HMRC is sending about 1.8 million Simple Assessment letters for the 2025 to 2026 tax year. Working-age recipients have been receiving them since 30 June 2026, pensioners since 12 August 2026, and a further batch built on bank and building society interest data follows between October and December 2026. The tax is payable by 31 January 2027, or within three months of the letter where it is issued on or after 31 October 2026.
HMRC urges customers not to ignore Simple Assessment letters — HM Revenue & Customs, August 2026
As a compliance matter the letter is straightforward: HMRC calculates, the client pays, no return is filed. As information about the client it says four things. The client holds capital in their own name. It earns enough interest to pass an allowance. It sits outside any tax wrapper. And HMRC knows the client's marginal rate.
Banks and building societies report interest paid to HMRC. Where the tax due cannot be collected through a PAYE code (HMRC collects underpayments of less than £3,000 through the code, per gov.uk), HMRC issues a PA302 calculation instead. HMRC's own account of the increase is that more savers' interest now exceeds their Personal Savings Allowance.
The allowances have not changed, while interest rates on cash have risen.
A saver with the same balance in the same account as in 2021 now produces an assessment, because the interest rate rose. We traced the same effect in the receipts data in the receipts bulletin.
Illustration, using made-up figures, with the balance and the interest rate held constant.
A higher rate taxpayer, an owner-manager paid in salary and dividends, holds £60,000 personally in an easy-access account paying 4.00%.
Made-up figures
That is the figure on the letter.
The same arithmetic for a retired client, 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 gone against pension income above £17,570, and £2,200 is taxed at 20%: £440 this year and £484 once the basic rate on savings income reaches 22% in April 2027.
Over five years across the rate change, the higher rate example gives up about £3,900 in tax.
Both were announced in the Autumn Budget on 26 November 2025, and both take effect in the same month.
The tax on cash held outside a wrapper goes up, and the cash wrapper gets smaller for savers under 65. Dividend rates rose on 6 April 2026, which we covered in the cash question, and AJ Bell's research on how the choice of wrapper has become harder is in the wrapper reset.
A set of accounts shows what the business did. A Simple Assessment for interest shows what the household did with the money afterwards.
Taxable interest plus the allowance, divided by a plausible deposit rate, gives the size of the balance. £2,400 of interest at 4% is £60,000.
Interest inside an ISA never appears on a Simple Assessment. If the interest is being assessed, the money is not sheltered.
The calculation states which savings rate applies, so you know what the next decision, whether a pension contribution, a disposal or a dividend, is worth to that client.
Together with the facts a set of accounts already shows, set out in what a client file already shows, these give a fuller picture of the client’s position.
HMRC issues a second Simple Assessment for the same year where later data, in particular the bank and building society interest batch, changes the figures. The Association of Taxation Technicians has warned that each letter states the total tax due for the year. It is not an additional amount 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.
Check that any payment already made relates to the same tax year before netting it off. If anything in the assessment looks wrong, HMRC must be contacted within 60 days (gov.uk, Simple Assessment).
The client with the letter holds capital with no structure around it, and the accountant knows they hold it.
Explaining all of the above is tax work. Setting out that ISA interest does not enter the calculation, that the allowance is £500 at the higher rate, or that savings rates rise in April 2027 is factual.
Telling a particular client to move £40,000 into a specific product, or that a pension contribution suits them better than a cash ISA, is a personal recommendation and needs FCA authorisation. The split is set out in who does what.
Deposit rates. If they fall, the interest and the bill shrink. The April 2027 rate rise is legislated and the cash ISA change is dated, so the position of cash held outside a wrapper does not change with Bank Rate. The size of the October to December batch of letters, built on bank and building society data, will be known in the new year.
Cash held outside a wrapper is taxed, it will be taxed more from April 2027, and the cash ISA limit falls in the same month for savers under 65.
Because HMRC already holds the data. Banks and building societies report interest paid to HMRC each year. 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. No return is needed. The letter means untaxed income exists and HMRC can see it.
The letter also shows information about the client. A Simple Assessment for bank interest shows that the client holds a material amount of cash in their own name, that it sits outside any tax wrapper, and what the client's marginal rate is. A set of accounts does not show any of that.
You can explain the rules. Setting out that the Personal Savings Allowance is £1,000 for basic rate and £500 for higher rate taxpayers, that ISA interest is outside the calculation, and that savings income rates rise on 6 April 2027 is tax information and within an accountant's work. 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 needs FCA authorisation. Describe the position and leave the recommendation to the financial planner.
HMRC issues a second Simple Assessment where later data changes the figures, which happens once bank and building society interest is loaded. The Association of Taxation Technicians has warned that each letter shows the total tax due for the year. It is not an extra amount on top of the first. A client who pays both in full overpays and has to reclaim it. Check that 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.
Two dated changes take effect 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 limit falls from £20,000 to £12,000 for savers under 65, with the overall £20,000 ISA allowance unchanged. Both were announced in the Autumn Budget on 26 November 2025. A client who leaves cash where it is will pay more on it, and the cash shelter for new money will be smaller.
Equity & General holds the FCA authorisation. There is no charge to your firm, and a named partnership director works with you from the first introduction.