For many people it’s been a tough few years. COVID-19 caused havoc with people’s livelihoods. Huge numbers of employees ended up on furlough or got made redundant. A lot of self-employed people saw demand for their services drop. Now high levels of inflation, coupled with soaring interest rates, are eating into people’s incomes. Given this backdrop, it’s little wonder that growing numbers of people are typing ‘can’t pay tax bill’ into search engines, hoping to find some advice.

If you’re currently struggling to find the money to pay your tax bill, it’s important you act as soon as possible. By doing so, you could avoid hefty penalties which will only make your situation worse. In this article we show you what steps you need to take next.

Step 1 – Submit your tax return

If you believe you can’t pay your tax bill, you need to find out for sure. The first thing you should do is complete your Self-Assessment Tax Return (or ask your accountant to do so). You have until midnight on 31st January each year to file it online.

Once you have completed your tax return, you will know exactly how much you owe HMRC. If you can’t afford to pay it, then a good first step is to pay as much as you can. This will keep the interest you owe to a minimum.

Step 2 – Set up a ‘Time to Pay’ arrangement

In many cases, you can easily set up a ‘Time to Pay’ plan online without the need to speak to anyone at HMRC. A Time to Pay plan allows you to spread your tax bill over a longer period of time. You won’t have to pay late payment penalties, but you will have to pay interest on the amount you owe.

To be eligible to set up a Time to Pay plan automatically, you need to:

  • Have filed all of your tax returns
  • Owe £30,000 or less
  • Apply within 60 days of the payment deadline
  • Be in a position to pay off the debt within 12 months
  • Not have any existing payment plans or debts with HMRC

While you have 60 days from the payment deadline to set up a plan, remember that you will incur penalties if you do this after 31st January. It’s much wiser to arrange your repayment plan before this date.

Can’t pay tax bill and owe over £30,000?

If you owe more than £30,000 in tax, you can’t set up a Time to Pay plan online. However, you can still do so over the phone. HMRC will ask you for information such as the following:

  • How much you can repay monthly
  • Whether you owe any other taxes
  • The amount you earn
  • What you usually spend in a month
  • What savings and investments you have

It’s important to note that HMRC will expect you to use savings and assets to reduce your debt as much as possible.

Can’t pay other taxes

If you are having problems paying other taxes such as VAT, employers PAYE or Corporation Tax, contact HMRC as soon as possible. You may be able to set up a repayment plan, similar to ‘Time to Pay’.

Is HMRC obliged to let me set up a Time to Pay plan?

No. HMRC is not obliged to let you set up a Time to Pay plan. This is another reason why it’s important to try and set one up as soon as possible. HMRC may be more willing to help if you get in touch as soon as you know there’s a problem.

Remember, if THP takes care of your tax return, we can complete it earlier if you provide us with your financial data as soon as possible. This means you’ll know more quickly if you’re likely to have problems paying, giving you more time to solve the problem.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    Avatar for Karen Jones
    About Karen Jones

    Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

    With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

    Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

    Karen’s specialist skills:

    • Personal Taxation
    • Tax Efficient Planning
    • Trust Administration
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