New HMRC Self-Assessment Threshold for PAYE

From the tax year 2023-2024 onwards, the self-assessment threshold for those taxed through PAYE will rise from £100,000 to £150,000. Those within this bracket do not need to take any action for now. They will receive a self-assessment exit letter if a tax return is submitted for the current tax period showing an income between £100,000 and £150,000 taxed through PAYE with no additional income. However, commentators have expressed concern that this is being implemented to manage their workload rather than simplify tax.

The tapering effect of the tax-free allowance for earners in the £100,000 to £125,000 bracket means that a tax return submission has usually been necessary to ensure that they are paying the correct tax. This is in order to take into account deductions and allowances for gift aid contributions, personal pension inputs, professional subscriptions and business expenses. The personal tax allowance for this bracket is written off gradually, so it can be more complicated.

Those losing out on the personal tax allowance will effectively be paying 60% tax. HMRC should be able to adjust tax affairs for the afore mentioned deductions and allowances but consistently fail to do so. Therefore, it is vital to be aware of any deductions or allowances one is able to claim against their tax bill, so that the correct amount of tax is charged and/or refunded. By taking employees out of self- assessment, there is a real risk that people in this range will end up paying too much tax and not getting refunds, to which they are genuinely entitled.