Income Tax Debt Help & Advice

What is income tax debt?

Income tax and VAT bills are viewed as priority debts, which means that if you fail to settle them, Her Majesty’s Revenue and Customs (HMRC) can take action against you to get the money that is owed. The consequences of not paying these can be very serious.

The HMRC can collect money directly from your earnings or pensions, take money directly from your bank account or send a bailiff to recover the debt. If you owe more than £5,000 they could also apply to make you bankrupt.

Key facts about income tax

Never ignore correspondence from the HMRC

Call the HMRC to discuss your available options if you need time to pay

Ignoring correspondence can lead to serious consequences

Work out an affordable amount by putting together an affordable budget

What to do if you’re in income tax debt

Get in touch with HMRC if you’re approaching the tax deadline and know you can’t pay, if you’ve already missed the deadline or if you think your statement is wrong.
Discuss a time to pay agreement that either gives you more time to pay or a schedule to pay in instalments
It is typically easier to get an agreement before the tax deadline rather than after it. It may be possible to arrange after the deadline, however.

What happens if you don’t pay?

Penalties will be charged if you don’t call HMRC and arrange a time to pay agreement
Penalties will be charged if payments are 30 days late and then again at six and 12 months. Interest is also charged on penalties
Possessions can be taken (including vehicles) to sell at auction
Court action can be taken
You can also be made bankrupt and/or your business shut down

Information to give HMRC

Be prepared to explain in detail why you’re having financial difficulties and why you can’t pay
Provide personal information on spending and finances, including your salary and what your household bills come to
Provide details of any special circumstance, such as illness or customer insolvency that resulted in you not being paid

What to offer HMRC

If you’re able to, offer HMRC a lump sum that you’re able to afford immediately, as this will make it more likely you’ll be given additional time to settle the rest
Consider seeking impartial debt advice if you still owe more than £5,000 after making a lump sum payment
Note that you’ll still be charged interest for as long as you’re on a time to pay agreement

What Bailiffs...

Get in touch with HMRC if you’re approaching the tax deadline and know you can’t pay, if you’ve already missed the deadline or if you think your statement is wrong.
Discuss a time to pay agreement that either gives you more time to pay or a schedule to pay in instalments
It is typically easier to get an agreement before the tax deadline rather than after it. It may be possible to arrange after the deadline, however.

Penalties will be charged if you don’t call HMRC and arrange a time to pay agreement
Penalties will be charged if payments are 30 days late and then again at six and 12 months. Interest is also charged on penalties
Possessions can be taken (including vehicles) to sell at auction
Court action can be taken
You can also be made bankrupt and/or your business shut down

What Bailiffs...

Be prepared to explain in detail why you’re having financial difficulties and why you can’t pay
Provide personal information on spending and finances, including your salary and what your household bills come to
Provide details of any special circumstance, such as illness or customer insolvency that resulted in you not being paid

If you’re able to, offer HMRC a lump sum that you’re able to afford immediately, as this will make it more likely you’ll be given additional time to settle the rest
Consider seeking impartial debt advice if you still owe more than £5,000 after making a lump sum payment
Note that you’ll still be charged interest for as long as you’re on a time to pay agreement

How can I manage income tax arrears?

You will need to suggest to HMRC how much you can afford and how long it will take you to make the repayments. Work out your incomings and outgoings, as well as any future risks to income, then devise a budget to cover living costs and other priority debts.

Seeking confidential debt advice can be beneficial. As a leading debt management company, Fresh Start UK deals with thousands of cases each year and is able to provide our clients with advice and guidance to help prevent debts from becoming insurmountable. Get in touch with us today to find out more.