What can you do if you are struggling to pay tax?

The January self-assessment payment deadline is not well timed, falling as it does in a month when people may be already struggling to pay their Christmas credit card bills. However unpalatable the 31 January tax deadline is, it is not one that should be ignored.

Taxpayers who are within self-assessment will need to pay any remaining tax due for 2020/21 by midnight on 31 January 2022, and also any Class 4 and Class 2 National Insurance liabilities for 2020/21. Where their tax and Class 4 National Insurance liability for 2020/21 was at least £1,000 and less than 80% of their liability was collected at source, such as via PAYE, the first payment on account must also be paid by midnight on 31 January 2022.

If you are struggling to pay what you owe, what can you do?

Contact HMRC

Ignoring the problem will not make it go away; rather, it will make it worse. If you think that you are going to struggle to pay what you owe in full by the 31 January 2022 deadline, you should set up a time to pay agreement or contact HMRC as soon as possible, and ideally before 31 January 2022. However, if you miss this deadline, all is not lost and you may still be able to set up or agree an instalment plan.

Paying in instalments

It may be possible for you to pay what you owe in instalments by setting up a time-to-pay agreement.

You can do this yourself online via your Government Gateway account if:

  • you have filed your latest self-assessment tax return
  • you owe less than £30,000
  • you are within 60 days of the payment deadline
  • you plan to pay back what you owe within the next 12 months or less

If you do not meet all of the above conditions, you will not be able to set up an instalment payment plan online. However, you may be able to agree one with HMRC. To do this, you will need to call the Self-Assessment Payment Helpline on 0300 200 3822. The line is open from Monday to Friday from 8am to 4pm. If you cannot pay another type of tax, for example, corporation tax, you should instead call HMRC’s Payment Support Service on 0300 200 3835. The lines are open from Monday to Friday from 8am to 4pm.

When making the call, make sure that you have the following information to hand:

  • your unique taxpayer reference and National Insurance number
  • your VAT registration number if you are VAT-registered
  • your bank account details
  • details of any previous payments that you have missed

HMRC will take into account what you are able to pay in full, your monthly income and outgoings, any savings and investments that you have and what you can afford to repay each month. If you have savings or investments, you will be expected to use these to clear your tax bill.

There is no set length for a time-to-pay agreement – it will depend on how much you can afford to pay each month to clear the tax that you owe. The payments are usually made by direct debit, and once the agreement is in place, it is important that payments are not missed and future liabilities are paid on time. You can pay more than the agreed amount if you are able to clear the debt more quickly.

If you do not make the payments, or HMRC will not agree to a time-to-pay agreement, you will be expected to pay what you owe in full. HMRC may use their debt collection powers if you do not do this.

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Any questions?

If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant