Severn Accounting
Tax & Accounting

Struggling to pay tax – what should you do

By Ali Jaw ·

Tax bills can catch anyone off guard. Whether you’ve had a sudden drop in income, unexpected expenses, or simply miscalculated what you owe, facing a tax bill you can’t afford to pay is stressful. The good news is that HMRC isn’t unreasonable—there are several legitimate routes available to you, and taking action sooner rather than later is always your best bet.

Act quickly and contact HMRC

The worst thing you can do when struggling with a tax bill is ignore it. If you’ve received a Self Assessment bill you can’t pay in full, or you’re expecting to owe money when you file your return, contact HMRC before the payment deadline. This is crucial because:

  • HMRC can impose penalties of up to 5% of the unpaid tax if you miss the deadline
  • Interest accrues daily on any overdue amounts at 8.5% per annum (as of the 2024/25 tax year)
  • The longer you wait, the larger your debt becomes

You can contact HMRC’s Self Assessment helpline on 0300 200 3310. They’re genuinely willing to discuss your circumstances and explore options with you, but only if you engage with them proactively.

Request a Time to Pay arrangement

One of the most common solutions HMRC offers is a Time to Pay arrangement. This allows you to spread your tax bill over several months rather than paying it all at once. The process is straightforward:

  1. Contact HMRC and explain your financial situation honestly
  2. Propose a payment schedule you can realistically meet
  3. If HMRC accepts, you’ll have a formal agreement in place

These arrangements typically last between 3 and 12 months, though this varies depending on the amount owed and your circumstances. It’s worth noting that interest continues to accrue during this period, but it’s far better to have a manageable payment plan than face escalating penalties.

For company tax bills, the rules are similar. If your limited company owes Corporation Tax (currently 25% on profits over £250,000 for the 2023/24 tax year), you can request a Time to Pay from HMRC’s helpline for Companies House matters.

Review your tax position

Before agreeing to pay a bill in full—or arranging payments—it’s worth double-checking whether you’ve claimed all the reliefs and allowances you’re entitled to.

Self-employed traders should ensure they’ve claimed:

  • All legitimate business expenses
  • Capital allowances on equipment and vehicles
  • Loss relief if your business made a loss
  • Trading Allowance (£1,000 from April 2024 if eligible)

Employees might have overlooked:

  • Work-related expenses (uniform cleaning, professional fees, subscriptions)
  • Marriage Allowance if your partner has unused Personal Allowance
  • Charitable donations under Gift Aid

Everyone should verify their Personal Allowance is correct (currently £12,570 for 2024/25). If you’ve overpaid tax through PAYE, you may be entitled to a refund that could offset what you owe.

Errors do happen, and HMRC is usually happy to discuss adjustments if they’re made promptly and honestly. This is where professional help can make a real difference—an accountant can spot reliefs you’ve missed and potentially reduce your bill significantly.

Consider professional support

If your tax situation is complex, or if you’re unsure about the best way forward, seeking advice from a qualified accountant is a sound investment. They can:

  • Review your accounts and tax calculations for accuracy
  • Identify missed reliefs and allowances
  • Negotiate with HMRC on your behalf
  • Help structure a Time to Pay arrangement that HMRC will accept
  • Advise on business planning to avoid similar situations in future

For limited company directors, this becomes even more important. Poorly managed cash flow can leave you personally liable for company debts if insolvency occurs, so getting proper guidance early protects you legally and financially.

Moving forward

Tax problems rarely disappear on their own, but they’re manageable if you tackle them head-on. Whether you need a Time to Pay arrangement, a tax relief review, or simply professional guidance on next steps, HMRC and qualified accountants are there to help.

The key is to act now. Contact HMRC this week if you’re struggling. The conversation might be uncomfortable, but it’s always better than the consequences of inaction.

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