HMRC Scraps Tax Returns For Thousands: New Rule Changes Explained

Rajiv Sharma

5 min read

Post on May 20, 2025

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Who is Affected by the HMRC Tax Return Changes?

The new HMRC tax rules significantly impact who needs to file a self-assessment tax return. Many individuals previously obligated to complete a self-assessment will now have their tax calculated automatically. This simplification of the self-assessment process is a welcome change for many UK taxpayers.

• Individuals whose income comes solely from employment (PAYE): If your only income comes from employment and your tax is handled through PAYE (Pay As You Earn), you likely won't need to file a self-assessment return. HMRC will automatically collect and process the necessary tax information from your employer.

• Those receiving only state benefits: Those whose income is solely derived from state benefits such as Universal Credit or Jobseeker's Allowance are generally exempt from filing a self-assessment. HMRC receives this information directly from the relevant benefit agencies.

• Taxpayers whose income is below a specific threshold: The threshold for automatically calculated tax is £10,000. If your total income (excluding tax-free allowances) from all sources is below this amount, you are usually exempt from filing. It is crucial to accurately report all income, even below this threshold, to avoid potential issues later on.

• Individuals whose only additional income is from savings and dividends (within certain limits): If your additional income, beyond employment, consists solely of savings and dividend interest, and falls below the specified thresholds for reporting, you may not need to file a self-assessment tax return. HMRC systems can automatically incorporate this data from banks and investment providers. Always check the specific limits on the HMRC website to ensure you meet the criteria.

How HMRC Will Collect Your Tax Information Under the New Rules

The shift towards automated tax calculations relies heavily on the increased use of Real Time Information (RTI) and sophisticated data sharing between HMRC and various organizations. This digital tax system aims for greater efficiency and accuracy.

• Real Time Information (RTI) plays a crucial role: RTI ensures that employers submit payroll information to HMRC directly and in real-time, enabling immediate and accurate tax calculations. This eliminates much of the manual data entry previously required.

• Data sharing from multiple sources: HMRC will also access information from banks, building societies, and investment platforms to automatically calculate tax on savings and dividends. This creates a more comprehensive and streamlined system for calculating your annual tax.

• Impact on tax credits and benefits: The changes in how HMRC gathers and processes tax information may also affect how tax credits or other benefits are calculated and paid. It’s vital to ensure your details are accurate and up-to-date within the HMRC system. Any discrepancies could affect your entitlement to certain benefits.

What You Need to Do if You're Affected by the Changes

Even if you no longer need to file a self-assessment, there are still crucial steps to ensure your tax affairs are in order. Proactive engagement with HMRC is essential.

• Check your tax code online via the HMRC website: This is vital to confirm the accuracy of your tax code and ensure that HMRC is calculating your tax correctly based on your income and circumstances.

• Verify your personal details registered with HMRC: Ensure all your personal information, including address and National Insurance number, is accurate and up-to-date on the HMRC online portal. Inaccurate details can lead to delays or errors in your tax calculations.

• Understand how your tax will be calculated automatically: Familiarize yourself with the new automated system and how HMRC will calculate your tax liability. Understanding this process will allow you to identify any potential discrepancies early on.

• Contact HMRC if any discrepancies arise: If you notice any errors in your tax calculations or have any questions, contact HMRC promptly through their online services or by phone. Addressing discrepancies early can prevent potential future problems.

What Happens if You Still Need to File a Self-Assessment?

Not everyone is exempt from the self-assessment process. If your circumstances are complex or your income exceeds the thresholds mentioned, you'll still need to file.

• Self-assessment deadline: The self-assessment deadline remains crucial, and penalties for late filing apply. Make sure you know the deadline and plan accordingly.

• Online filing process: The HMRC website provides a comprehensive guide and online portal for submitting your self-assessment tax return.

• Penalties for late filing: Late submission of your self-assessment can result in significant penalties. It's essential to submit your return by the deadline to avoid financial repercussions.

• Professional advice: For complex tax situations, seeking advice from a qualified tax professional is always recommended.

Conclusion

HMRC's changes to the self-assessment system represent a significant simplification for thousands of UK taxpayers. Many individuals are now exempt from filing annual tax returns, thanks to automated tax calculations based on Real Time Information and data sharing. This improved efficiency reduces the administrative burden on taxpayers and HMRC alike. However, it is still essential to verify your details with HMRC and to understand your tax obligations.

Visit the HMRC website today to see if you're exempt from filing your tax return. Don't delay—understand your new tax obligations under the HMRC's simplified system. Check your HMRC account to see how these new tax changes affect you. Learn more about the changes to HMRC's tax return system and ensure your tax affairs are in order.