Paying your Tax Bill: What to do if you can't afford it

I Hate Numbers: Simplifying Tax and Accounting

Welcome back to another episode of "I Hate Numbers," where we aim to guide you through the maze of financial challenges. Today, we're tackling a common concern: "Paying Tax Bill." As your dedicated business finance fixers, we've got your back, offering insights to navigate this stressful situation.

The Initial Situation

Having filed your personal tax return, you may face the daunting reality of lacking funds to meet the obligation. It's a scenario that can induce sleepless nights, but worry not – we're here to provide a roadmap to alleviate the stress.

Stay Calm and Take Action

In such circumstances, panic is not the solution. Stress only compounds the issue, leading to undue anxiety. Take a moment to breathe, relax, and follow our suggested steps to address the challenge effectively.

Arranging Time to Pay with HMRC

If your funds are insufficient, the crucial step is to initiate a payment arrangement directly with HMRC. We recommend the online mechanism, ensuring a smooth process without the need for direct conversations.

Understanding HMRC and Budgeting

Recognize the distinction between tax collectors and assessors at HMRC. Empathy goes a long way. Before contacting HMRC, assess your affordability by delving into your personal and business cash flow. For effective budgeting, explore the BudgetWhizz online platform we've linked in the show notes.

Payment Arrangements and Penalties

HMRC typically accommodates at least a six-month payment arrangement, provided efforts to raise funds are evident. Negotiate terms and build a rapport. However, remember to make arrangements by the deadline to avoid a 5% penalty surcharge. Late filing and payment penalties are also imminent without proactive communication.

Payments on Account

Understanding payments on account is crucial. Triggered if your tax bill exceeds a thousand pounds, it involves paying upfront towards the following year's tax bill. Flexibility exists to reduce payments if income expectations change, but accuracy is key to avoid interest charges.

Reviewing Previous Tax Returns

Moreover, consider reviewing past tax returns, as adjustments within a four-year window may be possible. Seek guidance from a competent accountant for any overlooked claims or expenses.

Conclusion

In conclusion, handling tax-related stress involves proactive steps – reviewing returns, making payment arrangements, adjusting payments on account, and ideally setting aside funds for future tax payments. Share this episode with those who may benefit, and remember, keep stress levels down as you take charge of your tax situation. Until next time, stay financially savvy!

This podcast uses the following third-party services for analysis:
Chartable - https://chartable.com/privacy