Recent data obtained through a Freedom of Information (FOI) request by Steve Webb, partner at LCP, reveals a significant increase in the number of people receiving end-of-year tax demands from HM Revenue and Customs (HMRC). In the 2023/24 tax year, over 1.3 million individuals were issued such tax bills—almost double the figure from just two years prior.
Many affected recipients have relatively straightforward tax affairs and do not file tax returns. However, they lack a PAYE code to collect tax on their income, leaving HMRC to issue these direct demands. A common example is state pensioners whose pension income exceeds the personal tax allowance but who do not have additional taxable income, such as a private pension, which would normally be managed through PAYE codes.
The primary driver behind this increase is the ongoing freeze on the personal tax allowance. The number of people receiving these tax demands jumped from 758,000 in 2022/23 to 1,321,000 in 2023/24. With state pensions rising by around 13% from April 2023 to April 2025, the numbers are expected to continue climbing and potentially surpass two million by the next tax period.
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Steve Webb, former Liberal Democrats Pensions Minister and current LCP partner, commented on the findings: “Having to deal with unexpected tax demands is a burden many pensioners can do without. The freeze on the personal allowance is driving up the number of people receiving these unwelcome bills each year. Many of them rely solely on the state pension, and this trend is only likely to worsen.”
Webb adds that while the government has hinted at relief for some pensioners starting in 2027, a more comprehensive solution is urgently needed to address the broader issue affecting millions.