Unable to pay tax bill: Any ideas?

belisama · 3 August 2008 at 12:34PM

Hello helpful people - this is my first post and hope you can give me some advice.

I am self employed, and have done my tax calculation online for 07-08 (but not sumbitted it yet - don't plan to until the final deadline). By my current reckonning I have approx £6,000 to pay for 07-08, plus £2,000 in advance for 08-09.

All well and good, except that, for a variety of family and financial reasons, I've had to spend my savings, and (while I am about to try) am unlikely to have the funds to pay come January. This is due to lack of work and further accumulating debts.

What I'd like to know is - are there any schemes for paying tax back in installments? How does the tax man view this? Will they take the attitude that small frequent payments are better than none? if I can't pay (or can't pay it all at once) what will happen? And finally - is it better to approach them before or after the payment deadline?

Sorry, that's a lot of questions, but any advice would be most welcome, if only to put my mind at rest/put me in the picture.

Thank you

sodamnfunky · 3 August 2008 at 1:51PM

Id submit the return now, and contact your tax office ASAP. I have a mate who couldnt pay his tax in January this year, so he paid a bit, then didnt pay the rest until the beginning of July, after receiving a letter from the tax office. He just called and said he would pay within 28 days.

Trust me, you wont be alone next January. I know loads of people who have no work, and are worried about living and paying their tax. So i shouldnt worry too much.

belisama · 3 August 2008 at 2:25PM

It's good to know that they can be paid more flexibly if needed

Mikeyorks · 3 August 2008 at 2:26PM

Your post isn't clear.

You should already have paid a large proportion of 07-08 (POA1 on 31st Jan 08 & POA2 on 31st July 2008)? So are you saying the £6k is on top of that? And, in which case the POA1 for 08-09 would normally (unless you intend to adjust downwards) be more than £2k ..... as it should be 50% of your entire 07-08 liability.

That apart. No point whatsoever delaying submission of the Return. Get it in now (in order HMRC have accurate figures to discuss) - then give it a few weeks and ring them to discuss a payment plan. It will cost you 7.5% (current rate) interest for payments made after the due date ... so the more you pay in advance of 31.1.09 the better. But that payment plan will stop them levying a 5% surcharge which comes in 28days (28.2.09) after the due date

Mikeyorks · 3 August 2008 at 2:37PM

Incidentally - you don't contact the local office for 'time to pay' .... unless the debt is already close to the recovery stage.

Go to the SA Payment Helpline .... who are a bit more reliable in ensuring the 5% surcharge isn't levied :-

http://search2.hmrc.gov.uk/kbroker/hmrc/contactus/search.ladv?sr=0&as=1&cs=ISO-8859-1&sc=hmrc&sf=&sm=0&nh=50&ha=34&tx0=366870&fl0=__dsid:&tx1=2042&raction=view

..... but do get to them well in advance of January as they're far more amenable that way (and any advice you get that they can only make arrangements up to 3 months after the due date .... is wrong).

belisama · 3 August 2008 at 4:02PM

Thanks for your prompt reply Mikey
- in the middle of 07 I did my return for 06-07, and they owed me. This was the first year of my self- employment, so there were 9 months of usual employment, 3 months of self employment in the return. There wasn't any mention of paying up front for the coming year, and the tax man seemed happy with what I sent.

It was only on filling out 07-08 online, at the end calculation, that the tax due for 07-08 (£6,000)and the up-front payment for next year 08-09 (£2,000 - actually it could be £3,000, but the principle is the same) appeared - I had no idea about it before then.

Thanks for your help - are you saying that the money only falls due on 31/1/09 regrdless of when I submit the return?(I thought they might want it sooner if they knew about it - although now you point it out, that would be daft....)

Mikeyorks · 3 August 2008 at 5:02PM

Sorry - did mean to add that you would have paid a lot of 07-08 already - unless this was your first full year. Missed that out - apologies.

On the subject of the Return - yes, the due date is 31st Jan 09 irrespective of when you file. So you should get it in soonest - then talk to them well before Jan about a payment plan. But pay as much as you can before 31.1.09 - as that reduces the interest. Don't pay them up front (as there is no credit interest) .... but save it, from now, in a high interest account and then pay a lump sum across before end Jan.

If your business is running below 07-08 levels - then you can reduce the advance sum for 08-09 (due in 2 instalments 31.1.09 & 31.7.09). But be careful to calculate any reduction very carefully, as they will charge you interest on any shortfall if you get it wrong and 08-09 turns out better than it's looking at the moment? Better to err on the upward side if you're unsure.

sodamnfunky · 3 August 2008 at 5:12PM

Mikeyorks wrote: »

Sorry - did mean to add that you would have paid a lot of 07-08 already - unless this was your first full year. Missed that out - apologies.

On the subject of the Return - yes, the due date is 31st Jan 09 irrespective of when you file. So you should get it in soonest - then talk to them well before Jan about a payment plan. But pay as much as you can before 31.1.09 - as that reduces the interest. Don't pay them up front (as there is no credit interest) .... but save it, from now, in a high interest account and then pay a lump sum across before end Jan.

If your business is running below 07-08 levels - then you can reduce the advance sum for 08-09 (due in 2 instalments 31.1.09 & 31.7.09). But be careful to calculate any reduction very carefully, as they will charge you interest on any shortfall if you get it wrong and 08-09 turns out better than it's looking at the moment? Better to err on the upward side if you're unsure.

Thanks for that, I was unaware you reduce the advance sum. This year is shaping up to be a lot less than last year.

belisama · 3 August 2008 at 5:13PM

Thanks again. My income is significantly lower so far this year, so I'll have a think about reducing the amount, just perhaps not as far as it could be. After all, if I overpay (despite it being against my principles usually) it will make the next payment easier.

Good tip about the high interest saving, too - I shall set that up (as soon as I've anything to put in it!)

Elaine_Wilson · 3 August 2008 at 11:15PM

Just to say that if you have your return all prepared then you should submit it as soon as possible. It will not affect the due dates for payment.

The advantage is that this year HMRC will only have twelve months from the date of submission to open an enquiry, rather than twelve months from the deadline date as previously.

Unable to pay tax bill: Any ideas?

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