Introduction: What a Simple Assessment Means for an American in Britain
A Simple Assessment is a tax bill HMRC calculates and sends to you, on a letter called a PA302, using only the information it already holds. HMRC introduced it so that people with straightforward affairs could pay tax without filing a Self Assessment return. For most British pensioners and savers, the letter is exactly what it looks like. However, for an American living in Britain, a Simple Assessment is often dangerously incomplete, because HMRC holds almost nothing about your US income.
Why a Simple Assessment Is Not a Tax Return
The distinction matters more than anything else in this guide. A tax return is your declaration of all your income and gains. A Simple Assessment, by contrast, is HMRC's calculation of the income it can see, mainly from UK employers, pension providers and banks. Consequently, US dividends, US brokerage gains, US rental profit and US Social Security are usually missing. Paying the letter settles only the tax on the income it lists.
Why This Matters More Every Year
HMRC has sent around 1.8 million of these letters in a single year, and the number keeps growing as UK banks report interest and pension incomes rise. Moreover, HMRC increasingly removes people from Self Assessment and moves them onto the simpler route. For Americans with income on both sides of the Atlantic, that switch can quietly create missed UK tax returns. Therefore, you should read every Simple Assessment as a prompt to check what HMRC does not know.
Who This Guide Is For
We wrote this guide for wealthy Americans and dual national US UK families: retirees living on UK and US pensions, investors holding large sterling deposits, and executives whose payroll tax fell short. At TaxYork, we prepare both the UK and the US returns, so we see where the two systems misread the same letter. Furthermore, we cover the points generic UK guides omit, including the notification rule that still applies after a PA302, the treaty treatment of US Social Security, and the effect on your US foreign tax credit.
How HMRC's Simple Assessment System Works
The legal basis is section 28H of the Taxes Management Act 1970. It allows HMRC to make a Simple Assessment for a tax year, based on information it holds, setting out the income, reliefs and allowances taken into account and the tax payable. Importantly, HMRC cannot make one if you have already filed a return for the year, or if you have an outstanding notice to file.
The Information Behind Every Simple Assessment
HMRC builds the calculation from third-party data. Employers and pension providers report through Real Time Information. The Department for Work and Pensions reports the State Pension. Banks and building societies report interest paid on UK accounts. As a result, a Simple Assessment reflects UK-sourced information only. HMRC receives some overseas account data through automatic exchange, but it does not use that data to build a PA302.
What the PA302 Letter Contains
The PA302 lists each income source HMRC has used, the personal allowance and other allowances applied, any tax already deducted at source, and the balance due. It also gives a payment reference and a due date. HMRC's page on checking your Simple Assessment tax bill explains how to view the figures online through your personal tax account. Notably, the letter does not ask whether you have other income, and it does not invite you to add anything.
Removal From Self Assessment
Section 28H allows HMRC to issue a Simple Assessment at the same time as withdrawing a notice to file. In practice, HMRC reviews Self Assessment customers each year and removes those whose affairs look simple from its own data. Many Americans receive a letter saying they no longer need to file, followed later by a PA302. However, HMRC's view of simple is based on UK data. If you hold US investments or receive US pensions, your affairs are rarely simple, whatever the letter says.
Why HMRC Sends a Simple Assessment
The official guidance on Simple Assessment lists the typical cases. For our clients, four situations cover almost every letter we see.
Untaxed Interest on Large Sterling Deposits
UK banks pay interest gross and report it to HMRC. A basic rate taxpayer has a personal savings allowance of £1,000, a higher rate taxpayer £500, and an additional rate taxpayer nothing at all. Consequently, an American holding £500,000 on deposit at 4 per cent earns £20,000 of interest, and most of it is taxable. HMRC's guidance on tax-free interest on savings explains the allowances. Where no return is filed, HMRC collects the tax through a PA302 or a tax code change.
State Pension Above the Personal Allowance
The State Pension is paid without tax deducted. The full new State Pension is £241.30 a week for 2026/27, according to GOV.UK's State Pension rates, which is just below the £12,570 personal allowance. Therefore, anyone with a private pension or other income on top pays tax on it, and HMRC often collects that tax through a Simple Assessment where the pension provider's code cannot absorb it. The government has said that people whose only income is the State Pension will not have to pay small amounts through this route from April 2027. However, that promise does not help anyone with other income.
PAYE Underpayments Above £3,000
HMRC codes out PAYE underpayments only up to £3,000, whatever your salary. Above that level, or where the code cannot collect it, a PA302 follows. This is common for executives whose personal allowance tapered away after a bonus, as we explain in our guide to the P800 tax calculation. The personal allowance falls by £1 for every £2 of income above £100,000, as GOV.UK's guidance on income over £100,000 confirms.
The High Income Child Benefit Charge and Other Adjustments
HMRC can also use the route for smaller adjustments, such as a benefit it cannot code or a charge that payroll never collected. Each of these arrives as a separate item on the PA302. Notably, HMRC can issue more than one assessment for the same year, so a second letter does not always mean the first was wrong.
What a Simple Assessment Leaves Out for Americans
This is where American taxpayers get into trouble. A Simple Assessment includes only UK-reported income, and an American's UK tax picture almost always includes US income that HMRC cannot see.
US Dividends and Brokerage Gains
A UK resident is taxable on worldwide dividends and gains. So dividends from a US brokerage account, sales of US shares and fund distributions all belong on a UK return. However, US brokers do not report to HMRC in the way UK banks do. Consequently, none of this income appears on a PA302. If you pay the letter and stop there, the UK tax on your US portfolio remains unpaid.
US Social Security Is Taxable Only in the UK
The treaty treatment surprises most retirees. Under Article 17(3) of the US-UK tax treaty, social security paid by one country to a resident of the other is taxable only in the country of residence. Moreover, the treaty exempts that paragraph from the savings clause, so it protects US citizens too. Therefore, US Social Security received by an American living in Britain is taxable in the UK and not in the US. HMRC receives no data about it, so a Simple Assessment will never include it.
The US Side of the Same Mistake
Many US preparers still include the benefit on Form 1040, taxing 85 per cent of it as though the recipient lived in America. In fact, claiming the treaty exemption needs a Form 8833 disclosure. IRS Publication 915 explains the US rules for Social Security in general. So a retiree can end up paying US tax that the treaty removes, while missing UK tax that the treaty imposes. Our guide to how the UK State Pension is taxed across the two countries covers the mirror-image case.
US Rental Income and US Pensions
Rental profit from a US property is taxable in the UK for a UK resident, calculated under UK rules. Similarly, distributions from US employer plans are generally taxable in the UK where you live. HMRC has no feed for either. As a result, a PA302 cannot reach them, and the only route to reporting them is Self Assessment, usually using the foreign pages described in our guide to the SA106 foreign pages for US income.
A Simple Assessment Does Not Remove Your Duty to Notify
The most important rule sits in section 7 of the Taxes Management Act 1970. Normally, anyone chargeable to tax who has not received a notice to file must tell HMRC by 5 October after the tax year. Section 7(2A) relieves someone who has received a Simple Assessment from that duty, but only if they have no income tax or capital gains tax liability that the assessment omits.
Why Section 7(2A) Catches Americans
For a British retiree with only UK pensions and UK interest, section 7(2A) works as intended. For an American with US dividends, US gains or US Social Security, it does not. Because the PA302 omits that income, the exception never applies. Consequently, you remain under a legal duty to notify HMRC and file a return, even though HMRC told you that you no longer needed to. In our experience, this is the single most common cause of missed UK tax returns among American retirees.
The Failure-to-Notify Penalty
If you miss the notification deadline, penalties can follow, and they are higher where the income is offshore. For US income, the offshore category is usually category 1, so the standard rates apply. However, the penalty is normally nil if you notify late but pay all the tax by the usual 31 January deadline. Therefore, acting as soon as you spot the gap costs little, while waiting until HMRC finds the income costs a great deal. You can register for Self Assessment online, and GOV.UK lists who must send a tax return.
Asking HMRC to Put You Back Into Self Assessment
You do not have to accept removal from Self Assessment. You can ask HMRC for a notice to file, and once you are within Self Assessment, HMRC cannot issue a Simple Assessment for that year. For high-net-worth Americans, this is almost always the better position. A full return lets you claim relief for US tax on US income, claim pension relief at your marginal rate, and report everything in one place. Moreover, it creates a clear filing record that supports your US foreign tax credit.
How to Check, Query and Pay a Simple Assessment
Even when the PA302 is the right route, the figures are frequently wrong. Professional bodies, including the ICAEW, have warned that taxpayers should check Simple Assessments carefully rather than pay automatically.
What to Check on the PA302
Start with the interest figures. Joint accounts are split 50/50 between spouses by default, so check that HMRC has not attributed the whole balance to one of you. Where the real ownership differs, a declaration can change the split, as our guide to the Form 17 declaration explains. Next, check that the allowances match your income band, and that tax deducted at source by pension providers is credited. Finally, compare the pension figures with your P60s.
The 60-Day Query Window
Under section 31AA, you can query a Simple Assessment within 60 days of the date the notice was issued. You must explain why you believe it is or may be wrong. HMRC must then consider the query and give a final response, which confirms, amends or withdraws the assessment. HMRC's own PAYE manual on the query and appeal process explains that an appeal follows only after a query has closed, and must be made within 30 days of that final response.
Postponing Payment During a Query
Section 31AA also lets HMRC postpone payment of the disputed amount while it considers the query. If it does, you owe nothing on the postponed part until the query ends. However, HMRC must confirm the postponement in writing, and raising a query does not suspend collection automatically. Consequently, you should ask for postponement expressly and keep HMRC's reply.
The Payment Deadline
Under section 59BA, the tax is due by 31 January after the end of the tax year. If HMRC issues the notice after 31 October, the tax is due three months after the notice date instead. Late payment carries interest at the Bank of England base rate plus 4 percentage points, the rate that has applied since April 2025, as HMRC's page on interest rates for late and early payments records. Late-payment penalties can follow as well.
How a Simple Assessment Affects Your US Return
The United States taxes its citizens on worldwide income and gives a credit for UK income tax. Therefore, every Simple Assessment you pay feeds your Form 1116, and every one you query or reduce changes it.
Simple Assessment Tax Is Creditable UK Income Tax
Tax paid under a PA302 is UK income tax, so it qualifies for the US foreign tax credit in the normal way. Tax on interest falls into the passive category, while tax on pensions usually falls into the general category, as the Form 1116 instructions explain. Consequently, you must allocate the payment between baskets, rather than entering one lump figure. Most individuals claim on the cash basis, so the credit belongs to the calendar year you pay.
Contested Tax Is Not Creditable Until Resolved
Under Treasury Regulation 1.901-2, a foreign tax you are contesting is not treated as paid until the contest ends. So if you pay a Simple Assessment and query it at the same time, the disputed part cannot support a US credit until HMRC gives its final response. Moreover, if HMRC later refunds part of it, you must report that change to the IRS. IRS Publication 514 summarises these redetermination rules for individuals.
Timing Between the UK and US Years
An assessment for 2025/26 is usually paid in January 2027. For a cash-basis American, the credit therefore lands on the 2027 US return, not the 2025 or 2026 return. That is normally harmless while you remain in Britain. However, if you move to the US in 2027, there may be too little UK income that year to absorb the credit. In that case, paying before 31 December 2026 moves the credit into a year that can use it.
Unpaid UK Tax Understates Your US Credit
The reverse also applies. If a PA302 omits your US dividends, you have underpaid UK tax on them. Once you correct the UK position, the extra UK tax becomes creditable in the US, often reducing your US bill on the same income. So correcting the UK side is not purely a cost. Our treaty and foreign tax credit optimisation work models both sides before any payment is made.
Correcting Missed UK Returns After a Simple Assessment
Where a PA302 has hidden a reporting gap for several years, the fix needs structure. Moreover, HMRC's offshore time limits are long, so older years may still be open.
The Worldwide Disclosure Facility
Where the unreported income is foreign, the usual route is HMRC's Worldwide Disclosure Facility. You register, then submit a disclosure covering the years concerned with the tax, interest and penalties. A voluntary, unprompted disclosure attracts the lowest penalties. Our guide to the Worldwide Disclosure Facility for US persons explains the process in detail.
How Far Back HMRC Can Go
For careless errors involving offshore income, HMRC can generally assess up to 12 years back. However, where it receives information about your overseas accounts through automatic exchange, that longer window can close sooner. In practice, the years at risk depend on your behaviour and on what HMRC has already received. Therefore, we map each year individually before choosing the disclosure route.
Coordinating the US Returns
Each corrected UK year changes the matching US return. Extra UK tax on US dividends and gains can generate additional US credits, and a US Social Security benefit wrongly taxed in the US can produce a refund. The US allows ten years to claim additional foreign tax credits. As a result, a coordinated correction frequently recovers US tax that offsets part of the UK cost. Our US tax returns for expats service prepares the amended US returns alongside the UK disclosure.
Reporting Your UK Accounts
Finally, the accounts that generated the interest on your PA302 must appear on your US reporting. Americans must file an FBAR with FinCEN when their foreign accounts together exceed $10,000 at any time in the year. Large sterling deposits usually also trigger Form 8938. Our FBAR and FATCA reporting service covers both, and our guide to UK savings interest for US filers explains the income side.
Case Study: A Retired Fund Manager and His PA302
The following example is illustrative. Names and figures are invented, and we translate dollars at an illustrative rate of $1 to £0.759.
The Facts
Robert is a 68-year-old American who retired from a London fund management firm. His UK income for 2025/26 comprises the full new State Pension of £11,973, a £40,000 drawdown from his UK personal pension taxed through PAYE, and £28,000 of interest on £700,000 of sterling deposits. He also receives US Social Security of $38,000, or £28,842, and US dividends of $55,000, or £41,745. In addition, he sold US shares at a gain of $90,000, or £68,310. In 2024, HMRC wrote to say he no longer needed to file Self Assessment.
What the Simple Assessment Showed
In August 2026, Robert received a Simple Assessment for 2025/26. HMRC saw income of about £80,000, all from UK sources. Treating him as a higher rate taxpayer, it gave him a £500 personal savings allowance and taxed the remaining £27,500 of interest at 40 per cent. The PA302 asked for £11,000 by 31 January 2027. Robert was ready to pay it and move on.
The Real Position
Once we added his US income, the picture changed completely. His total income reached about £150,500, so his personal allowance disappeared and his savings allowance fell to nil. His US Social Security, taxable only in the UK under the treaty, added about £16,800 of UK tax once the lost personal and savings allowances are included. His US dividends added roughly £15,300, before about £6,300 of treaty relief for US tax. Furthermore, his US gain carried about £15,700 of capital gains tax. In total, Robert owed roughly £41,500 more than the Simple Assessment requested, and he had missed the notification duty because section 7(2A) never applied to him.
The Outcome
We asked HMRC to reinstate Robert's Self Assessment and filed his 2025/26 return before 31 January 2027, so the failure-to-notify penalty should be nil. We also reviewed 2024/25, the first year after removal, and made a disclosure for it. On the US side, we removed his Social Security from his US returns with a Form 8833 treaty disclosure, which produced a refund for the open years. In addition, the extra UK tax on his dividends and gains created US credits that wiped out most of his regular US tax on that income. The net cost was far lower than the headline UK figure, and Robert now files a single, complete return in each country.
How TaxYork Can Help
TaxYork provides comprehensive US UK tax returns preparation for Americans who receive a Simple Assessment. We check every PA302 line by line, identify income HMRC has missed or misattributed, and file queries within the 60-day window. Furthermore, we decide whether you should return to Self Assessment, and in most cases for high-net-worth clients, we arrange it.
Where the letter reveals missed UK tax returns, we prepare the disclosure and the corrected returns, and we coordinate each year with your US filings. On the US side, we allocate the UK tax between foreign tax credit baskets, claim treaty positions such as the Social Security exemption, and prepare FBAR and Form 8938. We act for retirees, investors, bankers and accidental Americans with substantial income in both countries.
Conclusion
A Simple Assessment is a convenient tool for British taxpayers with simple UK income. For Americans, it is a partial calculation that looks final. It omits US dividends, US gains, US rental profit and US Social Security, and it does not remove your duty to notify HMRC of that income. Consequently, paying a PA302 without checking it can leave years of missed UK tax returns behind it.
However, the fix is usually manageable. Querying errors within 60 days, returning to Self Assessment and coordinating the US credit often limit the real cost substantially. Above all, treat every Simple Assessment as a snapshot of what HMRC knows, not a statement of what you owe. The Chartered Institute of Taxation and other professional bodies have repeatedly urged taxpayers to check these letters, and for an American the stakes are higher still.
Contact Us
If you have received a Simple Assessment and you file a US return, contact us before you pay it. We will check the figures, confirm whether you should be in Self Assessment, and prepare both returns on a consistent basis.
Email hello@taxyork.com or call 020 3488 8606 to book a consultation with our US-UK tax specialists.
Disclaimer
This article provides general information about HMRC Simple Assessments and US-UK cross-border taxation. It does not constitute tax, legal or financial advice, and it does not create a professional relationship. The case study is illustrative, and its names, figures and outcomes are invented to demonstrate how the rules apply. Tax law changes frequently, and your position depends on your own facts. You should obtain professional advice before acting on any matter discussed here. Written by the TaxYork Expert Team — US-UK tax specialists.