By Sam Bacall, Partner. 

Even with the best planning, unexpected expenses, a dip in income, or just a tougher year than usual can leave you facing a tax bill that you might not be able to pay.

If you’re in that position, don’t panic – if you act quickly, you’ll have more options for dealing with the issue.

HM Revenue & Customs (HMRC) expects payment on two key dates:

• 31st January – Balancing payment and any tax owed from the previous year.

• 31st July – Second payment on account (if applicable).

If you miss either of these deadlines, you’ll find that the penalties and interest start racking up.

They won’t accept “I was busy” as an excuse, so it’s important that, if you can’t pay, you still speak to HMRC to try to work out an alternative.

What to do if you can’t pay

If you know you’re going to struggle here’s what we recommend:

1. Contact HMRC early

It’s not a fun phone call, but it’s far better than waiting for a penalty letter.

If you get in touch before the deadline, HMRC is more likely to work with you on a repayment plan rather than hitting you with fines.

2. Set up a ‘Time to Pay’ arrangement

For tax bills under £30,000, you may be able to spread payments over 12 months with a Time to Pay arrangement.

If you owe more, you’ll need to speak directly with HMRC to negotiate a plan.

Interest still applies, but this can help you avoid harsher penalties.

3. Reduce your payments on account

HMRC calculates payments on account based on your previous income.

If this year has been leaner than previous periods, you may be overpaying and reducing these payments could make your bill more manageable.

4. Adjust your finances where possible

It’s not the most exciting solution, but reviewing your expenses and making some temporary cuts can free up cash.

Small changes now could mean avoiding unnecessary penalties later.

When to speak with your accountant 

Speak to your accountant as soon as you think you may have issues with paying – especially if you feel you may struggle to negotiate with HMRC.

We can help you:

• Find the best solution for your situation so you don’t agree to unrealistic repayment terms

• Plan ahead so this doesn’t happen again next year

• Speak to HMRC on your behalf, making the process far less stressful

In short, we strongly suggest that you act now if you’re struggling with your ITSA bill this year.

The sooner you take control, the easier it will be to find a solution that works.

For help or more information, please get in touch.