Simple Assessment Underpayment Letter: Don't Pay Until You Read This
Received an HMRC Simple Assessment underpayment letter? It could be wrong. Here's how to check the figure, challenge it, and avoid paying a penny too much.
A brown envelope from HMRC lands on your doormat. Inside is a PA302 — a Simple Assessment notice telling you that you owe them money. Your first instinct is probably to pay it. Don't. Not yet.
Simple Assessment underpayment letters are issued automatically by HMRC's systems, and those systems make mistakes. Before you hand over anything, you need to understand exactly what a simple assessment underpayment letter is, why you received it, and crucially, whether the figure is actually correct.
- A Simple Assessment (PA302) letter from HMRC is not the same as a tax demand — you have 60 days to query it before payment is due.
- The most common cause of a Simple Assessment underpayment is a wrong tax code applied by your employer or pension provider.
- HMRC's calculation can be wrong. You are legally entitled to challenge it and request a review.
- Paying the wrong amount does not protect you — you must dispute errors in writing within the deadline.
- Checking your tax code now at /check-my-tax-code can reveal whether the underpayment was caused by a coding error you did not know about.
What Is a Simple Assessment Letter?
- Simple Assessment (PA302)
- A Simple Assessment is a tax calculation issued by HMRC to certain taxpayers — typically PAYE employees or pensioners — who owe income tax that cannot be collected automatically through their tax code. The PA302 notice sets out how much HMRC believes is owed and gives a deadline for payment or dispute.
Simple Assessment was introduced under the Finance Act 2016, with HMRC rolling it out from 2017 onwards. The stated aim was to reduce the number of people who needed to file a full Self Assessment tax return. Instead of asking you to do the maths yourself, HMRC would calculate what you owe and simply tell you.
In practice, this means that if you have underpaid income tax during the year — through a combination of employment income, pension income, savings interest, or state pension — HMRC may issue a PA302 rather than asking you to register for Self Assessment. You receive the letter, you check it, and you pay (or dispute) by the deadline.
For the 2023 to 2024 tax year, HMRC issued Simple Assessment notices to hundreds of thousands of people, predominantly those whose state pension and other income together exceeded their personal allowance, or whose employer used the wrong tax code throughout the year.
Why Did You Receive One?
There are several common triggers for a simple assessment underpayment letter, and most of them are not your fault.
Your tax code was wrong
This is the single biggest cause. If your employer or pension provider was operating on an incorrect tax code — one that gave you too large a personal allowance or failed to account for a second income — you will have paid too little tax through PAYE without realising it. At year end, HMRC reconciles what was collected against what should have been collected, and the shortfall becomes a Simple Assessment underpayment.
If you have ever spotted your tax code changing unexpectedly (a topic covered in Tax Code Changed Unexpectedly: The Seven Reasons Why), this is exactly the kind of downstream consequence that can follow.
Your state pension pushed you over the threshold
The new state pension in 2024/25 is worth £11,502.40 a year. The personal allowance is £12,570. That looks fine on paper, but the moment you add any employment income, pension income, or savings interest on top, you are into taxable territory. HMRC cannot collect tax on the state pension through a tax code applied to it (the state pension is paid gross), so the shortfall falls on your other income source. If that other source does not have enough headroom in its tax code to collect the deficit, a Simple Assessment letter follows.
Savings interest or investment income
With Bank of England base rate staying elevated through 2023 and 2024, millions of people earned more in savings interest than they had in a decade. If your savings interest exceeded your personal savings allowance (£1,000 for basic rate taxpayers, £500 for higher rate), the excess is taxable. Banks report interest to HMRC, and HMRC may issue a Simple Assessment to collect what is owed.
Benefits in kind or untaxed income
Company cars, private medical insurance provided by an employer, or other taxable benefits that were not properly factored into your tax code can all create an end-of-year shortfall collected via Simple Assessment.
The Number in That Letter Might Be Wrong
Here is the part HMRC's covering letter does not shout about: Simple Assessment calculations are generated automatically from information held on HMRC's systems. Those systems depend entirely on the data reported to them by your employer, your pension provider, your bank, and other third parties. If any of that underlying data is wrong, the calculation is wrong.
Common errors include:
Duplicate income entries. If you changed jobs during the year, HMRC sometimes receives overlapping P60 or P45 data that double-counts a period of income. The result is an overstated income figure, which produces an overstated tax liability.
Wrong tax code applied throughout the year. If your employer used an emergency tax code or a code that did not reflect your correct personal allowance, the PAYE deducted may not match what the Simple Assessment expects. You may actually have already paid the tax through your code, and the PA302 is asking you to pay it again.
Marriage Allowance not reflected. If you transferred part of your personal allowance to a spouse and this was not properly coded, HMRC's system may calculate your liability without giving you credit for the adjustment.
Pension contributions ignored. If you make contributions to a personal pension outside of workplace auto-enrolment, these may not be visible to HMRC's automated systems. Pension contributions can reduce your taxable income and therefore your tax bill. If they are not in the calculation, the figure you have been given may be too high.
This is why checking your tax code is not a one-time exercise. An error that went unnoticed during the year can compound into a Simple Assessment bill that looks alarming but is actually based on faulty inputs.
How to Check Whether the PA302 Figure Is Correct
Before you do anything else, get the evidence in front of you. You will need:
- Your P60 from your employer (showing total pay and tax deducted for the year)
- P45s from any previous employer in the same tax year
- Bank statements showing savings interest received
- Details of any pension contributions you made
- Any letters about your tax code from HMRC (a P2 notice, for example — explained in detail in P2 Notice of Coding: Act Now or Pay Later)
With those documents, cross-reference the income figures HMRC has used in the PA302 against your actual records. The PA302 should itemise the income sources it has included. If any figure looks inflated, that is your starting point for a dispute.
You can also log into your Personal Tax Account on GOV.UK to see the individual data points HMRC is using. This is often more revealing than the letter itself.
Check your tax code at the source
If the underpayment was caused by a wrong tax code, check your current and historic tax codes at /check-my-tax-code before contacting HMRC. Arriving at that conversation knowing specifically which code was wrong, and in which pay period, dramatically improves your chances of getting the bill reduced or cancelled. HMRC's guidance is clear that if an underpayment arose because they gave your employer incorrect information, you may be entitled to have it written off under Extra-Statutory Concession A19.
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How to Dispute a Simple Assessment Bill
You have two main routes: contact HMRC by phone or write to them. Given the stakes, a written record is almost always the better choice.
Write to HMRC within 60 days
Address your letter to the office shown on your PA302. State clearly:
- Your full name, National Insurance number, and the reference on the PA302
- That you are disputing the calculation and why
- The specific figures you believe to be incorrect, with your evidence (copies of P60, bank statements, etc.)
- Whether you believe Concession A19 applies
Keep a copy of everything. Send by recorded delivery if posting. If you use HMRC's online service, take a screenshot confirming submission.
Request a review rather than an appeal
Formal appeals go to the Tax Tribunal, which is rarely necessary. Requesting an internal review from HMRC is faster and resolves the majority of Simple Assessment disputes without escalation. State explicitly in your letter that you are requesting a statutory review under Section 49A of the Taxes Management Act 1970.
What If the Bill Is Correct?
If you check the figures and HMRC's calculation is accurate, you still have options for how you pay.
Pay online via GOV.UK. The fastest route. You will need your payment reference from the PA302.
Ask HMRC to collect through your tax code. If the underpayment is under £3,000 and you want to spread the cost, you can ask HMRC to collect it through your PAYE code over the following tax year. This reduces your monthly take-home but avoids a lump sum payment.
Agree a Time to Pay arrangement. If you genuinely cannot afford the lump sum, HMRC operates a Time to Pay scheme. You need to call HMRC's payment helpline (0300 200 3300) before the deadline. Interest will still accrue, but the arrangement prevents escalation to debt collection.
One thing worth doing even if you pay: ask yourself whether the same coding error that caused this underpayment is still active in your current employment. If it is, you are building up another shortfall right now. A tax code check at /check-my-tax-code takes less than five minutes and could stop you from receiving the same letter next year.
The Broader Problem: HMRC's Automation Is Imperfect
Simple Assessment was sold as a simplification. And for straightforward cases, it broadly works. But the scheme rests on the assumption that all the data flowing into HMRC's systems from employers, pension providers, and banks is accurate and timely. It frequently is not.
A 2023 report by the Low Incomes Tax Reform Group found that pensioners in particular were receiving Simple Assessment bills that failed to account for allowable deductions, or that incorrectly combined income from multiple sources. Many of those people paid bills they did not legally owe simply because the letter looked authoritative and the 60-day deadline felt pressing.
This is the same structural problem that generates wrong tax codes — covered in Understanding Your Tax Code UK 2025: Are You Overpaying? — applied to a different output. HMRC's systems are only as good as the data they receive. When that data is incomplete or wrong, the taxpayer is expected to spot the error and challenge it within a tight window. That is a significant burden to place on people who have no accounting background and who reasonably assumed their employer and HMRC had everything in hand.
If you have a second income, a pension, significant savings interest, or recently changed jobs, you are statistically more likely to receive a Simple Assessment notice at some point. The antidote is not anxiety; it is a basic annual check of your tax code and your income data before HMRC's systems do the maths for you.
Key Dates for Simple Assessment
HMRC typically issues Simple Assessment notices for a given tax year in the autumn following that year's end. For the 2023 to 2024 tax year (ending 5 April 2024), most PA302 notices were sent between August and December 2024.
- 60-day dispute window: From the date printed on the PA302
- Payment deadline (if not disputed): Usually 31 January following the tax year, or 60 days from the notice date, whichever is later
- Interest start date: The day after the payment deadline passes
Missing these dates without contacting HMRC is the one thing you genuinely cannot afford to do. Even if you think the bill is wrong, acknowledge it in writing first, then dispute.
That brown envelope on your doormat is not the final word. It is HMRC's automated best guess, and best guesses are sometimes wrong. Check the figures, verify your tax code, and if something does not add up, dispute it in writing before the 60 days are gone.
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