Can't pay tax this year

Steel_2

After being ill last year, not earning any freelance income for six months and using my savings to keep going on the bills and mortgage, I've finally reached the point where I can't pay my taxes in January.

I can pay the sum over the next few months as my freelance income is finally rising again and I've decided to take on a temporary part time job to make absolutely sure and to get rid of all of my debts once and for all..

However I have two questions:

1) Does anyone know how long the IR will wait before they get nasty? I know I get a fine and interest at 8% and I'm willing to accept that, but will they hang on if I pay a bit each month? I'm pretty sure I can do it in four months.
2) If I get a part time job will they requisition my income from source? I'm worried they will simply take all of my part time income, whatever that may be, and if I have a lean freelance month that could leave me without what I need to cover the mortgage.

Does anyone know?

jimmo

Take a look at this thread. It seems to have most of the answers http://forums.moneysavingexpert.com/showthread.html?t=661955

Steel_2

Thank you!

Had as read through and it seems clear that they will wait as long as a they know what is going on and there is a payment structure is in place.

Hoddie_2

Exactly, though to avoid the 5% surcharge you need to agree a payment schedule with HMRC before 31/1.

Mikeyorks

Steel wrote: »

Had as read through and it seems clear that they will wait as long as a they know what is going on and there is a payment structure is in place.

Exactly - and the sooner you get that in place, the better. If you're paying over several months they will normally expect you to pay by Direct Debit.

There is no 'fine' (I'm assuming the Return is in?). But you need to avoid the 5% surcharge by getting the arrangement in place. They will charge 7.5% interest on the daily balance after 31/1 - but will include that in the instalments of the DD.

The payment helpline number is with the Statement details you have.

djm1972

If it's an option for you, look at doing a balance transfer from a credit card in order to pay your bill. If you apply for one of the current deals you could get 0% over 6 months, and one card (Capital One) is offering a special "Balance Transfer" card with no balance transfer fee.

Steel_2

djm1972 - the amount of credit I have is such I wouldn't want to transfer more funds across. I stand at £14K at the moment and a balance transfer could be the straw that breaks the camel's back.

I spoke to HMRC in the week and they have agreed to allow me to pay in installments. Payment schedule and payment slips turned up this morning and the interest in only around £25.

I got a pretty good grilling about why I couldn't pay and went through all possible sources of getting the money, like credit cards. Eventually I suggested four equal payments beginning at the end of January and it was agreed. I also went out and got a part time job to make absolutely sure I can make the payments, and I managed to negotiate a results-based commission so I may even be able to pay it off sooner. Once paid off, I'll keep on working and add this extra income to my debt snowball until everything is paid off.

Once again, thanks to everyone for your help and suggestions.

Debt_Free_Chick

Steel wrote: »

After being ill last year, not earning any freelance income for six months and using my savings to keep going on the bills and mortgage, I've finally reached the point where I can't pay my taxes in January.

Sorry, but this doesn't make sense.

What you need to pay in Jan 2008 is the balance of your tax from 2006/2007. You've received this - it's included in the profit you declared. So you have the money - or you've had it, but spent it

In addition, you need to pay half the tax you incurred on your profit in 2006/2007 as a payment on account, for 2007/2008. If your profit for 2007/2008 is likely to be lower than the previous year, then you can apply to pay a lesser amount "on account".

All in all .... you've received the money (possibly not, if your projected profit for the current year is less than last year).

First off .... if your profit this year is likely to be less than last year, then apply to pay a reduced payment on account. However, this will only be credited against your profit for this year (2007/2008). For 2006/2007, you've received enough cash to pay what you owe. You could apply to reduce your on account payment for 2007/2008 - have you done that?

Sorry to appear to be harsh, but for past years, you've actually received the money to pay your tax. For future years, you can apply to reduce your on account payment(s) if your profit reduces.

HTH

Steel_2

When I said I used my savings, I was referring to the money I'd put aside (saved) to pay the taxes owe. I have had two periods of illness in the last three years which has resulted in my tax on account for one year being refunded, effectively starting me from the beginning again for payments on account.

I put the refund, which wasn't a great deal as it was based on my first year's profit, into the bank. I then worked the next year and added to it the tax money for 2006-2007 tax year.

In Apr 2007 I became ill and unable to work for six months and used this money to keep my bills paid during this time. My projected income for 2007-2008 has already been reduced by my accountant after I worked out a forecast for my earnings up until apr 2008.

Regardless, the net result is I have no money to pay taxes.

I've only ever earned a maximum of 16k in my best year as a freelancer so the tax figures we're talking about aren't a great deal. But when you're struggling to get back up off the ground and have very little money, the figures feel enormous, hence me going back to work until the freelance income is back up to level again.