Struggling to pay your Self Assessment tax bill? Here’s what you need to do

The sound advice is to always put enough away for your tax bill when you’re paid. You’ve heard it many times and it’s something that you intend to start doing, but haven’t quite got around to it. And there are always bills and invoices to pay as a sole trader and some months your income hasn’t been great, so you’ve had to dip into whatever money was left in your business bank account.

That’s all well and good (well, kind of), until it comes time to pay your tax bill. Gulp. You don’t have enough money to pay your tax bill, because you haven’t put enough away. Double gulp. Not being able to pay your tax bill is the stuff of nightmares. It can quite literally keep you awake at night with worry. So, what should you do?

Self Assessment payment plan

Firstly, don’t panic. Obviously, you can’t ignore the problem, but you can take quick, decisive action to ensure the best outcome for you. Contact HMRC as soon as possible if you’ve missed a tax payment deadline or you know that you won’t be able to pay your tax bill on time.

If you’re a Self Assessment taxpayer, you may be able to set up a Self Assessment payment plan online if you’ve filed your latest tax return, owe £30,000 or less, are within 60 days of the payment deadline and don’t have any other HMRC payment plans or debts. When trying to set up your Self Assessment payment plan, HMRC will ask you about your income and spending, so make sure you have relevant information to hand.

Need to know! If you cannot set up a payment plan online, contact HMRC ASAP. You’ll be asked how much you can repay each month, whether other taxes are also unpaid, how much you earn, your outgoings each month and what savings or investments you have (you’re expected to use these to pay off your tax debt as much as possible).

Key facts about repayments

• You’ll be charged interest on the tax debt you owe to HMRC – a payment plan is not an interest-free loan.
• Your monthly repayments will be based on how much money you have after you pay your monthly rent/mortgage, food or utility bills and other fixed outgoings.
• You’ll be expected to pay HMRC about half of what you have left each month, which will go towards your unpaid tax bill.
• You can agree to pay more, if you can afford it, which will save you money because you’ll pay less interest.
• HMRC will count any pension payments as income, but won’t count the total in your pension pot as savings.
• The length of your payment plan will be determined by how much you owe and what you can afford to pay each month.
• The plan can be made longer or shorter should your circumstances change, whether you tell HMRC or it finds out.

Need to know! If you miss a monthly payment, HMRC will contact you to find out the reason. It might seek to rearrange or renegotiate your payment plan.

What if you don’t contact HMRC or just don’t pay?

HMRC will try to contact you if you miss a tax payment, whether by letter, text and a home or premises visit. Fail to contact HMRC or agree a payment plan and a debt collection agency may be instructed to get the money from you. Alternatively, HMRC can collect money directly from your wages or pension payments.

Unless you live in Scotland, your assets may be taken from you and sold or HMRC can take the money from your bank or building society account. HMRC can take you to court and make you bankrupt. 

Need to know! You can’t appeal an HMRC decision, but you can complain if you feel you were treated unfairly.

Using GoSimpleTax can prevent nasty surprises when it comes to your Self Assessment tax bill. Long before HMRC contacts you, take out a subscription and input your figures into GoSimpleTax and you can see how much tax you owe, so you can better budget for payment. GoSimpleTax also makes it easier, quicker and cheaper to fill out and file your tax returns. Start your FREE trial to find out why so many other people like you love GoSimpleTax.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.