HMRC-Tax-And-Debt-Consumer-Debt-Help

HMRC Tax And Debt

HMRC stands for Her Majesty’s Revenue and Customs. In simple terms, it’s the government body responsible for collecting your taxes to fund public services in the UK. If you don’t pay enough tax on your earnings, you may find yourself in debt and owing money to HMRC. But how do you know if you’re in debt, and what happens next if you are? Here’s a brief guide to HMRC Tax and Debt.

Table of contents:

    What Do I Pay HMRC Tax On?

    If you’re wondering what you pay tax on, it includes several things, such as:

    • Your earnings from your job or self employment
    • Any other income you get, such as an interest earned on savings in a bank account
    • Income from rental properties and property sales
    • Some state benefits
    • Grants and support payments made to you or your business because of Coronavirus.
    • Most pensions
    • Income from a trust.

    Your Income Tax is a tax you pay on your income. But you don’t have to pay it on all types of income. Moreover, most people in the UK get a personal allowance of tax-free income.

    HM Revenue and Customs (HMRC) calculates everyone’s Income Tax between June and October.

    I Have A Tax Debt Bill From HMRC, What Next?

    If HMRC think you owe money and haven’t paid the correct amount, you’ll get a bill in the post. This is called an ‘assessment’. It includes an explanation of why HMRC think you owe them money, as well as a breakdown of how they calculate the amount. Also, there will be a list of any interest and penalties on top of that.

    After receiving this letter, you should contact HMRC as soon as possible to discuss your situation. Perhaps you disagree with the amount of money they claim you owe them. Or, if you need advice on what to do next, then it’s a good idea to contact them straight away as well. They’ll ask you a series of questions and offer further advice.

    If you continue to disagree with the amount owed, HMRC may send you a ‘Notice of Appeal’ letter. Filling in this letter means you intend to challenge HMRC’s decision formally.

    What Happens If I Can’t Pay The HMRC Debt

    If you are in a situation where you just can’t pay the bill, then seek advice as soon as possible. There is support available, from debt advise agencies to debt charities through to HMRC support.

    The worst thing to do is to ignore an HMRC letter and take no action. This can lead to enforcement action further down the line.

    For now, get some help as soon as possible. Here are some options that HMRC offer:

    Time To Pay

    This is a payment plan based on your financial position. Maybe you can pay the debt back over a longer period of time or in smaller repayments. The Time to Pay arrangement will be specifically made to match your situation. It include any outstanding amounts, penalties and interest.

    Nominate Someone To Help

    If you need extra help with managing your tax and debt, then you can nominate someone to help you. This could be a professional tax agent, a friend or a family member you trust. If you are struggling to cope, or you need emotional or mental health support, this could be a good option for you.

    Further Free Advice

    Maybe you would like some independent advice when it comes to dealing with HMRC tax and debt. There are many free support services available, including the Money Helper. You could go to a free debt advice provider and ask for help. Then, with their support, you can come back to HMRC to negotiate a Time To Pay arrangement for example.

    HMRC Tax And Debt Legal Enforcement Methods

    If you ignore an HMRC debt letter and you don’t seek support or help to pay it, then you could face further action.

    In order to collect outstanding tax, HMRC has debt enforcement powers ranging from court orders to asset possession.

    First, they will try phone calls, letters and text messages to contact you. If you ignore these efforts, HMRC officers have the right to visit you at your home or business address, to try to settle your outstanding tax debt. According to the HMRC, these visits lead to agreements in 80% of cases.

    First, they will try phone calls, letters and text messages to contact you. If you ignore these efforts, HMRC officers have the right to visit you at your home or business address, to try to settle your outstanding tax debt. According to the HMRC, these visits lead to agreements in 80% of cases.

    As mentioned above, perhaps you are in a vulnerable or difficult position and in need of extra support. In this case, you may be referred to a specialist team who will try to help you.

    However, if you are openly ignoring contact, then you could face enforcement methods. These include ‘taking control of goods’ which means HMRC officials can take physical possession of your goods. HMRC will then try to sell these items in a tax sale, with the money going towards reducing your outstanding debt.

    Or they can recover debts directly from your bank account, by acting on a creditor’s behalf. This is called ‘Direct Recovery of Debt’.

    If you owe tax debt, you have assets and you still refuse to pay, you could then face county court proceedings. Potentially, you may have to sell your home in order to pay your debts. Hence you’re better off avoiding this risk by facing any tax debt as soon as possible.

    Seek Help For HMRC Tax And Debt

    In summary, if you know that you cannot pay an HMRC tax debt, the best thing to do is to seek advice. Ultimately, it’s much better to be proactive. You have the opportunity to get on top of your debt and to clear it, with the right support in place. Contact a debt advice agency for free help, or ask a friend or family member if they will help you. If you find it difficult to understand the process, or you believe you do not owe the debt, then get in touch with HMRC straight away to discuss the issue.

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