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If you can’t pay your taxes, HMRC has ways to collect unpaid taxes. Ignoring a tax debt doesn’t make it go away and can make things worse. HMRC charges interest on late payments, and there may be extra penalties. If you’re having trouble paying your tax bill or think you will, it’s best to talk to HMRC as soon as possible.
Time to Pay Arrangements: A Helpful First Step
One of the most common and accessible solutions for those struggling with tax payments is a Time to Pay arrangement. This option allows you to spread your tax bill over a series of manageable instalments rather than paying it all at once.
To set up a Time to Pay arrangement, you may be able to use HMRC’s online service, depending on your circumstances. If this isn’t possible, you can contact HMRC directly to discuss your options. While interest will still be charged on the outstanding amount, setting up an instalment plan can help you avoid late payment penalties.
It’s worth noting that HMRC generally views Time to Pay arrangements favourably, as they demonstrate your willingness to address your tax obligations. The specific terms of the arrangement will depend on your individual circumstances, including the amount owed and your ability to pay.
HMRC Visits: When They Come Knocking
If you have unpaid taxes and still need to set up a Time to Pay arrangement, HMRC may attempt to contact you to discuss settling your bill. If these attempts are unsuccessful, an HMRC officer might visit your home or business premises.
During these visits, the officer will aim to discuss your situation and try to agree on a plan for settling the debt, either in full or through instalments. They can even accept card payments on the spot. While these visits might seem intimidating, they’re often an opportunity to explain your circumstances and work towards a solution.
Debt Collection Agencies: HMRC’s Helping Hand
In some cases, HMRC may pass your debt to a debt collection agency. These agencies act on behalf of HMRC to recover the owed amount. They may contact you via letter, text, or phone, but they won’t make personal visits.
It’s important to know that you can pay the debt collector directly or discuss setting up a Time to Pay arrangement with them. Remember, these agencies are working for HMRC, so dealing with them is essentially the same as dealing with HMRC directly.
Tax Code Adjustments: A Subtle Approach
For those who pay tax through PAYE (Pay As You Earn), HMRC has the option to adjust your tax code to collect the debt. This method spreads the repayment over time by increasing the amount of tax deducted from your salary each month. While this can be a convenient way to repay tax debts, it’s crucial to ensure that the adjusted code doesn’t cause financial hardship.
Taking Possessions: A Last Resort
If other methods have been unsuccessful, HMRC may consider taking possession of your goods to cover the debt. This is a serious step, and HMRC will always warn you before proceeding and offer you a final opportunity to settle the debt.
The process involves issuing a formal notice of enforcement, which carries a charge. An HMRC officer will then visit you and ask for payment. If you can’t pay, they may either take possessions immediately or ask you to sign an agreement with a deadline for payment.
It’s important to note that HMRC won’t take possessions that are essential for your security and well-being. If goods are taken and sold, any excess funds after settling the debt will be returned to you. Conversely, if the sale doesn’t cover the full debt, you’ll still be liable for the difference.
Court Proceedings: Legal Action
In some cases, HMRC may pursue court proceedings to recover the debt. This can involve various legal measures such as charging orders (which secure the debt against your property), attachment of earnings orders (which deduct payments directly from your salary), third-party debt orders (which can freeze and take money from your bank account), or orders to collect from pension payments.
Insolvency: The Final Option
As a last resort, when all other options have been exhausted, HMRC may apply to the courts to make a person or company insolvent. This is an extreme measure and is only used in cases where there is no other way to recover the debt.
Navigating Your Options
If you’re facing difficulties with tax payments, here are some key steps to consider:
- Pay attention to the problem. Be proactive and contact HMRC as soon as you realise you might struggle to pay.
- Explore the Time to Pay option. This can be a manageable way to settle your debt without incurring additional penalties.
- Be honest about your financial situation. HMRC will be more accommodating if you are transparent about your circumstances.
- Keep detailed records of all communications with HMRC or debt collection agencies.
- Seek professional advice if you need clarification on your rights or the best course of action.
- Adjusting your financial management could help prevent future tax payment issues.
Remember, HMRC’s primary goal is to collect owed taxes, not to cause undue hardship. They are often willing to work with individuals and businesses to find mutually acceptable solutions. If you’re ever in doubt about your tax obligations or how to handle a tax debt, it’s always wise to seek advice from our tax advisers. We can provide personalised guidance based on your specific circumstances and help you find the best path forward.