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An individual should file a tax return if they have a liability to tax, and that tax will not be collected through PAYE. For years before 6 April 2016, the tax deducted at source from interest and the tax credit attached to dividends would cover the tax liability of basic rate taxpayers who received large amounts of investment income.
HMRC have changed the way in which they will assess some taxpayers removing the need for these individuals to complete a Self Assessment Tax Return. These changes took effect from September 2017.
The affected taxpayers fall into one of two categories:
- new state pensioners with income more than the personal tax allowance (£11,000) in 2016/17; and
- employees or pensioners with PAYE tax codes who have underpaid tax and who cannot have that tax collected through their tax code because it is too high to code out.