I can't pay my Self Assessment bill - what do I do?

Two weeks have now passed since the deadline by which Self Assessment taxpayers must settle their bills.

In these strained economic times, though, many will have found it impossible to meet that deadline. Every year thousands of taxpayers require extra time to pay. If you find yourself in this situation, it is important that you take prompt action.

Act now

It is important to remember that the longer you leave your unpaid bill, the bigger it will get. It is all too common for taxpayers to simply ignore the problem, putting it off until a later date or hoping that it will go away altogether. This will only make the problem worse.

If you can’t pay your tax bill, the best way to deal with it is promptly. By tackling the problem head on you can ensure that it is resolved as quickly and as painlessly as possible.

Remember credit

It is now possible to pay HMRC by credit card. Although this was a controversial move by the taxman, and although it is not recommended that you rely on credit to settle your tax liabilities, this option could help to solve your tax issue if the problem is one of cashflow.

Review your finances

In order to tackle your tax problem you need to make an honest and comprehensive assessment of your financial position. This is the first step in the process of making a payment proposal to HMRC.

Make a simple budget by listing all of your outgoings and all of your projected income. Consider how much you could realistically pay each month, and add this to any amount you already have set aside to pay HMRC. Write this down and make sure that you have it to hand before you call.

Make a proposal

Once you have assessed your financial position, you should call HRMC as a matter of urgency. The longer you leave this, the higher the penalties and interest charges you accrue will be.

Different people can have wildly divergent experiences of HMRC’s phone operators. Some find them to be congenial and accommodating, while others unfortunately get short shrift. You should make sure that you are well prepared before you call, and that you have all of the relevant material to hand.

HRMC will ask why you are late paying, and whether you can borrow the money elsewhere. They will then ask you to make a proposal for a payment plan, in which you will spread the debt out over a longer period.

HMRC is obliged to consider any reasonable proposal, but there are some important factors that you must remember. Primary amongst these is that you must be realistic. If you fail to stick to your agreed payment plan, HRMC will pursue legal action against you. You should therefore ensure that you are honest about your financial position, and that you only make a proposal that you are confident you should stick to.

If you are concerned about your tax bill, or if you are facing legal action from HMRC, you should seek independent legal advice, for example from a solicitor or the Citizens Advice Bureau.