What If I Cannot Pay My Self Assessment Tax Bill?

Trustees and beneficiaries often have to complete a Self Assessment tax return. As the income derived from a trust is seldom taxed at source (for example through the PAYE system as a wage would be), it is necessary for these individuals to report their income to HM Revenue and Customs separately.

The Self Assessment process itself is arduous enough; trustees and beneficiaries are required to complete extra forms that conventional self-employed people do not have to contend with. But after the Self Assessment has been returned, you still need to pay the resulting bill – and this is where the problems really start for many taxpayers.

There are strict penalties for those that miss Self Assessment payment deadlines. By 31 January you must pay any tax relating to the tax year just gone. This is also the final date by which your Self Assessment must be returned. If you miss the deadline you will attract a 5 per cent surcharge, and interest will begin to accrue on the outstanding balance.

Avoidance

Of course, the best option is to take steps in advance to ensure that you do not miss the deadline. If you know that you will receive income from a trust, make sure that you work out how much you will be taxed. Where possible, set this money aside in advance or upon payment. You can then choose to pay it straight away, or wait for the 31 January payment deadline.

You may also wish to consider ways that you can minimise your tax bill. There is further information available on this elsewhere on the site.

Payment proposals

If you cannot pay your full tax bill on time, you should call HM Revenue and Customs straight away. You have the right to make a ‘payment proposal’, meaning that you can ask for more time to pay. HMRC is legally obliged to consider any reasonable payment proposal.

If you promise to pay within 28 days, they will take no further action. But you should note that, if you make a proposal that would mean you take longer than 28 days to pay, HMRC may ask for details of your income and outgoings in order to make an assessment. Once a payment proposal has been made it is vital that you stick to it, as HMRC will take legal action if you fail to keep to the schedule.

What next?

If you cannot pay your tax bill, it is absolutely vital that you do not ignore the problem. HM Revenue and Customs will write to you soon after the deadline reminding you that you have a bill to pay. If you still do not contact them, they will pass your case onto your local collection office. After this you will receive a phone call and, if you do not come to an arrangement, they will begin legal action to recover the money. It is worth noting that HMRC has become significantly more aggressive in their pursuit of debts in recent months.

If you are in financial difficulty, you may wish to contact the Citizens Advice Bureau. They will be able to give you personalised advice to help you deal with your tax bill.