• HMRC debt management – What you need to know!


HMRC debt management – What you need to know!

HMRC debt management

This guide will cover everything you need to know about HMRC debt, from how to deal with it to what can happen if you ignore it.

Maxine McCreadie
Maxine McCreadie

8th August 2023


Her Majesty’s Revenue and Customs (HMRC) is the department of the UK government responsible for the collection of VAT, National Insurance, and other types of tax debt.

HMRC debts are considered priority debts which means there can be serious consequences for failing to pay them, such as court action, bailiffs, and, in some cases, imprisonment.

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What is HMRC debt?

HMRC debt covers a range of debts owed to HMRC, including:

  • Income Tax (PAYE)
  • National Insurance
  • VAT arrears

HMRC debt can occur for a variety of reasons but, in most cases, happens when you’ve underpaid on your taxes or overclaimed tax credits.

What if I can’t pay my HMRC debt?

Because HMRC debt is classed a priority debt, it’s important you reach out for help and advice as soon as possible if you have already missed a tax deadline or know you won’t be able to make payment on time.

Not being able to pay your tax bill in full can be daunting, but there is help available and HMRC can be more understanding than other creditors as long as you reach out for help sooner rather than later.

For example, while other creditors can harass you multiple times before passing the debt onto a debt collection agency, HMRC follow a formal process that can escalate quickly if not complied with.

Contact HMRC

The first step when you owe tax to HMRC and can’t pay should be to contact the HMRC Debt Management department by calling 0300 200 3887 Monday-Friday 8am-8pm.

By reaching out as soon as possible, you can discuss your situation with a HMRC officer and potentially come to a mutually beneficial agreement to repay your debts at a more affordable rate.

This can reduce the financial pressure on you or your business and prevent debt collection agencies from chasing you for the amount owed.

However, if no agreement is made, a debt management officer may be appointed to determine whether you are being honest about your financial situation or are withholding funds for other reasons.

What is a Time to Pay arrangement?

For individuals struggling to keep up with HMRC tax debt, a Time to Pay arrangement can be a way to repay what you owe in monthly instalments, typically over the course of 12 months, instead of in a single payment.

Entering into a Time to Pay arrangement will also put a stop to further charges being added to your total tax balance.

However, this timeframe can differ depending on your financial circumstances and affordability and if HMRC don’t believe you will be able to keep up with regular payments, your request for a payment plan will be denied and you will be asked to pay the full amount owed in full.

Having a history of conducting your tax affairs with no problems in the past, such as making payments in full and on time, can increase your chances of being accepted for a Time to Pay arrangement.

During a Time to Pay arrangement, all other taxes must be paid when they are due or the arrangement can go into default.

When this happens, HMRC will lose confidence in your ability to make future payments and may be less willing to come to an alternative arrangement.

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What can HMRC do if I don’t pay my debt?

Failing to pay HMRC debt can have serious consequences for you and your finances and HMRC has a range of powers to recover unpaid debts, including:

Apply for a County Court Judgment (CCJ)

Applying to the court for a CCJ is just one of the actions HMRC may take to get you to repay your debts.

Failure to address any County Court proceedings against you can cause further damage to your finances and potentially put your home, business, and assets at risk.

Send bailiffs to your home

HMRC don’t need a court order to visit your business premises and can seize work equipment up to the value of the debt owed. Even if you don’t have enough goods at your business premises to cover the debt, they can visit your home and take goods from there instead.

Failure to give bailiffs permission to enter your business premises or home can result in them obtaining a warrant to break in.

Apply for a Direct Earnings Attachment (DEA)

HMRC can take the money they are owed directly from your wages before you receive it through a DEA.

They do this by instructing your employer to deduct a certain amount each month until the full amount has been repaid.

Issue a summons for a court hearing

HMRC can issue a summons for a court hearing if you owe less than £2,000, which you’ll need to attend with a budget to support an offer to pay in instalments.

Failure to keep up with these payments will result in another court hearing being arranged, where a decision will be made on whether you should be sent to prison for ‘wilful refusal’.

Start bankruptcy proceedings

Bankruptcy is a serious action HMRC can take to recover debts of over £5,000 and can lead to your assets, including your home, being sold to settle your debts.

Being bankrupt will also limit your career choices and result in long-term consequences for your finances.

Take money from your savings

HMRC can take money directly from savings held in banks and building societies to pay tax and tax credits if the debt exceeds £1,000 and there is a minimum of £5,000 left in savings.

So, this wouldn’t happen if your total debts were under £6,000.

However, if you have joint savings and the debt is only in your name, only 50% of the savings will be classed as yours.

A massive thank you

“I’d like to say a massive thank you to Carrington Dean for helping me. It feels like I have control of my life again.”

Where can I get free advice and guidance with HMRC debt?

Dealing with HMRC debt can be daunting, but there is help available. Waiting to take action or ignoring mounting debt will only make the situation worse and cause further damage to your finances. From a Company Voluntary Arrangement to a Debt Management Plan, there are various solutions available to help you repay tax owed in a way that suits your financial situation.

Here are some organisations you can contact for free advice and guidance with HMRC debt:

  • Tax Aid – A free, independent, and confidential service specifically designed to help individuals with tax-related questions and problems that HMRC can’t sort out. Call 0845 120 3779 Monday-Thursday 10am to 12pm.
  • Citizens Advice – The UK’s largest advice provider where specialist debt advisors can help individuals with personal and business issues. Call 0800 144 8848 Monday-Friday 9am to 5pm.
  • Business Debtline – A debt advice service from the Money Advice Trust offering practical self-help for self-employed individuals and business owners dealing with debt. Call 0800 197 6026 Monday-Friday 9am to 5pm.
  • Tax Help for Older People – A free, independent tax advice service specifically designed for older people dealing with tax arrears and tax-related money worries. Call 01308 488066 Monday-Friday 9am to 5pm.
Maxine McCreadie
Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed's, and various other debt solutions.

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Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

August 8 2023

Written by
Maxine McCreadie

Edited by
Ben McCormack

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