Problems paying your tax?

Many people are unable to pay their tax on time. They may worry about going bankrupt, losing their home or job. Some worry they may go to prison (though in 2019 HMRC prosecuted 600 people and these cases involved substantial fraud often combined with serious criminality).

When confronted with a a tax debt, the worst thing is to ignore the matter. Your situation may not be as bad as you think, but you should act as soon as you can.

HMRC have made clear that they want to work with those who are struggling with tax debts and want to help in finding a way of paying off the debt as quickly as possible. They will contact you by telephone, post or SMS text. It is important that you respond to these communications otherwise HMRC cannot know if you need help or are simply refusing to pay. The support HMRC can provide is tailored to individual needs and circumstances.

You may become aware that you owe tax in one of the following ways:

• you may receive a letter from (HMRC) stating that not enough tax was taken off your employment or pension income, and enclosing a calculation of the tax “underpaid”. These letters may be sent out to people who have not previously had much contact with HMRC. The action to take is explained in the ‘Recovery of underpaid PAYE’ section.

• if you have previously been sent a tax return, then you may receive an HMRC Statement showing that tax is due, or a letter or telephone call demanding payment. The processes followed by HMRC, and the  actions they can take, are all explained in sections 2-7.

• you may have received a bill for late filing penalties for a self-assessment tax return. In this case, look at the information on late filing penalties,before reviewing the sections 2-8 below.

Please do not ignore a letter or demand from HMRC which states that tax is due, as this may make things worse. Often, a quick response can reduce the size of the problem.