High earners with PAYE income over £150,000 will no longer have to file a self assessment tax return from 2025
HMRC has confirmed the removal of the self assessment filing threshold for individuals with income over £150,000 which is taxed via PAYE from tax year 2024 to 2025.
These changes mean up to 338,000 taxpayers will no longer have to submit a tax return.
It is important to note that if the earner has other income from dividends, savings interest and property rental, for example, they will still have to submit an annual return.
The latest change is in addition to the increase of the threshold from £100,000 to £150,000 which took effect in the 2023 to 2024 tax year.
While the exemption from filing a tax return may sound good on the surface, it is not as straightforward as it sounds as individuals may open themselves up to potential HMRC penalties and overpaid tax.
Matthew Todd, associate director at RSM UK, said: ‘Individuals earning more than £100,000 may have complicated tax affairs, even if their main income source is taxed under PAYE.
‘The UK tax system is self assessment, so taxpayers are responsible for identifying when tax is due or a return is required, which is not always obvious.
‘The main pitfall of not filing a tax return is that taxpayers may pay the incorrect amount of tax on an annual basis. Late payment interest and penalties may be charged by HMRC, for underpayment of tax and failure to file a tax return when one is strictly required.
‘Additional rate taxpayers are not entitled to the personal savings allowance, which charges savings income to a 0% rate of tax. Therefore, receiving a relatively small amount of bank interest, which could presently be achieved with very little capital in a savings account, would result in an income tax liability.
‘Alternatively, taxpayers may overpay tax if they fail to claim relief for personal pension contributions or for charitable gifts via Gift Aid, for example.’