How Simple Assessment works in retirement
When you retire, you may get a tax letter from us called Simple Assessment. This is nothing to worry about – it’s simply us letting you know about any tax you might owe. And it’s usually easy to sort out.
Income Tax doesn’t stop in retirement
When you retire, you’ll still pay Income Tax on your total yearly income. This could come from lots of different places, such as:
- your State Pension
- workplace or private pensions
- interest you get from savings
- investments
- rented property
- if you’re self-employed
Most people have something called a Personal Allowance. It’s the amount of money you can get each year tax-free.
The current standard Personal Allowance is £12,570 a year.
If your total income is below your Personal Allowance, you won’t pay any Income Tax.
If your total income is more than your Personal Allowance, you’ll only pay tax on that bit of money above it.
How your State Pension is taxed
- You’ll always be paid your State Pension without any tax taken off
- Your State Pension is then added to any other income you may have (such as private pensions or savings interest) to check whether your total income is more than your Personal Allowance that year
- If you do go over your Personal Allowance, then you’ll only pay tax on that amount that’s above it
- There are a few different ways we’ll try to collect the tax you owe. You can learn about these in the next section
Collecting tax easily with Simple Assessment
When you’re employed, your tax can usually be collected automatically through your wages before you’re paid. This is called ‘Pay As You Earn’ (PAYE). You may have noticed this on your payslips over the years.
But when you’re retired, the way we collect tax will change.
If you receive any work or private pensions, we’ll try to collect any tax you owe through these using our PAYE system.
But if the State Pension is your only income and is above your Personal Allowance, we’ll need to collect the tax you owe in another way.
That’s where Simple Assessment comes in.
Key thing to remember:
Simple Assessment is a letter from us that lets you know how much tax you owe. It’s nothing to worry about and a totally normal process. It shows your income for the year, the tax you’ve already paid, (if any) and what’s left to pay.
You’ll get your Simple Assessment letter in the post, unless you’ve chosen to get letters from us in the HMRC app or online.
When a Simple Assessment letter might arrive
We may send you a Simple Assessment letter if you have tax to pay on your State Pension, on interest you’ve made from savings, or if you owe £3,000 or more – but we can’t collect it through any work or private pensions you have.
Helpful tip:
When you get a Simple Assessment letter, just make sure the numbers are right. Your P60, bank statements, or letters from the Department for Work and Pensions can help you do this. If something seems wrong, contact us within 60 days and ask us to check it again.
If everything looks ok, you can pay in different ways:
Online
By bank transfer
By cheque
The letter will tell you when you need to pay any tax you owe and how to do it.
Simple Assessment isn’t Self Assessment
With Self Assessment, you fill in a tax return yourself. You can find out more about how it works on our Self Assessment page.
But with Simple Assessment, we do all the number work for you and send you the result. It’s made to make life easier for people with straightforward tax situations.
Everything you need to know will be in your letter – how much tax you owe, how to pay it and when you’ll need to pay it by. You can learn more about Simple Assessment on GOV.UK.