Self Assessment: Advice when you cannot pay the tax due

If you can’t pay your Self Assessment tax bill on timeIf you are unable to pay your Self Assessment tax bill, you should contact HMRC as soon as possible to discuss your options.

Ignoring the situation can lead to additional penalties and interest charges. Depending on your circumstances, HMRC may allow you to arrange a payment plan or defer your payment.

In some cases, you may be able to make an arrangement to pay in instalments. However, if you fail to make payment arrangements, HMRC may take legal action against you to recover the outstanding amount.

This could include seizing assets, obtaining a court order, or taking money directly from your bank account. Therefore, it’s essential to communicate with HMRC and seek advice to avoid further complications

If you can’t pay your Self Assessment tax bill on time

If you know you won’t be able to pay your Self Assessment tax due by the deadline, contact HMRC to set up a Time To Pay plan. The tax authority will work with you to set up affordable monthly payment choices and to negotiate a time to pay whatever you owe based on your ability to pay.

If you are unable to pay the entire tax payment on time, you will be required to pay interest and possibly a penalty. A Time to Pay arrangement may potentially contain interest and penalty fees.

HMRC will consider requests from an authorised representative for a Time to Pay arrangement for partnerships and may not need to negotiate separately with each individual member provided the partnership meets certain conditions.

Don’t be concerned if the deadline has recently passed. You can normally set up a payment plan using your Government Gateway user ID up to 60 days after the payment deadline if the following conditions are met:

  • You have submitted your most recent tax return
  • you owe £30,000 or less
  • you have no other payment plans or debts with HMRC
  • and you intend to pay off your debt within the next 12 months.

If you do not fit the above conditions, or if your tax debt has been past due for more than 60 days, you should contact the Self Assessment Payment Hotline.

Calculating your monthly payments

Time to Pay agreements are customised to each individual’s needs. The length of the agreement and the size of the monthly payments are determined by your income and expenses, which include monthly expenses such as rent, food, and utility bills. HMRC usually expects no more than 50% of disposable income to be deposited into the Time to Pay scheme.

HMRC will ask firms what they can afford to pay, and the length of the agreement will be determined by how much the business owes and its financial situation. Savings and assets can also be utilised to minimise the amount owed to HMRC.

Time to Pay plans are adaptable and can be changed if your circumstances change. For example, if your income is cut, the arrangement may be lengthened, while it may be shortened if you receive a windfall and want to make larger payments. Visit the HMRC website for further information.

What action can HMRC take against you?

If a payment plan cannot be reached, HMRC will ask you to pay the unpaid tax in full, and if you refuse, it may collect the tax immediately.

  • HMRC can use a debt collection firm to recover your unpaid tax or collect it straight from your income or, if applicable, monthly pension instalments.
  • HMRC has the authority to confiscate and sell your assets in England, Wales, and Northern Ireland, as well as to take money immediately from your bank account or building society deposits.
  • If you owe business tax, HMRC can take you to court, declare you bankrupt, and shut down your operation.

Can HMRC take your house?

When attempting to reclaim unpaid tax, HMRC or its agent will never seize goods critical to your security and well-being. But, if you have assets sufficient to satisfy the obligation but refuse to pay it, HMRC may opt to recover it through County Court proceedings.

HMRC may file for a “charging order,” which is an order of the court which forbids a debtor from “selling specified assets without first paying what the court has ruled they must pay out of any proceeds”. The most prevalent assets susceptible to charge orders are land or property.

Charging orders provide HMRC the authority to recover debts from the sale of a property, either when the owner sells it or through a court action known as a “order for sale,” which forces the owner to sell the property.

Frequently asked questions

What happens if I can't pay my Self Assessment tax bill on time?

If you can't pay your Self Assessment tax bill on time, you should contact HM Revenue and Customs (HMRC) as soon as possible. If you don't, you may be charged penalties and interest on the amount you owe. HMRC may also take enforcement action to recover the debt, such as taking money directly from your bank account or taking you to court.

Can I negotiate with HMRC if I can't pay my Self Assessment tax bill?

Yes, you can negotiate with HMRC if you can't pay your Self Assessment tax bill. They may be willing to agree to a payment plan that allows you to pay the debt in instalments. However, this will depend on your individual circumstances and the amount you owe. It's important to contact HMRC as soon as possible to discuss your options.

What if I still can't pay my Self Assessment tax bill after negotiating with HMRC?

If you still can't pay your Self Assessment tax bill after negotiating with HMRC, you may need to consider other options, such as borrowing money to pay the debt or seeking advice from a debt charity. If the debt remains unpaid, HMRC may take enforcement action to recover the debt, which could include taking money directly from your bank account or taking you to court. It's important to seek help and advice as soon as possible to avoid further penalties and interest charges.

Conclusion

In conclusion, failing to pay your Self Assessment tax bill can have serious consequences, including penalties, interest charges, and enforcement action by HMRC. It’s important to contact HMRC as soon as possible if you’re unable to pay your bill and explore all available options, such as negotiating a payment plan.

However, the best course of action is to pay your SA on time to avoid these consequences altogether. Staying on top of your tax obligations is not only a legal requirement, but also a responsible way to ensure that you’re contributing your fair share to society and avoiding unnecessary stress and financial difficulties.

Insolvency & Restructuring Expert at Business Insolvency Helpline | + posts

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.