With the Self-Assessment deadline now just over a week away, failing to pay your tax bill on time can put you at risk of further costs and penalties.
Not understanding the financial implications and ongoing deadlines could be a costly mistake.
Late payments will cause penalties and interest charges and you must understand how to prepare a clear payment plan that is compliant with HMRC’s requirements.
Why should you contact HMRC first?
If you know you won’t be able to pay your tax bill by the 31 January deadline, you must contact HMRC immediately.
HMRC is far more likely to support taxpayers who act early and communicate openly about their situation.
Failing to contact HMRC can put you at risk of penalties or enforcement action, including the use of debt collection agencies or direct recovery of funds from your bank account or wages.
How can a Time to Pay arrangement help?
HMRC’s Time to Pay (TTP) arrangement allows you to pay any overdue tax bills in affordable monthly instalments.
This can reduce the immediate financial pressure and spread the costs over a realistic time period.
However, to qualify for TTP, your tax return must already be filed.
If you owe £30,000 or less and have no other outstanding HMRC payment plans, you can usually set up a TTP arrangement through your Government Gateway account.
This must be done within 60 days of the payment deadline, although setting it up within 30 days helps limit late payment penalties.
If you have larger debts or a more complex financial situation, you will need to speak directly with HMRC.
Be prepared to explain:
What are the interest and penalty charges?
Even with a TTP arrangement, HMRC will charge 7.75 per cent interest on late payments and this starts from the day after the tax was due.
Late payment penalties are applied separately at a rate of five per cent of the unpaid tax after 30 days, 6 months and 12 months.
HMRC will not apply the late payment penalties if you have agreed a clear TTP arrangement 30 days before the Self-Assessment deadline.
However, you no longer have that privilege and you must be aware of the ongoing charges on your finances.
What are the additional risks of late filing?
Even if you cannot pay your tax bill, you must still file your Self-Assessment return on time.
Late filing penalties are charged separately and can bring even more financial implications.
These include:
How can you prepare for future tax bills?
Cash flow pressures are affecting many businesses and self-employed individuals, but learning from this Self-Assessment season can help you better prepare your finances for next year.
Setting aside money regularly throughout the year can help you ensure that the funds are available when your next tax payment is due.
You must keep your financial records up to date regularly so you can estimate your tax liability as the year progresses.
Reviewing your tax code can also help ensure you are paying the correct amount of tax and reduce the risk of issues arising later with HMRC.
You may also wish to use HMRC’s Budget Payment Plan, which allows you to make regular monthly payments towards your future tax bills.
How can we support you?
If you are struggling to pay your tax bill, you must seek financial support now to help limit any further interest or penalties.
We can help review your tax bill and set up a clear payment plan with HMRC on your behalf.
With early planning and the right support, you can regain control of your finances and remain compliant with HMRC’s deadlines.
For expert financial advice and support, contact our team today.
