Over 300,000 Hit With “Trivial” Tax Demands! Pension Rule Changes Spark Savings Fears as Energy Bills Rise This Winter
- TBA
- Jan 12
- 5 min read
HMRC hits 300,000 taxpayers with ‘trivial’ bills
Data shows that in the 2023–2024 tax year, HM Revenue & Customs (HMRC) sent tax underpayment notices to a large number of workers and pensioners in the UK, with more than 300,000 people owing less than £100 in additional tax.
It is reported that HMRC issued a total of 1.32 million “Simple Assessment” notices during the year, a record high and roughly double the average of the previous six years. Of these, about 317,000 cases (24%) involved underpayments of no more than £100, and nearly half (around 647,000 cases) involved amounts of no more than £300.
“Simple Assessment” is a method of taxation that does not require taxpayers to complete a Self Assessment tax return. It is typically used for employees and pensioners who have underpaid tax, where HMRC already has sufficient income information and the tax calculation is relatively straightforward.
Although HMRC is legally required to collect all tax due, this practice has raised questions about administrative costs and proportionality. In the past, there have been cases where HMRC employed debt collection agencies to recover as little as £89.
HMRC explained that one of the main reasons for the sharp increase in Simple Assessments is the freeze on the income tax personal allowance. This threshold has been frozen since 2022 and, following an extension of the policy by Chancellor Rachel Reeves, is expected to remain in place until 2031. The freeze means that more pensioners are brought into the tax system as their incomes rise slightly.
Analysis by wealth management firm Quilter also noted that this trend is a direct result of “fiscal drag”: with tax thresholds frozen, modest increases in earnings, pensions and investment returns push more people just over the threshold, resulting in additional tax bills that are often only around £100. This is particularly surprising for pensioners who had assumed their income was below the £12,570 personal allowance.
Pensions consultancy LCP expects the number of people receiving Simple Assessment notices in the 2024–2025 tax year to exceed 2 million.
In response, the UK Treasury said that the real tax burden on low- and middle-income workers remains at a historic low, and that the UK’s personal allowance is the highest among G7 countries.
Almost 1million to cut back on pension when HMRC rules change
As HM Revenue & Customs (HMRC) prepares to change the rules governing “salary sacrifice” arrangements, experts warn that nearly one million people may cut back on pension contributions once the new rules take effect, with many affected individuals unaware that the changes are even coming.
A survey conducted by the UK pensions industry body Pensions UK in December 2025 found that 28% of participants in salary sacrifice pension schemes said they would increase their contributions before the new rules come into force. Only 3% planned to reduce contributions ahead of implementation, while 43% said they would make no changes to their pension payments.
However, once the new rules are in place, around 11% of respondents expect to reduce their pension contributions, while others said they were unsure how they would respond.
Recent HMRC guidance shows that around 7.7 million employees currently pay into pensions via salary sacrifice arrangements, with about 3.3 million of them sacrificing more than £2,000 of salary or bonuses each year.
Salary sacrifice is a tax-efficient way of contributing to a pension and is offered by employers. By reducing their nominal salary and paying the difference directly into a pension, employees can boost their retirement savings while paying lower National Insurance (NI) contributions, helping to maintain their take-home pay.
Industry experts also point out that many people already face insufficient retirement savings, and the new policy could further weaken their long-term ability to save. Research suggests the changes will prompt some individuals to shift their financial planning toward other options, such as Individual Savings Accounts (ISAs), cash savings, or paying down mortgages and other debts earlier.
At the same time, the new rules may dampen not only individuals’ willingness to save but also employers’ behavior. Once implemented, employers will have less incentive to increase pension contribution rates, ultimately resulting in smaller pension pots at retirement.
In response, the UK Treasury said that the cost of salary sacrifice arrangements had been expected to surge to £8 billion, with higher earners using the mechanism to avoid tax by sacrificing large bonuses, effectively turning it into a “taxpayer-subsidized benefit” that primarily favored the wealthy. The Treasury stated that the new rules would protect 95% of workers earning under £30,000 a year who use salary sacrifice, while retaining income tax and National Insurance relief on employer pension contributions, ensuring individuals remain free to save as they choose.
Household energy bills rise as temperatures plummet
As temperatures have dropped sharply across many parts of the UK and cold weather health alerts have been issued, household energy bills have risen for many families this winter. The UK energy regulator Ofgem has recently increased the energy price cap, leading to a small rise in average annual household energy costs.
The price cap was raised by 0.2%, meaning that typical households in England, Wales and Scotland on standard variable tariffs will see their monthly bills increase by around 28 pence on average. Annual energy costs will rise from £1,755 to £1,758.
Chancellor Rachel Reeves said that from April 2026 the government will abolish the Energy Company Obligation (ECO), a scheme introduced by the previous Conservative government, which is expected to reduce average household energy bills by £150.
According to forecasts from energy consultancy Cornwall Insight, the energy price cap is set to fall significantly when it is updated in April 2026. Average annual household bills are expected to drop by £138 to around £1,620, a reduction of about 8%. The firm also noted that the recent decline in wholesale energy prices should help limit future increases in household energy bills.
This year, the Labour government has continued the Warm Home Discount scheme. The programme will cover around 2.7 million additional low-income households this winter, including 900,000 families with children, with each eligible household receiving a £150 energy discount.
The energy price cap sets the maximum unit rates and standing charges that suppliers can charge customers on non-fixed contracts, but it does not cap total bills. A household’s final energy costs still depend on how much energy it actually uses.
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