In the latest edition of Agent Update, HMRC announced that starting from the 2023/24 tax year, individuals whose sole income is subject to PAYE and fall within the £100,000 to £150,000 income bracket will no longer be required to undergo self-assessment. However, this change could potentially lead to higher tax payments for those affected.
Dated 12th June 2023, this update brings news that the self-assessment threshold for PAYE taxpayers will be raised from £100,000 to £150,000, taking effect in the upcoming tax year.
For the 2022/23 tax year, the self-assessment threshold for PAYE taxpayers remains unchanged at £100,000, and individuals will receive the customary notification to file their tax return.
Nevertheless, HMRC clarifies that once these taxpayers submit their tax return for the 2022/23 period, they will be assessed against the new £150,000 threshold. If their tax return indicates that their income falls between £100,000 and £150,000, solely through PAYE, and they have no other substantial sources of income, they will receive an exit letter known as SA251.
However, taxpayers falling within this category will still be required to submit a tax return for the 2023/24 tax year if they have untaxed income, are involved in a business partnership, need to settle the High Income Child Benefit Charge (HICBC), or if they are self-employed with a gross income exceeding £1,000.
HMRC highlighted that enhancements to its IT systems have enabled the increase in the threshold.
The tax authority also emphasized that taxpayers will still need to file a self-assessment tax return if they possess untaxed income that cannot be accounted for and taxed via the PAYE system.
Potential overpayment of taxes by taxpayers? Critics have voiced concerns that excluding individuals with PAYE earnings below £150,000 from the self-assessment system may lead to many taxpayers inadvertently overpaying their taxes.
