Here’s what you need to know when it comes to your self-assessment tax due and what to do if you can’t afford to pay.
Your self-assessment tax due for 2023-24 is due for payment by 31 January 2025. If you can’t pay by the deadline, HMRC will charge you interest on the unpaid amount daily using the HMRC rates.
Any tax unpaid by 28 February 2025 will also incur a 5% surcharge, so if you owed £100, you’d pay a surcharge of £5, plus the interest.
Whilst owing HMRC feels scary, don’t panic – you do have options available!
Self-Assessment Tax Payment Plans with HMRC
If you can’t pay self-assessment tax on time, get in touch with HMRC before the deadline to discuss your options. HMRC will work with you to figure out what you can afford. HMRC will put together a payment plan via direct debit called a ‘Time to Pay’ arrangement to clear your debt in instalments.
If you set up a payment plan with HMRC in advance of the deadline, you won’t be charged the 5% surcharge on your unpaid self-assessment tax. A small win – but you will still pay interest!
Should you miss any instalments, HMRC may cancel the arrangement and seek to collect the amount in full!
Self-Assessment Payments on Account Owed
What if you can’t pay your payments on account? Whilst you won’t incur any surcharges on the payments on account if they’re not paid, HMRC will apply interest and chase you for the amounts.
You can set up payment plans for these too, but you may also want to consider if you can reduce these.
What are payments on account? Your payments on account are payments towards your next tax bill, HMRC use last year’s tax bill to work these out and expect you to pay 50% in January and then again in July, meaning they’re collecting tax from you quicker!
You can Reduce your Payments on Account if you are expecting your next tax bill to be lower, then you can reduce your payments on account to reflect what will be owed. However if you overstate the reduction to the payments on account, guess what? A surcharge on the difference of 5% (Ouch!).
You or your accountant can reduce your payments on account when submitting your tax return, over the phone or online.
Summary
Owing HMRC is likely going to be overwhelming and feel like a cloud hanging over you. So if you can’t pay your self-assessment tax – reach out to us at Brisan to understand your options and to plan going forward for what’s owed and your future tax bills.
We have experts who can guide you through your options and give you peace of mind through our tax and cashflow planning solutions and being experts in dealing with HMRC.
