HMRC Debt Management HMRC debt
If you have debts of over £5000, you may be able to write off your debt with an IVA

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What is HMRC debt?

HMRC (Her Majesty’s Revenue and Customs) deals with debt relating to income tax arrears, among other debts.

If you owe debts to HMRC, they’re classed as priority debts, and you need to pay them as soon as possible. The consequences of not paying your tax debts are serious, and can include imprisonment.

What happens if you owe HMRC money?

The first people you should talk to if you owe money to HMRC, are HMRC themselves. They may be one of the largest departments in the government, but they aren’t there to catch you out or ruin your life.

Give them a call on 0300 200 3300. They’re incredibly helpful and they have very knowledgeable staff available during the week between 8am – 8pm, and on Saturdays between 8am – 4pm.

HMRC want your income tax arrears to be paid before they issue you your next tax bill.

What happens if I don’t pay HMRC debt?

If you don’t pay your tax debts, including tax credit debts, HMRC could take action against you:

Start bankruptcy proceedings

If you owe more than £5,000, HMRC could start bankruptcy proceedings against you, which can lead to assets you own i.e. your home, being sold to settle your debt.

Issue a magistrates’ court summons

If you owe HMRC less than £2,000, they can issue you with a summons to attend a hearing where you may be instructed to make pay arrangements.

Apply for County Court Judgement (CCJ)

HMRC could take out a CCJ against you. If they do, you’ll need to fill in forms and, based on your disposable income, set up a legal pay arrangement.

Direct recovery of debt

HMRC don’t need a court order to recover debts. They can take money directly from your savings account.

Taking control of your tax debts

Getting back in control of your tax debt doesn’t have to be demanding. Even if it does feel overwhelming.

Check your tax bill is right as soon as possible

People assume that a government organisation like HMRC always get their tax calculations right, but that’s not always true. If you’ve been told you’re in tax arrears, we advise you to double check their calculation and determine for yourself if you owe money.

Make sure:

  • You’ve provided HMRC with your up to date business finances

  • All of your business expenditure figures are correct

  • HMRC has your personal or financial information up to date

If any of this information is out of date or incorrect, it could result in miscalculations or overestimates of what you owe.

Time to pay arrangements

HMRC don’t chase payment like other creditors. They will escalate the recovery process quickly. Before you get to that stage, consider setting up a Time to Pay arrangement, even if you’re in financial hardship.

This payment arrangement is a deal you can strike with HMRC taking into account your financial circumstances to repay debt spread over a series of payments, giving you breathing space.

Make a payment

As soon as you’ve spoken to HMRC about organising a pay arrangement, make a payment. Even if HMRC reject your payment plan, at least you’ve made an effort to pay something.

The reason for making even a token offering is that if HMRC look at your disposable income and assume you are trying to avoid paying tax, you could face more serious consequences than just a late payment fine.

Put together a budget

Once you’ve determined an accurate tax debt amount, you can begin the process of putting in place a payment plan to repay any debts owed.

Seek debt advice

If you’re self employed and you aren’t sure how to handle your HMRC debts, or you’re uncertain about your personal tax account, seek debt advice as soon as possible.

There are a number of UK charities that can help, including Business Debtline, Citizens Advice, or Tax Aid.

Get free debt advice today

You can get free debt advice from IVA Advice. While many people may be wary of asking for help, it’s important to take responsibility for your situation. We will offer you a plan that deals with all aspects of your financial situation, including debt advice. If you feel like there’s nothing you can do to deal with your debts, and you want advice on writing them off and doing monthly payments, then contact IVA Advice. We can help you with a debt solution or IVA proposal. We’ll help you to prepare a budget and work out what options there are to deal with your debts. Call IVA Advice and chat with us, so we can understand the best way to help you.