Severn Accounting
Tax & Accounting

Action you can take if you are struggling to pay your tax

By Ali Jaw ·

Tax bills can feel overwhelming, especially when cash flow has tightened or business turnover has dipped unexpectedly. If you’re facing a tax liability you’re struggling to meet, you’re not alone—and there are practical steps you can take right now. Whether you’re a sole trader, partnership, or limited company director, HMRC offers a range of options to ease the burden. This guide covers the actions available to you under current UK tax law and what you should consider before taking the next step.

Check your assessment and challenge if needed

Before panicking about payment, make sure the amount HMRC is asking for is actually correct. Errors do happen. Review your Self Assessment tax return (if you’re self-employed or a company director) or your Corporation Tax calculation (if you run a limited company). For the 2024/25 tax year, the basic personal allowance remains £12,570 for those under 65, and the higher rate threshold sits at £50,270.

If you believe your assessment is wrong, you have the right to appeal. You must do this within 30 days of the notice of assessment. Common grounds for appeal include:

  • Calculations made in error
  • Allowable expenses you’ve missed
  • Relief claims you’re entitled to but haven’t claimed

Contact HMRC’s Self Assessment team or your local tax office with evidence. Sorting this out before panicking about payment could save you time and stress.

Explore Time to Pay arrangements

If your assessment is correct but you simply don’t have the funds right now, HMRC’s Time to Pay (TTP) arrangement is worth exploring. This allows you to spread your tax bill over several months rather than paying the full amount by the deadline.

To qualify, you need to demonstrate genuine financial difficulty—not just inconvenience. You’ll typically need to show:

  • Current cash flow projections
  • Details of your business or employment income
  • Existing debts and outgoings
  • Why you cannot pay in full

The good news is that TTP arrangements can be set up quickly, sometimes within a few days. You can request one online through your HMRC login, by phone (0300 200 3822), or by writing to your local tax office. Importantly, interest and penalties continue to accrue during a TTP arrangement, so this is a breathing space rather than a permanent solution.

Review your allowable expenses and reliefs

Have you claimed all the deductions and reliefs you’re entitled to? Many business owners inadvertently leave money on the table.

For the self-employed, ensure you’re claiming:

  • All business running costs (rent, utilities, software)
  • Vehicle expenses (fuel, insurance, maintenance)
  • Professional development and training
  • Home office allowance (£10 per week if using part of your home)

For company directors, check you’ve claimed:

  • Director’s pension contributions (tax-deductible and reduce Corporation Tax)
  • Business premises costs
  • Equipment purchases (capital allowances)

Working capital relief, trading loss carry-back, and research and development tax credits may also apply depending on your circumstances. Recalculating your liability properly could mean a lower bill overall.

Consider professional help and debt support

If your situation is more serious—multiple unpaid tax years, County Court Judgments, or mounting debt—professional guidance is invaluable. An accountant or tax advisor can review your affairs, identify missed reliefs, and negotiate with HMRC on your behalf. Many firms, including ourselves at Severn Accounting, can request a TTP arrangement or explore other solutions like Statutory Debt Repayment Plans.

If you’re genuinely unable to meet your obligations and facing insolvency, you may need to consider:

  • Informal debt arrangement with creditors
  • Formal Company Voluntary Arrangement (CVA)
  • Administration or liquidation (for limited companies)
  • Trust Deed or sequestration (in Scotland)

These are serious steps and require proper advice from an insolvency practitioner, but they exist to help when circumstances have genuinely become unmanageable.

Act quickly

The key is not to ignore the problem. The longer you leave an unpaid tax bill, the worse it becomes—interest accrues at 8.5% per annum, and penalties can reach 100% of the unpaid tax if HMRC suspects deliberate non-payment.

Contact HMRC or seek professional advice as soon as you realise you’ll struggle to pay. Most of the solutions outlined here require proactive engagement rather than reactive crisis management.

For tailored advice, contact Severn Accounting — we’re here to help.