£2000 Tax bill - Repayment Plan.

MariaAvenue

To fund my lifestyle/car/living etc throughout college and university i worked part-time in a local pub, during the summer months i would gain full time jobs through a temping agency, whilst still working my part-time job in the evenings and weekends. Over this time my tax code changed a lot, and at some points wasn't correct, as i found out years later..........
April 2010 i received a £1900 tax bill - which was a calculation of underpaid tax through being on the wrong tax codes over 3 years.

I understand i am to pay this tax back - this isn't the problem.
The problem is.....HMRC have arranged a payment plan for a payment of £50 a month which i have been paying since May 2011. I am on a very low income and just buying my first home, so now this £50 a month installment isn't manageable for me. HMRC have refused to let me pay a smaller amount of £25 each month. Giving a reason of it will not be paid by April 2014- i do not see why this time limit matters??? After all i am not avoiding the tax bill i just want a more reasonable and manageable payment plan.


Does anybody have any advice?

CLAPTON

a bit confused
if you pay 1900 back at 50 per month then that will take 38 month i.e. 3 years and 2 month ie. sometime in 2014
if you pay 1900 back at 25 per month that will take 76 months i.e. 6 years and 4 months i.e. sometime in 2018

they seem to be very reasonable to me

dori2o

Just think yourself lucky that you have the extra 3 years to pay it back, I have to pay my taxes every month with no choice of 'spreading' the cost.

There is no automatic right to spreading the cost of tax, it is a concession that HMRC allow. They would be well within their rights to demand payment in full.

chrismac1

I think you need to be very careful about more than just tax. For once I agree with HMRC, this is a very decent plan you are on and many of my clients would give their back teeth for it. The notion that you are buying your first home and £25 per month is deemed make or break to your finances is what really worries me, though. If I were your accountant or even just a friend I would be doing my best to put you off, I speak as someone who punted into the property market aged 21 and escaped negative equity of about £40k back in 1990 in the last crash by the skin of my teeth, I basically found a "greater fool" to offload the flat to.

We are currently at a 250-year low in UK interest rates, and opinions are divided 50-50 as to whether inflation or deflation is the greater threat. If it's deflation and you keep your job, sweet. If it's inflation you could be looking at an extra 5% on base rates by 2016 no problem. That is your "stress test", can your cash flows stand much greater mortgage payments? Based on your tax post I doubt it.

chrismac1

Bearing in mind that the result of an extra 5% inflation in the absence of big pay rises would be a truly horrible squeeze on the "squeezed middle" leading to lower house prices.....