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Dealing with income tax arrears

This advice applies to England

Coronavirus - if you can't pay your tax bill

If you're struggling to pay your tax bill, you should speak to HMRC straight away - you might be able to delay your payment. You can call them on their coronavirus helpline:

HMRC coronavirus helpline
Telephone: 0800 0159 559
Monday to Friday, 8am to 4pm

Calls to this number are free.

You can read more about what to do if you can't pay your tax bill on time on GOV.UK.

Call HMRC's Income Tax helpline straight away if:

  • you’re getting close to the deadline for payment and know you can’t pay your tax
  • you’ve already missed the deadline
  • you think your statement’s wrong

Income Tax helpline
Telephone: 0300 200 3300
Monday to Friday, 8am to 8pm
Saturdays, 8am to 4pm
Calls cost 12p per minute from a landline, and from 3p to 45p from a mobile

HMRC phone lines are often busy. The best time to call is between 8am and 11am on Wednesdays, Thursdays and Fridays - but you might still have to wait in a queue. 

Ask to talk about a ‘time to pay agreement’. An agreement will give you either more time to pay, or a schedule to pay your tax in instalments.

It’s usually easier to get an agreement before the deadline rather than after you’ve missed it. You might still be able to get one after the deadline, so it’s always worth calling HMRC.

You’ll be charged interest for however long it takes you to pay off your income tax debt. This starts from the first day the payment is late.

The interest rate is 3.25%.

Penalties for not paying

If you don’t speak to HMRC to arrange a time to pay agreement, they’ll charge penalties.

You’ll be charged a penalty when your payment is 30 days late, then again at 6 and 12 months. HMRC charges interest on penalties.

The penalty is 5% of the original amount you owe HMRC.

Example if you haven't paid after 30 days:

Your income tax payment is £10,000 and was due by midnight on 31 January.

It’s now 2 March and you haven’t paid it, so you’ll be charged a penalty of 5%.

5% of £10,000 = £500

30 days of interest at 2.75% APR = £22.50

You now owe £10,522.50

Example if you still haven’t paid after 6 months:

Original penalty of £500

Additional penalty of 5% of £10,000 = £500

181 days (6 months) of interest at 2.75% APR = £135.75

You now owe £11,135.75

Information you need to tell HMRC

When you call HMRC about a time to pay agreement, you should be prepared to explain in detail why you can’t pay.

You’ll be asked personal questions about your spending and finances. These will include what you earn and how much your household bills are.

You can use our budgeting tool to work this out. 

You could also be asked:

  • what other family members earn
  • what you spend on clothes or holidays
  • what savings or other assets you have

Don’t guess if you don’t know an answer - ask if you can call back with the details they need.

Tell HMRC if there are any special circumstances, for example you’ve had a serious illness or one of your customers became insolvent and didn’t pay you.

If HMRC agrees that these are things you haven’t been able to plan for, they might be more likely to give you time to pay. They could even delay the start of the time to pay agreement.

It's a good idea to keep a record of the dates and times of any calls you make to HMRC. Try to write down the name of the person you speak to as well.

What to offer HMRC

If you can, offer a lump sum that you can afford to pay straight away. You’re more likely to be given time to pay the rest.

You should talk to an adviser at your nearest Citizens Advice first if you’ll still owe more than £5,000 after paying a lump sum.

You’ll still be charged interest while you’re on a time to pay agreement.

Ask HMRC to confirm your agreement in writing, so you know how much you’ll be paying in total.

If your circumstances change and you think you can’t pay the agreed amount, you need to contact HMRC before you miss an instalment. If you wait until after you’ve missed a instalment, HMRC will cancel your agreement and demand payment in full.

If you’re turned down for an agreement

Time to pay agreements aren’t given to everyone - HMRC will consider your individual circumstances.

Ask to be referred to someone more senior and ask for a full response in writing. If you get turned down and think your case wasn’t properly considered, follow the steps on GOV.UK to complain.

If you think the amount you’ve been charged is wrong

If you think your statement is wrong, you should call HMRC’s Income Tax helpline and ask them to explain it.

Income Tax helpline

Telephone: 0300 200 3300
Monday to Friday, 8am to 8pm
Saturdays, 8am to 4pm
Calls cost 12p per minute from a landline, and from 3p to 45p from a mobile

HMRC phone lines are often busy. The best time to call is between 8am and 11am on Wednesdays, Thursdays and Fridays - but you might still have to wait in a queue. 

There are lots of reasons why the tax you’re being asked to pay could be wrong. It could be because:

  • you made a mistake on your tax return
  • you stopped being self-employed, but didn’t tell HMRC
  • you missed filing a tax return, so your income tax has been estimated - HMRC call this a ‘determination’
  • a payment you made previously hasn’t been taken into account
  • your profits have fallen, so any payments on account included in your bill are too high

Contact the charity TaxAid if you earn less than £20,000 a year and can’t sort out your problem with HMRC. The help on their website is available to everyone, whatever you earn.

TaxAid helpline

Telephone: 0345 120 3779
Monday to Friday, 10am to midday
Calls cost up to 12p per minute from a landline and 45p from a mobile

If you made a mistake

If the amount is wrong because you made a mistake, it’s normally not enough to tell HMRC about it over the phone. You’ll need to correct the mistake using the proper forms or by making corrections to your online tax return. HMRC will tell you which to use.

If HMRC made a mistake

You might be able to appeal an income tax decision if it looks like HMRC made a mistake. It’s best to speak to an adviser at your nearest Citizens Advice before doing this, or talk to an accountant.

You can delay paymentwhile the appeal runs, but you’ll still be charged interest.

Other action HMRC can take

HMRC can take further enforcement action if you haven’t paid your income tax and haven’t made an agreement with them to pay it.

It's rare to be prosecuted or sent to prison for tax evasion, but HMRC can: 

  • take your possessions, including vehicles, to sell at auction (called ‘distraint’)
  • take money directly from your bank account, if your debt is £1,000 or more
  • take court action
  • make you bankrupt, or close down your business

HMRC don’t do these things in order - they take whichever action they think is the most likely to work, based on the size of your debt.

If you’re having problems paying your income tax and need further help, you can talk to an adviser at Citizens Advice, or contact TaxAid.

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