What happens if you can’t pay your Self Assessment tax bill?

Even the most organised small business owners can occasionally find themselves struggling to pay their Self Assessment tax bill on time. If this happens to you, then don’t worry. There are some simple steps you can take to make payment arrangements with HMRC.

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

How you go about paying any tax you owe to HMRC will depend on whether or not the Self Assessment deadline has passed:

Before the Self Assessment deadline

If you know in advance that you won’t be able to pay your Self Assessment tax bill by the deadline, you should contact HMRC to set up a Time To Pay arrangement. HMRC will work with you to set up affordable monthly payment options and negotiate time to pay whatever you owe based on what you can afford.

If you are unable to pay the full tax bill on time, you will have to pay interest on any tax you pay late and may also have to pay a penalty. Interest and any penalty fees may also be included in a Time to Pay arrangement.

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

How HMRC calculates your monthly Time To Pay payments

Time to Pay arrangements are tailored to each individual’s circumstances. The length of the arrangement and the size of the monthly payments are decided based on your income and expenditure, including monthly costs such as rent, food and utility bills. HMRC typically expects no more than 50% of any disposable income to be paid into the Time to Pay arrangement. 

For businesses, HMRC will ask what the business can afford to pay and the length of the arrangement will depend on how much the business owes and the business’s financial circumstances. HMRC may also use any savings or assets you have to reduce the amount you need to pay. 

Time to Pay arrangements are often flexible and may be adjusted if your circumstances change. For example, the arrangement may be lengthened if your income is reduced, or shortened if you have a windfall and would like to make larger payments.

After the Self Assessment deadline

If the deadline has recently passed, then don’t panic. You can usually set up a Self Assessment payment plan up to 60 days after the payment deadline, provided that:

  • you have filed your latest tax return
  • you owe £30,000 or less
  • you do not have any other payment plans or debts with HMRC
  • you plan to pay your debt off within the next 12 months

You may have to pay a penalty for late filing and/or payment of your Self Assessment tax return, as well as any interest accrued on the tax owed. HMRC can usually account for this in your payment plan, so you shouldn’t have to pay anything extra up front.

If you don’t meet the above criteria, or if it’s more than 60 days since your tax bill was due, you should call the Self Assessment Payment Helpline.

If you think HMRC has charged you the wrong amount

If you think that HMRC has charged you the incorrect amount of tax and are worried about paying your tax bill, you should call HMRC’s Income Tax helpline as soon as possible. 

Further reading: TaxAid provides a lot of information about what to do when you can’t pay your tax bill on its website.

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Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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