HMRC Debt Help

Dealing with a tax bill can feel worrying, but you aren’t alone. Everyone in the UK must pay Income Tax if their earnings go over a certain amount.

We’ve put together this simple guide to explain how tax works, what happens if you fall behind and what steps you can take to get back on track.

How do I pay income tax?

The way you pay income tax depends on how you’re employed.

• If you’re employed: You’ll most likely pay your tax through Pay as You Earn (PAYE). This means that the money comes straight out of your wages before it hits your bank account.
• If you’re self-employed: You must fill out a Self-Assessment tax form online by January 31st each year. The tax year runs from April 6th until April 5th the following year. After you send the form, HMRC will tell you how much tax you owe for the year.

How can I check if I’m paying the right amount of tax?

• PAYE: You’ll receive a tax code, either by post or you can check online to tell you how much you can earn tax-free.
• Self-employed: You can use the government’s online tax checker tool

What if I’ve paid too much tax?

If you think you’ve overpaid tax in the last four years, you can claim a tax refund on the government website. Make sure you claim as soon as you spot the error. You can then use this money to pay off existing debts or add to your savings. If you’re paid by PAYE, it’s up to you to check your payslips monthly and make sure this code is right.

What if I haven’t paid enough tax?

If you’re employed, paid through PAYE and owe less than £3,000, HMRC can usually just change your tax code. This adjusts the amount of tax collected, and they’ll collect the shortfall bit by bit over the tax year, so in most cases you won’t need to do anything.

If you’re self-employed and get a bill you can’t pay, it’s important to act quickly. Tax and HMRC debt are what’s known as priority debts. This means that there could be serious consequences if you don’t pay it, just like rent, mortgages and council tax.

What happens if I can’t pay the taxes I owe?

If you don’t pay the correct amount, HMRC might take further action. They could:

• Pass your debt to a debt collection agency who will chase you for the money.
• Take you to the Magistrates’ Court if the debt is under £2,000 and less than a year old.
• Apply for a County Court Judgement (CCJ) against you.

In extreme cases, HMRC could also ask for you to be made bankrupt if you’re self-employed. This could mean you have to stop trading, your goods and assets are sold to pay the debt, and the Official Receiver looks into your finances

To avoid any of these outcomes, try to work out your monthly budget and see where you can cut back. Making even small payments to HMRC shows you intend to clear the debt. Speak to them as soon as possible, as they might agree to a payment plan that lets you pay over a longer time.

Worried about your tax debt?

If you’re struggling to keep up with what you owe, it’s important to act early. We can help you understand your budget, explore your options, and find a way forward that works for you.

Speak to our expert advisors for free on 0800 316 1833 or start your journey online today.