What happens if you can’t pay your Self Assessment tax bill?

Even the most organised small business owners can occasionally find themselves struggling to pay their Self Assessment tax bill on time.

If this happens to you, then don’t worry. There are some simple steps you can take to make payment arrangements with HMRC

If you can’t pay your Self Assessment tax bill on time

If you know in advance that you won’t be able to pay your Self Assessment tax bill by the deadline, you should contact HMRC to set up a Time To Pay arrangement. HMRC will work with you to set up affordable monthly payment options and negotiate time to pay whatever you owe based on what you can afford. 

If you are unable to pay the full tax bill on time, you will have to pay interest on any tax paid late and may also have to pay a penalty. Interest and penalty fees may also be included in a Time to Pay arrangement.

HMRC will consider requests for a Time to Pay arrangement for partnerships from an authorised representative and may not need to negotiate separately with each individual partner if the partnership meets certain criteria.

If the deadline has recently passed, then don’t panic. You can usually set up a payment plan using your Government Gateway user ID up to 60 days after the payment deadline, provided that:

  • you have filed your latest tax return
  • you owe £30,000 or less
  • you do not have any other payment plans or debts with HMRC
  • you plan to pay your debt off within the next 12 months

If you don’t meet the above criteria, or if it’s more than 60 days since your tax bill was due, you should call the Self Assessment Payment Helpline.

Calculating your monthly payments

Time to Pay arrangements are tailored to each individual’s circumstances. The length of the arrangement and the size of the monthly payments are decided based on your income and expenditure, including monthly costs such as rent, food and utility bills. HMRC typically expects no more than 50% of any disposable income to be paid into the Time to Pay arrangement. For businesses, HMRC will ask what the business can afford to pay and the length of the arrangement will depend on how much the business owes and the business’s financial circumstances. Any savings or assets may also be used to reduce the amount to be paid to HMRC. 

Time to Pay arrangements are flexible and may be adjusted if your circumstances change. For example, the arrangement may be lengthened if your income is reduced, or shortened if you have a windfall and would like to make larger payments. For more details visit HMRC’s website.

If you’re struggling to pay because of the cost of living crisis

If you’re struggling to pay a tax bill as a result of rising energy costs, take a look at the support that may be available for your business on the Citizens Advice website.

For further help, MoneyHelper, Advice NI and Scotland Debt Solutions can offer free information and guidance on debt management.

Avoid surprise tax bills with FreeAgent

FreeAgent gives you a real-time overview of your Self Assessment tax position so you’ll always know what you owe and you won't be left scrambling at the last minute. Try a 30-day free trial of FreeAgent to see for yourself.

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Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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