What Can You Do If You Can't Afford To Pay Your Tax Bill?
Facing a tax bill that you can’t afford is a difficult situation that many taxpayers can find worrying. Whether it’s due to unforeseen financial challenges or errors in financial planning, not being able to pay your tax bill can cause significant stress and anxiety. However, there are options available to help manage this situation. Read on as we explore what you can do if you find yourself unable to pay your tax bill, including steps for handling various types of taxes and how to approach repayment in a manageable way.
Understanding Your Options
When faced with a tax bill that seems unmanageable, the first step is to assess the full scope of your financial situation. Understanding exactly how much you can realistically afford to pay not just immediately but over time is critical. With this knowledge, you can approach HMRC with a clear picture of your finances, which is essential for setting up a feasible payment plan.
It’s also important to understand the various types of assistance that HMRC provides. For taxpayers who cannot pay their tax bill on time, HMRC may offer solutions such as deferring your due date, setting up a payment plan, or even reducing the bill if you can prove genuine hardship. Each of these options comes with its own set of requirements and implications, which you should consider carefully to determine which path might work best for your specific circumstances.
Arranging a Payment Plan with HMRC
HMRC understands that individuals and businesses might face difficulties in paying their taxes on time. They offer a service called “Time to Pay Arrangement,” which allows taxpayers to spread their tax payments over a period of time. This can be particularly helpful if you’re dealing with large bills such as income tax, National Insurance, or VAT obligations.
To set up a payment plan, you will need to:
➡️ Contact HMRC as soon as you realise that you won’t be able to pay your tax bill on time.
➡️ Provide accurate details about your current financial situation.
➡️ Negotiate the terms of your payment plan, including how much you can pay monthly and the duration of the payment plan.
*For a detailed guide on how to request and manage these arrangements, refer to the government’s official page – If you cannot pay your tax bill on time
To be able to create a payment plan, our Oxford accountants strongly recommend creating a cash flow forecast and monitor your cash flow on a regular basis.
Professional accountant from Oxford
Overwhelmed with accounting side of your business?
Discover how our accounting services can help you and your business.
What Happens If You Don’t Pay?
If you decide to ignore your tax bill, the implications can be severe. HMRC can take enforcement actions, which might include charging interest on the amount you owe, applying penalties for late payments, and in extreme cases, pursuing legal action.
Engaging with HMRC before your payment is due and explaining your situation is the best approach to avoid these consequences.
Seeking Professional Advice
If you’re uncertain about how to proceed or negotiate with HMRC, it might be wise to seek professional advice. Tax professionals can offer guidance on your specific situation, help communicate with HMRC on your behalf, and find a realistic solution that won’t jeopardise your financial stability.
Being unable to pay your tax bill is not an uncommon situation, but it needs to be handled carefully and responsibly. By understanding your options and taking advantage of the arrangements offered by HMRC, you can manage your tax liabilities in a way that aligns with your financial capabilities. Remember, the worst thing to do is nothing, so take action as soon as you realise there might be a problem.
For professional bookkeeping and accounting services, book a call and have a chat with our professional Oxford-based accountant to learn more about how we can help you with your tax obligations and so much more.
Your Accountant in Oxford
Oxford Office
Joanna Bookkeeping
The Wheelhouse Angel Court
First Floor, Angel Court
81 St Clements St
Oxford
OX4 1AW
Connect
joanna@joannabookkeeping.co.uk
01865 591952
