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Tax debts to HMRC

Who pays tax to HMRC?

Everybody has to pay tax – it’s the law. Whether you are employed by a company or work for yourself, you need to make sure you are paying the correct amount of tax each financial year – it’s a priority debt.

What happens if you don’t pay enough tax?

If you fail to pay the correct amount of tax on what you earn, HMRC may contact you to agree a payment plan of the outstanding amount, whereby they amend your tax code so you pay more tax to cover the arrears. They can also pass your debt on to a debt collection agency who will chase you for the outstanding amount.

If you are self-employed, HMRC can petition for your bankruptcy which would result in you ceasing trading and selling off your assets to pay towards what you owe. Therefore, it’s important you keep on top of your income and make sure you are paying the right amount of tax to avoid going to court.

How to check tax paid by PAYE

If you are paid via Pay As You Earn (PAYE), you can work out your income tax for the current year and find out what you should be paying. Use payslips from the current tax year to find out your tax code and see if this is correct.

How to check self-assessed tax

To find out your self-assessment tax bill, use the Government’s online ‘ready reckoner’ to get a better idea of the tax band that applies to you.

What if I can’t pay my tax debt?

It’s important to pay back what you owe in tax and you should act quickly to do so, to avoid being chased by bailiffs or asked to go to court. If you cannot repay your tax debt, you should work out your monthly budget and see where you can cut back in order to pay off your debts.

Whilst you are trying to work out your budget, try and make payments to HMRC to show you intend to repay what you owe. It’s important to speak to somebody at HMRC to see whether you can pay back your debts over a longer period of time. If you show a commitment to clearing your debt, you stand a better chance of avoiding bailiffs and court action.

What if I’ve paid too much tax?

If you think you have overpaid on tax in the past 4 years, you can submit a claim on the GOV.UK website to request a refund. Make sure you do this as soon as you spot the error, so you can put any tax rebate towards existing debts or savings. You are responsible for checking if you have paid too much tax, so make sure you check your payslips every month.

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