What Can HMRC Do If You Don’t Pay Your Tax Bill?
If you’re struggling to pay your tax bill, you’re not alone – but ignoring the problem won’t make it go away. HMRC has several powers to recover unpaid tax, and they won’t hesitate to use them. Taking action sooner rather than later can help you avoid penalties and additional interest.
So, what happens if you can’t pay your tax bill? Here’s what HMRC can do, and how you can get ahead of the situation.
Set Up a Time to Pay Arrangement
If you know you can’t pay your tax bill in one go, you may be able to set up a Time to Pay arrangement. This allows you to spread your payments over instalments, giving you more flexibility.
Depending on your circumstances, you might be able to set this up online. If not, give HMRC a call to discuss your options. While you’ll still need to pay interest, you can avoid late payment penalties. For more details on how to set this up, visit Gov.uk’s Time to Pay page.
HMRC Visits
If you don’t set up a payment plan and ignore your unpaid tax, HMRC may decide to visit you at your home or business premises. An HMRC officer will discuss your situation and try to agree on a way for you to settle the debt – either in full or through instalments. They can even take card payments during the visit to help you get started.
Debt Collection Agencies
HMRC may also pass your debt on to a debt collection agency. The agency will contact you by letter, phone, or text to collect the amount owed. It’s important to know that debt collectors won’t visit you in person, but they can discuss setting up a Time to Pay arrangement, just like HMRC.
Adjusting Your Tax Code
If you’re on PAYE, HMRC can adjust your tax code to collect the debt directly from your salary. This will mean more tax is taken from your pay each month until the debt is cleared.
Taking Possessions to Cover the Debt
If HMRC or the debt collectors are unable to recover the tax you owe, HMRC might take more serious action – they could seize possessions to cover the debt.
Before this happens, they’ll issue a formal notice of enforcement and give you a chance to settle the debt. If you don’t pay, an HMRC officer will visit, and if necessary, take goods that can be sold to cover the amount you owe. You’ll be charged for this, and if the sale doesn’t cover the full debt, you’ll still be liable for the difference.
It’s worth noting that HMRC won’t take items essential for your wellbeing or security, and if the goods sell for more than you owe, you’ll be paid the excess.
Court Proceedings
HMRC also has the option to take you to court to recover the debt. They can apply for charging orders, attachment of earnings orders, or third-party debt orders, and even recover the money from your pension payments if needed.
Insolvency
If all other options fail, HMRC may apply to the courts to make you or your company insolvent.
Need Help?
If you’re struggling to pay your tax bill, don’t wait for HMRC to take action. The sooner you reach out, the more options you’ll have. At Jon Davies Accountants, we can help you set up a payment plan or guide you through your options to avoid penalties and stress.
Get in touch with Jon and the team today – we’re here to help you get back on track.
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