Income Tax debt

If you find yourself falling behind with HMRC debt, it’s important to seek support straight away.

Falling into debt with your income tax, VAT or National Insurance this will typically be handled by Her Majesty’s Revenue and Customs (HMRC) and are considered to be priority debts.

Not paying these debts come with serious consequences, including court and bailiff action or – in some cases – even imprisonment.

If you find yourself in a situation where you owe HMRC debt, it’s important not to bury your head in the sand and seek advice as soon as possible.

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What do I do if I have HMRC debt?

Understandably, being faced with HMRC debt can be daunting. However, despite seeming intimidating handling this type of debt doesn’t need to be stressful.

Getting in control of HMRC debt can be done in four simple steps:

  • Check what you owe: The first thing you should do is double-check how much it is claimed you owe. Always ask yourself if you have provided the latest details of your business takings, ensured your business expenses are up-to-date and ask if they have your information correct on all correspondence. Any incorrect information could lead to a miscalculation or sometimes even an overestimation of what you owe so it’s always worthwhile to double-check.
  • Budget: Tackling HMRC debt can be done by having a simple but strict budget. Start by calculating your income and then your essential outgoings – such as food, mortgage payments and utility bills. You should then calculate your disposable income, and this is what you should use as a basis of your affordability to repay your debts. Finally, speak to HMRC to discuss setting up a regular repayment plan. You can call HMRC on 0300 200 3300.
  • Stay in touch: Always be sure to stay in touch with HMRC and ensure you keep them up to date with your financial situation. If you are going to struggle to make a payment you should speak to them before it is missed, likewise, if you’re able to make an overpayment it is advised to do so as this can provide breathing space further down the line.

What if I don’t pay my HMRC debt?

There can be serious consequences if you fail to repay your HMRC debts.

The organisation has formal processes that must be followed and likely lead to legal actions which can include applying to the court for a County Court Judgement (CCJ). This will attempt to force you to repay the balance owed and will outline what repayments you will be required to make. A CCJ will appear on your credit file and hurt your credit score.

You may also be issued with a magistrates’ court summons which will call on you to attend court with your financial details to determine a payment plan. Should you fail to comply with the agreement further court action may be required and could result in imprisonment if you continually break the rules of the agreement. It’s important to recognise that you are legally obliged to attend court when summoned.

An application for an attachment of earnings can be made by HMRC – meaning a significant proportion of your wage will be taken before you are paid. In some instances, money from any savings over £5,000 you may have will also be taken from your savings account.

HMRC can also petition to have you declared bankrupt to reclaim what is owed if your debts total more than £5,000. This will lead to assets you own – including your home – being sold to repay your debt.

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Can I find help with HMRC debt?

If you’re worried about handling HMRC debt, there are charities which can provide support and advice about the best way to proceed.

Citizens Advice: 03444 111 444

TaxAid: 0345 120 3779

Business Debt Line: 0800 197 6026

As already mentioned, it is important to address the issue of HMRC debt as soon as possible to avoid serious consequences.

For free and impartial debt advice talk to our resident expert TAD.

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