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What To Do If You’re Struggling To Pay Your Self Assessment Tax Bill

Self assessment tax

If you’re struggling to pay your self assessment tax bill there are options available to you so you don’t need to struggle in silence.

  • Contact HMRC in the first instance to discuss your situation. They may be able to assist with a payment plan that makes your tax burden more manageable.
  • Review your finances to find areas where you can save money or increase your income so that you can free up money to help pay your tax bill.
  • If you are a low income earner, you may qualify for tax relief or grands from the Government. Find out more at gov.uk to see what you may be entitled to claim.
  • Speak to a professional who can advise. Consider Citizens advice, or an accountant who can help to point you in the right direction.

The worst thing you can do is to ignore the issue and hope that it will go away. Taking proactive steps to do what you can to help yourself get out of the situation that you’re in is the best and most helpful thing that you can do.

Most people will face periods of financial hardship at some time and it can be incredibly stressful if this falls at the time that your tax bill is due. In this article, you will learn more about what you can do, and what available options there are to help you navigate these difficult circumstances.

Why do People Struggle to Pay Self-Assessment Taxes?

People may have difficulties paying self-assessment tax bills for many reasons. Some of these reasons are:

Unexpected Expenses: A medical emergency or some home and car repairs that cannot be postponed may take a toll on your finances. As a result, your plans change and you may fail at making self-assessment tax bill payments on time.

Sudden Changes in Financial Circumstances: Sometimes you find yourself amid unfavourable circumstances such as losing your job, or getting a reduced income, which complicates your financial situation and prevents you from paying your tax bills.

Miscommunication with HMRC: If HMRC sends you messages on your tax bills, and you do not get them properly, there is a chance that you will miss important information such as the amount you owe, the due date, and the available options for your payment. Underestimating the Amount Owed: when taxpayers underestimate their self-assessment tax amounts, their bills will be larger than expected.

Filing Tax Returns Late: late filing of tax returns can lead to fines and penalties that complicate the situation, increasing the amount to be paid, and making it more difficult to pay your tax bill on time.

Getting Help from HMRC

When you are self-employed or do not have a fixed salary, your financial resources may be limited, so HM Revenue & Customs (HMRC) is ready to support you. They know that unexpected circumstances can emerge, making it difficult for taxpayers to pay a tax bill in full, so they provide help for those who are struggling.

Payment Plans

You might face difficulties paying self-assessment tax bills, so entering into an HMRC payment plan is an available option to help you pay. These flexible and affordable plans offer you to pay your self-assessment tax bills debt in instalments. It is worth noting that other types of debt such as VAT or National Insurance contributions are not included in HMRC payment plans.

Entering into an HMRC payment plan requires reaching out to HMRC directly. Your application should include an explanation of your financial situation. Each case is individually assessed, and then HMRC sends you a payment plan that lasts between 12 and 60 months, taking into consideration how much you can afford to pay monthly. To avoid penalties, fines, and additional charges, you must make your payments every month without delay.

Time-to-Pay Arrangements

Time-to-pay arrangements are similar to HMRC payment plans. They are designed to provide you with longer periods of time to make your tax bill payments. Applying to time-to-pay arrangements is similar to applying to HMRC payment plans.

These arrangements are based on the individual financial situation, estimating how much time you need to make your payment. These arrangements are also flexible so that the time of payment is shortened or lengthened depending on the income increase or reduction.

Although HMRC payment plans and time-to-pay arrangements give taxpayers extra time to pay off their debt, additional interests and charges will apply, so you have to keep this in mind as you enter into a payment plan.

HMRC also allows you to negotiate the reduction of your tax bill. They will accept your application to reduce or postpone your payments if they assess your case and see that your financial difficulties are not allowing you to fully pay your tax bills.

Waiting longer to pay your assessment tax bills means that more interests and charges will apply, so it is crucial to take action promptly.

What are the Penalties for Failing to Pay a Self-Assessment Tax Bill?

What happens when you fail to pay your self-assessment tax bills? If you fail to pay, HMRC will impose penalties for late payments and interest on the unpaid amount through taking different actions, such as:

  • Late payment penalties: Missing the payment deadline means that you will be charged a penalty. A 5 % penalty of the outstanding amount is due for each month with late payment, up to a maximum of five months.
  • Interest Charges: in addition to the 5% monthly penalty, Interest is charged on the unpaid amount, starting from the due date of the payment, and accumulating until it is paid. The interest rate is not fixed and HMRC can change it over time.


Bailiff action: When the financial situation gets really complicated, bailiff action is an extreme measure that can be taken by HMRC to collect the unpaid tax bill. Bailiffs are given the permission to enter your property attempting to collect the debt. They can also sell your goods and get the debt paid.

How can penalties make paying the due amount even more difficult? Penalties can add up quickly, adding costs to the unpaid amount. This can aggravate the situation, making payment of tax bills even more difficult. If you are looking to avoid penalties, quick action needs to be taken, so that you can get on to the right path as soon as possible.

How to Appeal an HMRC Penalty

Sometimes taxpayers may find that HMRC penalty is exaggerated or unjustified, and they need to appeal the decision. In this case, take the following steps to navigate this hurdle in your finances.

  1. Review the Reason for the Penalty:

To appeal, you need to understand why HMRC has placed a penalty. When you receive the letter from HMRC which lists the reasons for the penalty, you should review it precisely to guarantee a thorough understanding of the penalty. Having a comprehensive look at the penalty will guide you through the appeal process.

  1. Gather supporting evidence: 

Feeling that your penalty is unjust is not enough to appeal the decision. You have to collect some evidence that supports your appeal. Showing any receipts or bank statements among other documents will be helpful as these can support your claim that you have already made the tax bill payment, or the payment should not be made in the first place.

  1. Write a letter of appeal:

Have you collected the needed evidence? It is time to write a letter of appeal to HMRC. Starting with your name, address, and National Insurance Number, you can proceed by mentioning the reasons that made you believe that the penalty is unjust or incorrect. These reasons should be supported by the evidence you collected.

  1. Submit your appeal:

You have prepared your letter and all the supporting documents. Submit your written letter of appeal supported with the collected evidence. It is wise to save a copy of the appeal letter and all the accompanying documents you submit.

  1. Wait for a Response: 

As HMRC receives your appeal, they will review it and reach out to you with the decision they made. The response from HMRC could include a reduction or total cancellation of the penalty.

  1. Further action:

You have the right to take further action if HMRC upholds the penalty. Making a complaint to the HMRC’s Adjudicator’s Office or appealing to the First-tier Tribunal (Tax Chamber) are possible options to take your appeal further.

The appeal process can be time-consuming. Delaying the appeal will result in more complications. As soon as you notice that the HMRC penalty is incorrect, head to submit your appeal. If you are still unsure what to do, you can ask for professional guidance and advice from experts like tax accountants or tax lawyers, who will help you through the process.

Who Needs to Pay Taxes in the UK Via Self-Assessment?

Some of the individuals who are required to use the self-assessment tax system are:

  1. Self-employed individuals: Self-employed individuals who work independently in trade or in any other economic activity owe taxes. Accordingly, they need to complete a self-assessment tax return, where they submit a declaration of all income resources and profits gained from their business.
  2. Directors of limited companies: Some directors of limited companies are paid a salary or receive benefits from their companies. These directors are also required to complete a self-assessment tax return.
  3. Landlords: Landlords own property and consequently receive rental income that should be taxed. They must declare their earnings from rentals by completing a self-assessment tax return.
  4. Individuals with overseas income: Self-assessment tax system must be used also by individuals receiving an income from another country. Accordingly, these individuals have to complete a self-assessment tax return in order to pay the due taxes.
  5. Individuals with untaxed income: Receiving an income that is not taxed at source, such as savings interest, requires declaration of this income on their self-assessment tax return. Such individuals should also pay the taxes owed.

The above list is not inclusive. Any individuals who receive income from a source that is not taxed must complete a self-assessment tax return. Communicating with HMRC themselves or consulting with a tax professional can help when you feel unsure whether you should use the self-assessment tax system to pay your owed taxes.

What to Include on Your Self-Assessment Tax Form

Completing a self-assessment tax return can feel like a long and arduous process but in reality, if you stay on top of your income/expenses and have an organised filing system for your business finances, then you will be in great shape to fill out your self assessment form with minimal issues.

The key information that you will need to supply can be broken down as:

  • Personal details: Provide your name, address, and National Insurance number.
  • Income: Completing a tax return includes a declaration of all sources of income. You can be employed, self-employed, or you could be a landlord, or an individual whose income comes from savings and investments. Regardless of the source, your income should be clearly stated in the self-assessment tax form.
  • Expenses: Self-employed people have business costs and expenses. They probably need to pay for rental, fuel or equipment. These costs should be included in your self-assessment form when you are self-employed. The same applies for Landlords who should declare their expenses.
  • Capital gains: Making capital gains within the tax year, such as the sale of shares or property, must be declared in your self-assessment tax return.
  • Tax allowances and reliefs: Tax allowances or reliefs that you are eligible for, such as the personal allowance or the married couples’ allowance should also be included in your self-assessment tax return.
  • Foreign income: If you have assets or property overseas, and you are receiving a foreign income, information about this foreign income should be a part of your self-assessment tax return.
  • Offshore accounts: Are you living in the UK, but you have bank accounts in other countries? You should add information about these accounts to your self-assessment tax return.

False or incomplete information will put you at risk of penalties and fines. Asking for assistance from tax professionals is a good idea if you do not know how to provide the needed information to fill your tax return. They can ensure that the information you provide is accurate, complete, and precise.

Who Can Help You with Your Self-assessment Taxes?

If you struggle with record keeping or simply find the whole process of self assessment daunting, there are plenty of professionals available to assist you.

You can instruct these people to complete the whole task for you or simply check what you have done for errors or omissions – whichever route works best for you!

Tax accountants: As their job title indicates, Tax accountants specialise in tax law and regulations. They can be of great help when completing your self-assessment tax return. They are also experts in claiming tax allowances and reliefs, as well as in minimising tax bill amounts.

Tax lawyers: If legal disputes arise between you and HMRC, do not hesitate to contact a tax lawyer. Tax lawyers can provide precious legal advice. In addition, they can make sure your payment plan is fair and affordable. If the situation requires representation in court, they will be there for you.

Financial advisors: Since tax payments are part of your financial plans, you might need a financial advisor to guide you on how to manage your finances, including your tax bill payment. Financial advisors can also help you understand a lot about the tax implications of various investments. Their advice is needed when you are trying to minimise your bill.

Asking for guidance and help can add costs to your finances. However, choosing the right people who are experienced will make your self-assessment tax return process smooth and easy. HMRC also provides free guidance and support, giving you insights on how to choose the right professionals.

Final Thoughts

If you are struggling to pay your self assessment bil, it can be a stressful time but there are options and support available to help you. The key is to take action as soon as possible and reach out for help rather than hoping that the problem will go away on its own.

By being proactive and honest with HMRC, you can access payment plans, additional time to pay or potentially even a reduction in your tax bill without incurring further fees due to late payments.

People struggle to pay for many reasons, from a drastic change in financial circumstances, to poor business management. Whatever the reason, there is no shame in seeking help. There is plenty of guidance available from HMRC for free, or you can look into professional assistance from a qualified accountant or tax advisor.

 

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