A big chunk of HMRC’s 1.8 million Simple Assessments for the 2025/26 tax year are completing their “summer” letter run, raising questions for former Personal Service Company (PSC) contractors who may no longer be within self-assessment due to IR35 reform, retirement or other factors, and are unexpectedly receiving a Simple Assessment (form PA302), writes Carl Bridges, operations director at Caroola Accountancy.
However, leaving the UK’s self-assessment system does not mean leaving HMRC’s view.
Why did Personal Service Company (PSC) directors stop needing to file a tax return?
Over recent years, HMRC has moved away from the long-held assumption that every company director automatically needs to file a self-assessment tax return. The tax department even set down fresh guidance around August 2023 to put beyond doubt when self-assessing was superfluous. At the time, HMRC clarified that directors whose income is fully taxed at source through PAYE are not required to register for self-assessment.
When do personal service company directors need to self-assess?
Today, in tax year 2026/27, PSC directors generally only need to submit a return if they meet one of the normal self-assessment criteria, notably:
- having taxable dividend income
- having other untaxed income
- being specifically required to file by HMRC.
Due to winding up their personal service company, a good deal of contractors will have legitimately left the SA system of late. Other ex-temporary workers will be in the same position — no longer receiving income that requires using form SA100 — because they’ve taken on permanent, PAYE employment or even retired.
Changing circumstances bring ex-contractors back onto HMRC’s radar
But personal circumstances can change, and that change may bring individuals who’ve stopped contracting back into self-assessment’s scope.
That’s why Simple Assessment letters from HMRC can catch taxpayers by surprise, particularly where circumstances have changed since the last filed tax return.
For example, a higher savings total may have pushed interest income above available allowances.
Changes to tax thresholds and allowances may also create a liability the individual isn’t aware of — especially without an accountant keeping them updated.
What is a Simple Assessment Calculation (SAC)?
Simple Assessment letters are HMRC’s way of collecting tax when it already has enough information to calculate what it believes you owe. Instead of requiring a tax return, HMRC sends a Simple Assessment Calculation (SAC) — officially form PA302 — showing the income it has identified and the tax that it has determined as apparently owed.
Importantly, a PA302 / Simple Assessment is not:
- a penalty
- a compliance warning
- an HMRC investigation notice or inquiry.
Rather, a Simple Assessment is simply HMRC’s assessment of a tax liability based on information it already holds.
HMRC may use Simple Assessment Calculations where tax cannot easily be collected through PAYE.
Form PA302 may also be issued by HMRC where an underpayment is too large to recover through a tax code adjustment — typically £3,000 or more.
Where does HMRC get the information for a Simple Assessment?
Former PSC directors should further expect Simple Assessment letters where HMRC identifies an underpayment using information received from:
- banks
- pension providers
- other third parties.
It's rarely about what your PSC or you have done wrong
The issue is not necessarily that HMRC has changed the rules, but that many former contractors have had a change in their circumstances since exiting self-assessment.
An IT consultant who wound up their PSC a few tax years ago may now have significant personal savings, pension income, or investment returns that did not exist when they last filed a tax return.
If any of these — savings, pension income or investment returns — apply to you, a Simple Assessment could arrive on your doorstep.
Why are these Simple Assessment triggers more common in 2026/27?
As interest rates have risen, taxable savings income has become a more common issue, particularly where funds are held in standard savings accounts or fixed-rate bonds, rather than tax-free ISAs.
Pension withdrawals, investment dividends, occasional freelance income, or a return to contracting on an outside IR35 basis, could also create unexpected tax liabilities that trigger a PA302.
Does a Simple Assessment mean I need to file a tax return?
But there’s not necessarily a trigger to complete a SA100 even if you receive one of the 1.8m PA302s, which HMRC advised in July 2026 will be reaching taxpayers up until December 2026.
Remember, where HMRC identifies an underpayment using information it already holds, you’ve likely got a Simple Assessment with your name on it, yet it’s not automatically a compliance concern.
Is HMRC’s Simple Assessment calculation always correct?
No, taxpayers should not automatically assume a PA302 is correct. Although HMRC relies on extensive third-party data, errors can occur and allowances may not have been applied correctly. Any PA302 recipient (former PSC director or otherwise) who believes the calculation is inaccurate should contact HMRC promptly and challenge the assessment, rather than simply accepting the figures presented.
The starting point for former PSC directors and other ex-contractors in receipt of a PA302 is to always check the calculation carefully against personal records before payment is made, and consult an experienced accountant if in doubt.
The takeaway
The 2023/24 removal of the blanket requirement for directors to file Self-Assessment was intended to reduce unnecessary administration, not create a blind spot within the tax system.
For former PSC contractors in particular, the risk is often not that HMRC has uncovered something new, but that changes in their savings income, pension income or investment returns have created a tax liability that HMRC no longer needs a tax return to identify.
Therefore, a PA302/ SAC should not be regarded as an opening salvo from HMRC.
But neither should it be accepted without questions from the taxpayer, which former contractors might be tempted to do because they’re caught by surprise.
The bottom line for ex-PSCs
Leaving self-assessment — even if you left several years ago — does not mean leaving HMRC’s radar; it potentially instead means HMRC believes it has sufficient information to calculate the tax itself. For some ex-PSCs, then, it’s a case of ‘Goodbye Self-Assessment, Hello Simple Assessment Calculation’ — two very different processes with a confusingly similar name, so don’t assume your next letter from HMRC is the one you used to know.
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