Tax or Loan

jj_5

Hi,

Hope this is the right board.

I'm currently £4k in debt to Lloyds (personal loan). I have a tax bill coming in January which is likely to be around £2k. I have NOT (stupidly) saved anything for it so far.

I am wondering, If I have extra money coming in over the next few months (likely) should I put it to the loan or the tax bill? I'm really keen to clear the loan as the interest rate is sky high on it (17%).

I obv don't want to annoy HMRC but As far as I'm aware paying tax late will incur less charges/interest than I'd incur paying the loan off.

Hope you all can help:)

Savvy_Sue

In general I'd say Do Not P Off The Tax Man!

Look around at other ways of reducing the interest on the loan?

chalkie99

Savvy_Sue wrote: »

In general I'd say Do Not P Off The Tax Man!

Look around at other ways of reducing the interest on the loan?

And, if in any doubt, P is not short for pay

Definitely pay HMRC ahead of others, not the people to get on your case.

paddyrg

Pay your tax, totally. Remember Al Capone had all sorts of alcahol, drug and prostitution rings, thuggery and murder under his belt, but what they got him on was tax.

jj_5

Thanks guys,

How would I go about reducing the interest on my loan though? could I negotiate with lloyds or is that unlikely to work?

Was considering, once it's down to £2/3k putting it onto a credit card (either interest-free or low interest) and paying it off that way..... would that work??

Thanks for replyin!:T

Savvy_Sue

Well yes, you could talk to Lloyds. But is there an early repayment fee? If not, shop around!

I'd suggest Martin's articles here as a good starting point.

heretolearn_2

On the other hand I know someone who says the HMRC is the cheapest lender around if you don't have enough money to pay everyone....but you need nerves of steel and to know how far you can push things with them.

My advice would be to call and discuss with the HMRC whether they would accept payment by installments - they normally do if you come up with a reasonable suggestion, and that would help give you a bit of breathing space.

Savvy_Sue

heretolearn wrote: »

On the other hand I know someone who says the HMRC is the cheapest lender around if you don't have enough money to pay everyone....but you need nerves of steel and to know how far you can push things with them.

And I will confess that ONCE, as a small employer, I didn't pay them all I was meant to at the end of the quarter, because I simply didn't have it - it had been an expensive quarter staff-wise, and the amount due was about 4 times any previous amount due. I also KNEW that I would have it by the end of the next quarter (grant payment coming in). AND I also knew that the only 'reconciliation' HMRC normally do for employers is at the end of the tax year. AND I even phoned them and confirmed this, without giving the name of the organisation.

But that is a different situation, and it's not a course of action I'd recommend to anyone, ever.

heretolearn_2

no I wouldn't recommend it either, but it happens.

I still think OP your best bet is to agree installment payments with the HMRC - but keep to the agreement.