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HMRC  •  Personal tax  •  Tax Planning  •  Tax Relief  •  Taxation

Dealing with HMRC: What to do if you can’t pay your tax bill

By RJP LLP on 11 September 2019

The economy, improved technology systems and ongoing investment in anti-avoidance have helped HMRC to secure record tax receipts in recent years. With these increased tax payments have come record numbers of penalty charges being imposed on taxpayers too.

Last tax year (2018/2019) the amount of money paid to HMRC in the form of penalties – for late payment, non-payment and errors – was £860 million. This was a 24% increase on the previous tax year when penalties netted £694 million.

There are a range of reasons why so many penalties are being incurred by taxpayers and one factor is the challenging economic situation, leading to people not being able to meet their obligations.

Added to this, the percentage rates of penalties being charged have also slowly increased and in some cases the penalty charged can be up to 200% of the previously unpaid tax.

What penalties can HMRC impose for late or non-payment of taxes?

  • Self-assessment tax returns, VAT returns and tax payments that are filed late will incur automatic penalty charges.
  • The flat rate penalty for late filing of a self-assessment tax return is £100 where it is up to 3 months late, after which there is a daily penalty of £10 per day for up to 90 days, after which there is a percentage charge based on the tax due for that year. Other returns have different penalty regimes.
  • Tax returns and payments that are 6 months overdue will incur a 5% penalty surcharge and if they remain unpaid by 12 months, the 5% penalty is repeated.
  • After 12 months a further penalty may be payable, of up to 100% of the tax outstanding in situations where HMRC considers non-payment to be deliberate.

What to do if you can’t pay your tax bill?

Communication with HMRC as early as possible is essential to securing a positive outcome. Although everyone has a legal obligation to pay taxes, HMRC can be understanding if contacted promptly and where agreed payment terms are met on time. This means it is often  possible to negotiate longer payment terms, although you will be obliged to provide personal details that demonstrate why it is not possible to make payment on time.

For support with your 2019/20 self-assessment tax return, please contact: partners@rjp.co.uk

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The economy, improved technology systems and ongoing investment in anti-avoidance have helped HMRC to secure record tax receipts in recent years. With these increased tax payments have come record numbers of penalty charges being imposed on taxpayers too.

Last tax year (2018/2019) the amount of money paid to HMRC in the form of penalties – for late payment, non-payment and errors – was £860 million. This was a 24% increase on the previous tax year when penalties netted £694 million.

There are a range of reasons why so many penalties are being incurred by taxpayers and one factor is the challenging economic situation, leading to people not being able to meet their obligations.

Added to this, the percentage rates of penalties being charged have also slowly increased and in some cases the penalty charged can be up to 200% of the previously unpaid tax.

What penalties can HMRC impose for late or non-payment of taxes?

  • Self-assessment tax returns, VAT returns and tax payments that are filed late will incur automatic penalty charges.
  • The flat rate penalty for late filing of a self-assessment tax return is £100 where it is up to 3 months late, after which there is a daily penalty of £10 per day for up to 90 days, after which there is a percentage charge based on the tax due for that year. Other returns have different penalty regimes.
  • Tax returns and payments that are 6 months overdue will incur a 5% penalty surcharge and if they remain unpaid by 12 months, the 5% penalty is repeated.
  • After 12 months a further penalty may be payable, of up to 100% of the tax outstanding in situations where HMRC considers non-payment to be deliberate.

What to do if you can’t pay your tax bill?

Communication with HMRC as early as possible is essential to securing a positive outcome. Although everyone has a legal obligation to pay taxes, HMRC can be understanding if contacted promptly and where agreed payment terms are met on time. This means it is often  possible to negotiate longer payment terms, although you will be obliged to provide personal details that demonstrate why it is not possible to make payment on time.

For support with your 2019/20 self-assessment tax return, please contact: partners@rjp.co.uk