What if I cannot pay my tax bill?

Updated on 26 April 2018

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

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 if I have a tax credits overpayment?’.

What should I do if I cannot pay my tax?

First, make sure the amount owed is correct and that in fact you do owe it. You may have certain rights to dispute or appeal, and if need be you should take action to do so before you enter into any arrangement to pay the amount demanded.

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 guide for employees: What if I do not pay enough tax?

You pay tax under Self Assessment (SA)

When you complete your tax return, you calculate how much tax you then need to pay. But you can end up owing tax if, for example, you are simply struggling to afford your payments, or if HMRC have enquired into your tax return and found that you owe more than you thought.

If you cannot afford to pay your SA 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, nor would it be easy for you to access them. 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. This will not of course 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, whichever 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 2014/15 tax return HMRC’s ‘final date’ for issuing a determination would be three years from 31 January 2016, which is 31 January 2019). 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 relief is explained on the TaxAid website.

What is a Time to Pay arrangement?

Please note that HMRC’s Business Payment Support Service is open to anyone, not just businesses.

This is a special arrangement that can be made with HMRC in certain circumstances where an individual is having difficulty paying a tax bill. By contacting the Business Payment Support Service, you should be able to negotiate payment of your tax bill over a 6 to 12 month period, 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. Please note that any instalment arrangement is entirely at HMRC’s discretion.

When you contact the Business Payment Support Service, you will be expected to make an offer to HMRC 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.

You can find contact details for the Business Payment Support Service on GOV.UK.

Before you call them you need to have the following information to hand:

  • your tax reference number
  • your name and/or the name of your business
  • your address or the business address including the postcode
  • a contact telephone number
  • details of the tax that you believe you will have difficulty paying
  • details of any repayments you are currently receiving and/or may receive from HMRC in the future

You can find out more information on this service on GOV.UK.

Your rights of complaint and/or appeal

If you have a tax dispute with HMRC, you can find out more on our website under ‘Enquiries, penalties, appeals, complaints and debt’ about complaining or appealing – which route(s) are open to you depend on what has gone wrong and whether you have legal appeal rights.

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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 cannot afford to pay a professional adviser and particularly those who are in tax debt crisis. Their service is independent and confidential.

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