Struggling to pay your tax bill by 31 January 2025? With the ongoing cost of living challenges, you’re not alone. Ignoring the problem won’t make it go away—interest and penalties can quickly add up. The good news is, there are options to help you manage the situation and spread the cost.
Let’s explore what you can do.
- Coding Out Your Tax Bill
If you owe £3,000 or less and have PAYE income, you may be able to have the tax collected through your tax code for 2025/26. This option is available if:
- You file your 2023/24 tax return online by 30 December 2024, or
- You submit a paper return by 31 October 2024.
This method lets you pay in interest-free instalments through your salary—making it a great option if you qualify.
- Time to Pay Arrangements
For larger tax bills, HMRC offers a Time to Pay Arrangement, allowing you to spread payments over several months.
Can You Set It Up Online?
You can apply online if:
- You’ve filed your 2023/24 tax return.
- You owe £30,000 or less.
- You’re within 60 days of the deadline.
- You don’t have any other payment plans with HMRC.
Simply log in to your HMRC account to set it up.
Need to Speak to HMRC?
If you can’t set up an arrangement online, call HMRC on 0300 200 3820. Be prepared to provide details of your income and outgoings.
Key Points to Remember:
- Interest applies: HMRC charges interest on overdue tax (currently 2.5% above base rate, rising to 4% above base from April 2025).
- No penalties: As long as you stick to the plan, you’ll avoid penalties.
- Flexible payments: You can pay off the plan early to save on interest.
If you can’t meet your agreed payments, contact HMRC as soon as possible to renegotiate. Falling behind without an agreement could lead to HMRC taking recovery action.
- Consider Other Borrowing Options
Since HMRC charges interest on Time to Pay Arrangements, you might find it cheaper to borrow money elsewhere, such as through a personal loan at a lower interest rate. Always compare the costs before deciding.
- Set Up a Budget Payment Plan
To avoid a tax bill shock next year, consider a Budget Payment Plan. This lets you make weekly or monthly payments to HMRC towards your next tax bill.
- If you’ve underpaid, you’ll need to settle the balance by the due date.
- If you’ve overpaid, you can request a refund.
You can even pause payments for up to six months if needed. As long as your tax affairs are up to date, you can set up a Budget Payment Plan through your online HMRC account.
- Review Payments on Account
If your 2023/24 tax bill (including Class 4 NICs) is more than £1,000, you’ll need to make payments on account for the 2024/25 tax year. These payments are:
- 50% of your 2023/24 liability, due by 31 January 2025 and 31 July 2025.
If your income has dropped and you expect to owe less in 2024/25, you can reduce your payments on account. However, be careful—reducing them too much could result in interest on the shortfall.
Need Help Managing Your Tax Bill?
Don’t let your tax bill cause unnecessary stress. At Jon Davies Accountants, we can guide you through your options and help you create a plan that works for you.
Let us help you stay on top of your taxes and focus on what matters most—your business!
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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
- You can ring us on 0151 380 8080
You can email us at gr****@*********************co.uk