HMRC used to collect tax due on state pensioners which exceeded the personal allowance through self-assessment tax return. This is due to Department of Work and Pensions (DWP) not deducting tax under PAYE.
In order to be more efficient, HMRC is now introducing a new system this month intended to eradicate the completion of tax return if there is no other income that needs to be reported. A simple assessment will be issued instead based on the information that HMRC receives from Department of Work and Pensions.
HMRC is still issuing notices to pensioners regarding the completion of their tax return even though this new system has been introduced. To resolve this problem, HMRC is now backtracking and informing the same pensioners that they are no longer required to file a tax return.
This is why the Low Income Tax Reform Group has advised that pensioners must wait until the end of May to be informed about HMRC decision about their obligation to file a tax return. If an individual is informed to complete a tax return but did not receive another notice to no longer complete a tax return then the return must be filed by 31 January 2018 to avoid any penalties.