Around 1.8 million Simple Assessment letters are going out for the 2025 to 2026 tax year. Working-age recipients started receiving them from 30 June 2026, pensioners from 12 August 2026, and a second tranche follows between October and December 2026 built specifically on bank and building society interest data. The tax is payable by 31 January 2027, or within three months of the letter if it is issued on or after 31 October 2026.
Read as a compliance story that is unremarkable. HMRC calculates, the client pays, nobody files anything. Read as a client signal it is one of the most useful pieces of post a practice sees all year, because of what has to be true for the letter to exist at all: the client holds capital in their own name, it is earning enough to breach an allowance, it is sitting outside any tax wrapper, and no regulated conversation has taken place about any of it. The letter is a receipt for a decision that was never actually made.
Why the volumes went up
The mechanism is dull and that is exactly why it catches people. Banks and building societies report interest paid to HMRC. Where the resulting liability cannot be collected through a PAYE code — broadly, once it reaches around £3,000 — HMRC issues a PA302 calculation instead. Part of the increase in letters, on HMRC's own account, is simply more savers whose interest now exceeds their Personal Savings Allowance.
The allowances have not moved. They have not needed to. What moved was the return on cash:
- The Personal Savings Allowance is £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and nil for an additional rate taxpayer.
- The starting rate for savings can cover up to £5,000 of interest, but it reduces by £1 for every £1 of other income above the personal allowance of £12,570, and disappears entirely once other income reaches £17,570.
- Bank Rate was held at 3.75% by the Monetary Policy Committee on 30 July 2026, a fifth consecutive hold. Cash pays a real return again, which is precisely what fills the letters.
So a saver who was invisible to HMRC in 2021 with the same balance in the same account is now producing an assessment. Nothing about the client changed. The rate environment changed around a decision nobody revisited — the same threshold-drift mechanic we traced through the receipts data in the receipts bulletin is a client list.
What it costs a client who does nothing
The figures below are illustrative arithmetic, not a statement about any real client, and assume the balance and the interest rate stay where they are.
Take a higher rate taxpayer — an owner-manager on salary and dividends — holding £60,000 personally in an easy-access account paying 4.00%:
- Interest for the year: £2,400.
- Personal Savings Allowance available: £500. Taxable interest: £1,900.
- Tax at the current higher rate on savings of 40%: £760. That is the letter.
- The same position from 6 April 2027, when the higher rate on savings income rises to 42%: £798.
Now run the same test on a retired client, because that is who has been receiving letters since 12 August. A basic rate pensioner with £80,000 on deposit at 4% earns £3,200. The Personal Savings Allowance covers £1,000, the starting rate for savings is long gone against a pension income above £17,570, and £2,200 is taxed at 20% — £440 this year, £484 once the basic rate on savings income reaches 22% in April 2027.
Neither figure is a crisis. Held for five years across those rate changes, the higher rate example above gives up roughly £3,900 in tax on money the client was told was the safe option. That is the part worth saying out loud.
Nobody decides to pay tax on idle cash. They decide to leave it where it is, which is the same decision wearing a different coat.
Two dated changes sit behind the letter
Both were announced in the Autumn Budget on 26 November 2025, and both bite in the same month:
- Savings income rates rise on 6 April 2027, from 20% to 22%, from 40% to 42% and from 45% to 47%. Property income rates rise on the same day and by the same amounts for taxpayers in England and Northern Ireland, with the government engaging the Scottish and Welsh governments on their own rate-setting powers.
- The annual cash ISA subscription limit falls from £20,000 to £12,000 from 6 April 2027 for savers aged 65 and under. The overall £20,000 ISA allowance is unchanged, and existing cash ISA balances are unaffected — it is new subscriptions that are capped.
Note the direction of travel: the tax on cash held outside a wrapper goes up, and the simplest wrapper for cash gets smaller for anyone under 66. Dividend rates already rose on 6 April 2026, which is why the marginal pound increasingly stays inside the company rather than coming out — the position we set out in the cash question. A client sitting on personal deposits now faces the mirror image of that problem, and the advisers who do this for a living say the wrapper choice itself has got harder, as we covered in the wrapper reset.
Three things the letter tells you that the accounts do not
A set of accounts shows what the business did. A Simple Assessment based on interest shows what the household did with the money afterwards, which is usually the part the practice never sees:
- Scale. Work backwards. Taxable interest plus the allowance, divided by a plausible deposit rate, gives you an order of magnitude for the cash balance. £2,400 of interest at 4% is £60,000 sitting still.
- Structure. Interest inside an ISA never appears in a Simple Assessment. If the interest is being assessed, the money is not sheltered.
- Marginal rate. The calculation states which savings rate applies, which tells you what the next decision — a pension contribution, a disposal, a dividend — is worth to that client.
Add those to the six markers already sitting in your files, set out in the six signals already sitting in your client file, and the picture is fairly complete: capital, no structure, known rate, and a dated increase coming.
The practical trap: two letters, one liability
There is a live operational point worth knowing before a client rings. HMRC issues a second Simple Assessment for the same year where later data — typically the bank and building society interest tranche — changes the figures. The Association of Taxation Technicians has warned that each letter states the total tax due for that year, not an additional sum on top of the first. A client who pays both in full has overpaid and has to reclaim it; a client who assumes the second is a duplicate has underpaid.
Two housekeeping rules follow. Check that any payment already made relates to the same tax year before netting it off. And note the deadline that is easy to miss: if anything in the assessment looks wrong, HMRC must be contacted within 60 days. That is a shorter fuse than most correspondence in a practice, and it is why these letters get forwarded to the accountant rather than filed.
Where the accountant stops
Everything above is tax information, and explaining it is squarely within an accountancy firm's remit. The line sits exactly where it always does. Setting out that ISA interest does not enter the calculation, that the allowance is £500 at higher rate, or that savings rates rise in April 2027 is factual. Telling a particular client that they should move £40,000 into a specific product, or that a pension contribution beats a cash ISA for them, is a personal recommendation and needs FCA authorisation. We set the boundary out in full in accountant and financial planner: who does what.
That boundary is also why the introduction matters more here than in most cases. The client with the letter has demonstrated three things at once: they hold capital, they have no structure around it, and they have never taken advice. On the lang cat's State of Advice Report 2025, only 9% of UK adults had paid for financial advice in the previous two years, while 91% of those who did found it valuable — and with fewer than 5,000 IFA firms left, an average new advised client portfolio of £411,000 and an average IFA client age of 59, the market is not coming looking for a 48-year-old with £60,000 on deposit. The accountant is the only professional who knows they exist.
Two things to do this week
First, run one query. Filter your personal tax and Simple Assessment correspondence for clients with untaxed savings interest in the last two years, and sort it by the interest figure rather than the tax. The tax figures are all small; the implied balances are not. Anything above roughly £1,500 of interest points to a five-figure cash balance with no structure around it.
Second, add one line to the covering email. When you send a client their Simple Assessment explanation, the useful sentence is not about the payment. It is something like: “This bill exists because the money is held in your own name rather than in anything sheltered. We can't advise on where it should sit, but we work with a planner who can look at it properly.” That is a factual statement of scope, it recommends nothing, and it arrives at the exact moment the client has a letter in their hand proving the point. What happens after that sentence — who does what, and how long it takes you — is set out step by step in anatomy of an introduction.
What is not settled
Two things genuinely are not. The first is the rate environment: Bank Rate has been held at 3.75% through five consecutive meetings, with three of nine Committee members voting for a rise at the July decision, and the next decision falls on 17 September 2026. If deposit rates fall, the interest shrinks and so does the bill — but the structural point does not move, because the April 2027 rate rise is legislated and the cash ISA limit change is dated. The second is the second tranche itself: the October to December letters are built on bank and building society data, so the volume of clients affected will only be visible in the new year.
What is settled is the arithmetic. Cash held outside a wrapper is taxed, it will be taxed more from April 2027, and the shelter available for new cash gets smaller in the same month for anyone aged 65 or under. HMRC is sending 1.8 million letters that say so. The accountant is the person who reads them.
Common questions
My client is not a Self Assessment case. Why has a tax calculation arrived at all?
Because HMRC already holds the data. Banks and building societies report interest paid to HMRC each year, and where that interest creates a liability that cannot be collected through a PAYE code, HMRC calculates the tax itself and issues a PA302 Simple Assessment rather than asking for a return. Amounts of roughly £3,000 or more are usually too large to code out, so they arrive as a demand instead. Nothing has gone wrong and the client has not been selected for anything. The letter simply means untaxed income exists, HMRC can see it, and no return was needed to find it.
It is a few hundred pounds of tax. Why treat it as a planning signal?
The tax is not the point; the disclosure is. A Simple Assessment based on bank interest tells you three things at once that a set of accounts does not: the client holds a material amount of cash in their own name, it is sitting outside any tax wrapper, and HMRC now knows their marginal rate. That combination is the plainest evidence you will get that no financial planning decision has been taken about personal capital. The bill is small. What it reveals — capital with no plan attached, in a household that has never had a regulated conversation — is not.
Can I tell a client to move the money into an ISA?
You can explain the tax rules; you should not recommend the product. Setting out that the Personal Savings Allowance is £1,000 for basic rate and £500 for higher rate taxpayers, that ISA interest falls outside the calculation, and that savings income rates rise on 6 April 2027 is factual tax information and squarely within an accountant's remit. Telling a specific client that an ISA, a bond or a pension contribution is the right home for their money is a personal recommendation and requires FCA authorisation. The clean split is to describe the position and hand the recommendation to a regulated planner.
A client has received two letters for the same year. What is going on?
HMRC issues a second Simple Assessment where later data changes the figures, which is common once bank and building society interest is loaded. The Association of Taxation Technicians has warned that each letter shows the total tax due for that year, not an extra amount on top of the first — so a client who pays both in full will overpay and must then reclaim it. Check the payments already made relate to the same tax year before advising anything. If a figure looks wrong, HMRC must be contacted within 60 days of the assessment, so the letter cannot sit in a pending tray.
Why raise this now rather than at the next year end?
Because two dated changes land before the next cycle finishes. From 6 April 2027 the tax rates on savings income rise by two percentage points to 22%, 42% and 47%, and the annual cash ISA subscription limit falls from £20,000 to £12,000 for those aged 65 and under, with the overall £20,000 ISA allowance unchanged. Both were announced in the Autumn Budget of 26 November 2025. A client who leaves cash where it is will pay more on it, and the shelter available for new cash is narrower. Deciding in 2026 is a different exercise from reacting in 2028.