What if I cannot pay my tax bill?

Updated on 11 August 2020

Tax basics

This page is for people who are unable to pay their tax bill or who have tax debt. It advises you first to check your tax bill and then what to do about it, including where to go for more help.

Ilustration of a man shackled to the word tax
(c) Shutterstock / FGC

This page is about tax only. If you have received an overpayment of tax credits or have a tax credits debt, you should look at our page What can I do if I have an overpayment? in our tax credits and benefits section.

⚠️ If you pay tax under self assessment and have a tax payment due by 31 July 2020, this will automatically be deferred as part of the government’s coronavirus support package. If you are self employed, there is more information on this in our coronavirus guidance. If you are not self employed there is more information on this measure as it applies to you in our coronavirus guidance.

What should I do if I cannot pay my tax?

First, make sure you understand why you owe tax and that you are satisfied the amount you are told is owed is in fact correct. If you are not sure whether the amount is correct then you should ask for a detailed explanation. If you think the amount owed is incorrect, you may have certain grounds to dispute or appeal the debt. If you need to take any action, you should do so before you enter into any arrangement to pay the amount demanded. HMRC should agree to postpone collection of any sums in dispute while any disputes or appeals are being dealt with. However, if any part of the debt is not in dispute you will be expected to make arrangements to settle this.

You are employed or receive a pension

If you are employed or receive a pension and have tax deducted under Pay As You Earn (PAYE), you can still owe tax in some situations – particularly if you have more than one source of income. You should check our page for employees on What if I do not pay enough tax?. This page explains the main circumstances which may give rise to tax being owed by employees and what to do if you cannot pay the tax due.

You pay tax under Self Assessment

When you complete your Self Assessment tax return, your tax position is calculated based on the tax return entries and shows you how much tax you need to pay for the tax year. If you file your tax return online you can print off the tax calculation for your records. If you file a paper tax return, HMRC will send you a tax calculation, known as an SA302 statement.

If you cannot afford to pay your Self Assessment tax bill, contact HM Revenue & Customs (HMRC) as soon as possible and ideally before the tax becomes due. They might agree to make a Time to Pay arrangement with you, so that you can spread the payments and get yourself back up to date. This might be possible if you can show that you do not have the necessary funds available, or if it would not be easy for you to raise any funds (for example, through a bank loan). It is crucial that you approach HMRC as soon as it becomes apparent that you will not be able to pay your tax on time and preferably in advance of the tax falling due, as you can then negotiate with them early. However, this will not be possible if the tax debt arises from an enquiry.

Bear in mind that HMRC are required to collect the debt from you as quickly as is reasonably possible and that any tax paid late will attract interest. An instalment option may cost more in the long run.

What is a determination?

If you were supposed to submit tax returns to HMRC but have not done so, they may have sent you a ‘determination’ of the tax they think you owe. Even though this will be an estimated amount, it is legally enforceable until you submit the outstanding return, which you must do within 12 months of receiving the determination (or three years from the filing date of the outstanding return to which it relates, is later). HMRC must send you the determination within three years of the date the return was originally due to be filed (usually 31 January after the tax year end – so, for a 2016/17 tax return HMRC’s ‘final date’ for issuing a determination would be three years from 31 January 2018, which is 31 January 2021). If you miss the time limit for submitting your return after receiving the determination, then the determination stands unless HMRC agree a claim you might make for ‘special relief’ – this is explained on the TaxAid website.

What is a Time to Pay arrangement?

This is a special arrangement that can be made with HMRC in certain circumstances where an individual is having difficulty paying a Self Assessment tax bill., or anticipates having difficulty in paying a bill that will become due in the near future.

If the bill you are concerned about is not yet due, you should contact the Payment Support Service to discuss the possibility of paying the upcoming bill in instalments.

Alternatively, if you owe £10,000 or less, have no other tax debts and have no other current instalment plans in place, you may be able to use HMRC’s new online service to arrange a ‘Time to pay’ plan to pay regular instalments via Direct Debit. We explain how this works in our recent news article. In particular you should note the timeframe in which this service can be used, which is up to one month after the due date for the outstanding payment.

If you have missed a payment and cannot use the online service and you have not been contacted by HMRC by letter about the outstanding amount, you should contact the Self Assessment Payment Helpline on 0300 200 3822 to discuss a possible ‘Time to Pay’ arrangement.

If you have received a letter from HMRC’s Debt Management team you should contact the number on the letter to discuss your options to clear the tax debt.

You should be able to negotiate payment of your tax bill over a 6 to 12-month period with the appropriate helpline, provided that you can satisfy them that you cannot afford to pay the whole amount now and that you will be able to afford to pay in instalments. In exceptional cases, a longer instalment period can sometimes be negotiated, but any instalment arrangement is entirely at HMRC’s discretion.

When you contact HMRC, you will be expected to make an offer t as to how you propose to settle the outstanding amount – that is, what you can afford to pay and what period of time you need to make the repayments. If HMRC do not agree to your proposal in its entirety, it should form the basis of your discussions to reach an acceptable repayment arrangement.

Before you call HMRC, you should have the following information to hand:

  • your tax reference number (Unique Taxpayer Reference or National Insurance number);
  • your name and/or the name of your business and address;
  • a contact telephone number;
  • details of the tax payment that you wish to discuss;
  • details of any repayments you are currently receiving and/or may receive from HMRC in the future.

You should also be prepared to explain why you are having difficulties paying the amount due and what steps you have taken to try to raise funds to pay the debt, as well as your proposal as to how you hope to repay the amount due.

HMRC also use debt collection agencies to chase taxpayers who owe HMRC money. If you are contacted by such an agency, they should act in a similar manner to HMRC themselves.

You can read more about such agencies and also, more generally, about negotiating time to pay arrangements with HMRC on TaxAid’s website.

There is more information on what to do if you cannot pay your tax on time on GOV.UK.

Your rights of complaint and/or appeal

If you have a tax dispute with HMRC, you can find out more about how to challenge or appeal against a decision and how to make a complaint in the Enquiries, penalties, appeals, complaints and debt part of the website. Which routes are open to you depend on what has gone wrong and whether you have legal appeal rights.

Where can I find advice on how to deal with tax debt?

We recommend you visit the tax debt section of the TaxAid website. TaxAid is a separate charity providing free tax advice to people on low incomes who have tax problems that they cannot resolve with HMRC and particularly those who are in tax debt crisis. Their service is independent and confidential.

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