Business and tax debts. Where to get advice

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 have given them correct information about:

• Your business takings
• Your expenses

The tax bill may be over-estimated if not.

2. Put together a budget

Work out how much you can afford to pay towards your debt. Our self-employed income calculator can help.

Next, put together a personal budget. This should cover:

• Rent/Mortgage
• Council tax
• Utility bills
• Food costs
• And other basic spending needs

Your budget helps you see what you can afford to pay towards tax arrears.

3. Contact HMRC

Come up with a payment plan to clear the debt.

HMRC will want the debt paid before your next tax bill is due.

You may be able to repay them over a longer time if you cannot afford this.

Show them your budget and explain that:

• You are offering what you can afford
• This is what is left over in your personal budget after bills and living expenses
• This amount lets you keep up with your ongoing tax

Call HMRC on 0300 200 3300.

• Monday to Friday 8am to 8pm
• Saturday 8am to 4pm

4. Make your payment

Start making payments after you speak to HMRC. Even if they do not accept your offer.

HMRC might assume you are avoiding tax if you do not pay anything at all.

This can be very serious.

5. Keep them updated

Make sure you update HMRC on your situation.

Let them know if you are struggling to pay. Otherwise, they may assume you are avoiding paying.

What happens if I do not pay my HMRC debts?

Further action can be taken against you if you do not pay HMRC debts, like tax credit overpayments.

This action includes:

Bankruptcy Proceedings

HMRC can start this if you owe more than £5,000.

Read more about this on our bankruptcy from creditors page.

Sending bailiffs to collect the debt

HMRC do not need 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

The bailiff (or “enforcement agent”) can take goods from your home if goods at your business will not cover the debt.

HMRC officials can get warrant to break in if you stop them from entering your business premises or home.

Applying for a County Court judgment

HMRC could get a County Court judgment (CCJ) against you. In this case:

• You are sent some court forms
• You must fill these in and offer an affordable payment amount
• Use our easy to follow CCJ guide

They can use other enforcement methods if you do not pay the CCJ.

They may apply for a charging order to attach the debt to your property.

Issuing a summons to a magistrates' court hearing

HMRC can issue you with a summons to a hearing if you owe less than £2,000.

You need to attend this.

• Bring your business and household budget
• Offer to pay in affordable instalments

Another hearing is arranged if you do not keep to these instalments. This is to decide if you should be sent to prison.

Before this happens you must either:

• Be found guilty of ‘wilful refusal’
• This is when you can pay but refuse not to
• Or found guilty of ‘culpable neglect’
• When you have the money but ignore the debt

The court cannot write off your debt.

Taking money from your wages

HMRC can alter your tax code to increase how much tax comes out of your wages.

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

Taking money from your savings

HMRC can take money from savings accounts at banks and building societies.

• This is only for debts of more than £1,000
• They must leave a minimum of £5,000 in savings
• They cannot take this action if your savings are under £6,000

Only 50% of joint savings are seen as yours when the debt is in your name alone.