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Business and tax debts. Where to get advice

If you have outstanding Her Majesty's Revenue and Customs (HMRC) debts, whether it's Income Tax (PAYE), NI or VAT arrears, you need to deal with them as soon as possible. These are classed as priority debts.

The consequences of not paying them can be very serious and could lead to court action or bailiffs.

This page tells you how to deal with the arrears you have and what can happen if you don't repay them.

5 steps to help you deal with tax arrears

1. Check your tax bill is right

First check that HMRC are asking you to pay the right amount. Make sure you’ve given them correct up to date information about your business takings and expenses. If you don’t do this, the tax bill may be over-estimated.

2. Put together a budget

You need to work out how much you can afford to pay towards your income tax arrears. To do this you can use our self-employed income calculator to help you work out how much you're taking home from your business.

Once you know what you're earning you need to put together a personal budget. This will cover all of your household costs like rent, mortgage and council tax. Once you've done this you'll know how much you can afford to pay towards your tax arrears.

If you need help putting together a personal budget you can contact us and we'll help you. 

3. Contact HMRC 

You need to agree a regular payment to clear the debt. You should offer the amount shown in your personal budget after all of your bills and living expenses are covered. Don’t offer a payment that you can’t afford.

You can call HMRC on 0300 200 3300. They're open Monday to Friday 8am to 8pm, and Saturday 8am to 4pm.

HMRC will want your arrears to be repaid before your next tax bill is due. If you can't afford to do this they may let you repay them over a longer period of time, as long as you can provide proof that the amount you've offered is all you can afford and you keep up with your ongoing tax.

4. Make your payment

Once you've spoken to HMRC start making your payments. Even if they don't accept the payment you've offered pay it anyway. 

It's much better to pay something, even if it's only a small amount, otherwise HMRC might assume that you're avoiding paying your tax; this can have many more serious consequences.

5. Keep them updated

Make sure you keep HMRC up to date with your situation. If you're struggling to pay let them know, otherwise they'll assume that you're avoiding making your payments.

Where can I get help with HMRC debt?

There are two ways you can get help with HMRC debts if you're self-employed. The best way for you to get advice will depend on your situation.

  • Call our Helpline for advice - Our telephone debt advice service can help you deal with personal debts, including some business related debts that you're personally liable for. We can help if you're a sole trader, you can calculate your income you can draw from your business and you're mostly dealing with personal debts, rather than business debts.
  • Contact Business Debtline - Our friends at Business Debtline offer specialist help for self-employed people dealing with business and personal debts. Contact them if you're trading as a partnership or limited company, you have employees or lease business premises, you're unsure of the earnings from your business, you're dealing with mostly business related debts or if you're worried your business is in difficulties.

Before calling our Helpline or Business Debtline try to get together details of all of your personal and business debts, your income over the last few months and your regular business and personal expenses. Recent bank statements can be handy for this. Don't worry if you can't find all this information - you'll still get help if you call.

What happens if I don't pay my HMRC debts?

If you don't pay your HMRC debts including any tax credit overpayments, further action can be taken against you such as:

If you owe more than £5,000 HMRC can start bankruptcy proceedings against you. You can find more details about how this works on our bankruptcy from creditors page.

Send bailiffs to collect the debt

HMRC don't need to obtain a court order to visit your business premises and take your stock and equipment (up to the value of the debt that you owe them).

If you don't have enough stock or goods at your business premises to cover the debt, the bailiff (officially known as an enforcement agent) can go to your home and take goods from there. If you stop the HMRC officials from entering your business premises or home they can get warrant to break in.

Apply for a County Court judgment

They could get a County Court judgment (CCJ) against you. 

If they apply for a CCJ you'll be sent some court forms. You need to fill these in and offer an affordable monthly repayment amount. Find out how to fill in these forms using our easy to follow CCJ guide.

If you don't pay the CCJ they can use enforcement methods including applying for a charging order to attach the debt to your property.

Issue a summons to a magistrates' court hearing

If you owe less than £2,000 HMRC can issue you with a summons to a hearing. You'll need to attend this with your business and household budget, to support an offer to pay by instalments.

If you don't keep to these instalments another hearing will be arranged to decide whether you should be sent to prison. Before this can happen you will need to be found guilty of ‘wilful refusal’ (when you have the ability to pay but refuse on a point of principle) or ‘culpable neglect’ (where you have the money but you've ignored the debt).

The court may decide not to send you to prison but it can't write off your debt.  

Start bankruptcy proceedings against you

If you owe more than £5,000 HMRC can start bankruptcy proceedings against you. You can find more details about how this works on our bankruptcy from creditors page.

Take money from your wage

If you work for an employer, HMRC can collect a debt by altering your tax code to increase the amount of tax deducted from your wage.

HMRC can do this for debts of up to £3,000 if you earn less than £30,000. If you earn more than this, they can collect larger debts through your tax code, up to a maximum of £17,000 if you earn more than£90,000 a year.

Take money from your savings

HMRC can take money to pay tax and tax credit debts directly from savings held in banks and building society accounts. 

This only applies to debts of more than £1,000 and they must leave a minimum of £5,000 in savings. So if your savings are under £6,000 they can't take this action.

If you have joint savings and the debt is in your name, only 50% of the savings will be classed as yours.

If you're still struggling there are organisations that can help

Tax Aid - a free, independent, and confidential service for anyone with a tax question or problem. Call their helpline on 0845 120 3779. They're open 10am to 12 midday, Mondays to Thursdays.

Tax help for older people - are an independent and free tax advice service for older people. Call their helpline on 0845 601 3321. They also provide home visits if you're disabled. 

Helping you become debt free...

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They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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