Personal Tax Debts
Being in debt of any kind is stressful, but personal tax debts can be particularly worrisome because of the enforcement action HMRC can take for non-payment. For this reason, and to help you avoid future penalties, it is crucial to contact HMRC as soon as possible.
Failing to make contact when you know you owe money will be viewed in an unfavourable light by HMRC, and may prevent a solution such as a Time to Pay (TTP) arrangement being offered.
Penalties for non-payment of personal tax
HMRC’s penalty regime for late payment of income tax can severely increase your debt. A penalty of 5% of the outstanding amount is applied when your payment is 30 days late, with daily interest of 3% also being charged on the penalty.
Further penalties of 5% on the outstanding tax due are imposed after six months and 12 months, and interest accrues daily from the first day your payment was late. So what should you do if you have personal tax debts, and what options might be available to you?
Extra time to pay your personal tax debts
One of the most important considerations when dealing with HMRC debt is letting them know as soon as possible that you cannot afford to pay. Doing this demonstrates you take your tax liabilities seriously, and are keen to find a solution.
HMRC may be willing to offer an instalment plan called a Time to Pay arrangement to help you repay your tax arrears. This would provide a welcome breathing space to deal with your debts, but bear in mind that HMRC take enforcement action if the TTP terms and conditions are not adhered to.
You are more likely to be offered time to pay if you have a good record of payment with HMRC and there have been no issues in the past. Our experts at UK Debt have extensive experience of dealing with HMRC, and can advise on the best way forward.
How we can help with your personal tax debts
Our licensed insolvency practitioners can contact HMRC on your behalf after assessing your financial situation. One of the issues when applying for time to pay is ensuring you can afford the new repayments without question, so the arrangement concludes successfully.
HMRC are likely to require repayment of their debt as quickly as possible, and might therefore request higher repayments than are comfortable for you. This is where our professional input helps, as we can put forward a solid case for lower and more affordable repayments if necessary.
But what if HMRC do not offer you extra time to pay? What are your potential options then, and how can we help?
Individual Voluntary Arrangement (IVA)
An IVA is a formal debt procedure that allows individuals in serious debt to repay their creditors over four or five years. It may be a suitable solution if you owe other debts, and offers a viable alternative to bankruptcy. You are protected from creditor action within an IVA, and interest and charges on your debts are frozen.
Bankruptcy is an official insolvency process that involves the transfer of all your assets to the control of a Trustee, usually a licensed insolvency practitioner. If you are a homeowner, this includes your property which may be sold to provide a higher return for your creditors. Bankruptcy is generally seen as a measure of last resort, but it can provide a fresh start for those in serious debt.
Please contact one of our licensed insolvency practitioners at UK Debt for more information on how to deal with personal tax debts, and to arrange a free same-day consultation.