If you’ve recently received a tax bill that you’re unable to pay, the situation may feel incredibly stressful. However, it’s important to remember that you have options and there are steps you can take to resolve the issue. In this article, we’ll guide you through the practical measures you can take if you find yourself unable to pay your tax bill in the United Kingdom.
Understanding Your Tax Bill
Firstly, ensure that you understand your tax bill and confirm its accuracy. Check the calculations and the income details the HM Revenue and Customs (HMRC) has used. If you spot an error or if something is unclear, contact HMRC to resolve these queries.
Contact HMRC Promptly
If the bill is accurate and you’re certain you can’t make the payment, it’s crucial to contact HMRC as quickly as possible. Don’t delay. The earlier you address the issue, the more options and goodwill you’re likely to encounter. HMRC has a dedicated helpline for those struggling to pay, and they’re often more accommodating than people expect.
Payment in Instalments
One of the main solutions HMRC may offer is to pay your tax bill in instalments. This is known as a ‘Time to Pay’ arrangement. You will need to provide detailed information on your income and expenditure to prove that you can’t pay the bill all at once, and also to negotiate a realistic payment plan. Be honest and realistic about what you can afford to pay each month.
HMRC will consider your individual circumstances and may spread the cost over a period which could be up to 12 months. Keep in mind that interest may be charged on the outstanding sum, so it’s in your best interest to pay off the amount as quickly as you can afford to.
Seek Professional Advice
Depending on the complexity of your financial situation, you might find it beneficial to seek advice from a tax professional or financial advisor. Such professionals can help negotiate with HMRC on your behalf and may even find you are entitled to certain reliefs or allowances that reduce your bill.
Control Your Expenditure
Review your finances and budget accordingly. While you’re paying off your tax bill, you may need to cut down on non-essential expenses. This not only frees up more money to clear your debt but also demonstrates to HMRC that you’re taking responsible steps to manage your situation.
Understand the Consequences of Non-Payment
It’s essential to be aware that ignoring your tax bill can lead to serious consequences. HMRC has the power to collect debts through your earnings or pension, known as Direct Recovery of Debts. They can also take money you owe from your bank or building society account. In the worst-case scenario, you may end up facing legal action or insolvency. Taking prompt action can prevent these severe outcomes.
Future Tax Planning
Once you have arranged to pay your current tax bill, start planning to avoid future payment difficulties. This could mean saving a portion of your income regularly in preparation for your next tax payment or reviewing your tax code to ensure you’re not paying more tax than you need to.
Unexpected income changes can also affect your tax bill, so make regular checks to ensure the correct tax is being collected, especially if you’re self-employed or have multiple income streams.
If You Can’t Pay Due to COVID-19
HMRC has put specific measures in place for those affected by the COVID-19 pandemic. If your income has been impacted, make sure to mention this when discussing your situation with HMRC. They may offer additional leeway.
Know Your Rights
While it’s vital to meet your tax obligations, you also have rights as a taxpayer. You have the right to be treated fairly and to receive professional assistance from HMRC when needed. You can also expect privacy and confidentiality in your dealings with them.
Stay Communicative
Maintain open and transparent communication with HMRC throughout the process of repaying your tax bill. If your circumstances change – for better or for worse – inform them immediately. This can avoid misunderstandings and additional penalties.
In Conclusion
Being unable to pay a tax bill isn’t an uncommon situation, and it’s one that HMRC deals with regularly. The most important thing is not to ignore the problem. By taking proactive steps, you can manage your tax bill effectively, even when you’re facing financial hardship. Remember, the worst thing you can do is nothing at all.
By understanding your bill, communicating promptly with HMRC, and possibly seeking professional help, you can navigate through this challenge and find a resolution that works for both the tax authorities and yourself.
The key is to act quickly, communicate openly, and address the issue head-on. With a clear plan and a proactive approach, you can manage your tax situation and work towards a stronger financial future.
