Accuracy of the automated system: The accuracy of this system depends heavily on the accuracy of the data provided by employers and other reporting bodies. While generally reliable, it's essential to check your tax calculation for accuracy.

• Discrepancies and errors: If there are any discrepancies or errors in the data received by HMRC, you may need to contact them to resolve the issue. This might involve providing additional documentation to support your income details.

• Checking your tax calculation online: You can conveniently access your tax calculation details through your HMRC online account. Regularly checking your online account ensures accuracy and enables early detection of any potential issues.

What You Need to Do if You're Affected

If you're one of the thousands affected by these HMRC tax return changes, you'll need to take a proactive approach to manage your tax affairs.

• Regularly check your HMRC online account: This is the most crucial step. Regularly reviewing your online account for accuracy ensures that your tax calculations are correct and that you are neither overpaying nor underpaying.

• Report any discrepancies: If you believe your tax calculation is incorrect, contact HMRC immediately to report the discrepancy. Provide supporting evidence to back up your claims.

• Contact HMRC for assistance: If you need clarification or further assistance understanding the changes, don't hesitate to contact HMRC through their online services or telephone support.

• Maintain accurate financial records: Keeping meticulous financial records is crucial, even with the automated system. Accurate records will aid in resolving any discrepancies that may arise.

Potential Implications and Future Changes

These changes represent a significant step towards a more digital and streamlined tax system in the UK.

• Long-term effects on tax administration: The simplified system aims to reduce the administrative burden on both HMRC and taxpayers. The long-term impact on tax administration will depend on the success of the automated system and its ability to accurately process a vast amount of data.

• Future expansions and modifications: HMRC may expand the scope of the automated system in the future to include more income types. Modifications and improvements can be expected as the system matures.

• Alignment with HMRC's digital transformation: These changes are part of HMRC's broader digital transformation strategy, aiming for a more efficient and user-friendly tax system.

Conclusion:

The changes to HMRC tax returns represent a significant simplification for thousands of taxpayers, eliminating the need for a self-assessment return. This move towards automated tax calculations offers greater convenience and efficiency. However, regularly checking your HMRC online account and promptly addressing any discrepancies are essential for ensuring accuracy and avoiding potential tax issues. Stay informed about updates and changes related to HMRC tax returns to effectively manage your tax obligations. Understanding the new HMRC tax return rules is crucial for navigating this simplified system and maintaining tax compliance.