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23rd January 201713 money saving ideas to combat debt
13th February 2017January 31st is HMRC’s final deadline for filing and paying your personal tax liability for the tax year 2015/16.
Failure to pay can result in a fine and interest being added to your account.
Self-employed people and people with significant amounts of non-PAYE income can find themselves stuck when hit with a larger than expected tax bill.
Our debt team has compiled some advice for people who are struggling to pay back debts. It includes advice on what to do if you know you won’t be able to pay on time, what to do if you have been contacted by HMRC and what to do if you are struggling with other creditors as well as HMRC.
First steps
A good first step for anyone struggling to pay self-assessment debt is trying to reduce your liability.
Offsetting allowable business expenses against your tax bill is the easiest way of bringing down your tax liability. You can claim expenses for a whole range of things detailed in full on HMRC’s website.
Transport costs, specialist clothing and office costs are all examples of allowable expenses.
There may be other ways of bringing down your tax bill, either by claiming certain reliefs or finding ways to be more tax efficient.
Your ability to do this will depend on your personal circumstances so you are advised to talk to an accountant or a tax planner straight away.
If you know you can’t pay before January 31
If you have reduced your tax bill as far as you can, and you still can’t pay before the January 31 deadline, then you should contact HMRC as soon as possible.
On its website, HMRC says that if you contact them before the deadline then you may be given more time to pay, or you may be able to pay a bill in instalments via direct debit.
You should also contact HMRC if you disagree with a tax decision and you believe that you owe less than you are being told to pay.
If you have missed the deadline
If you have missed the January 31 deadline and HMRC has contacted you asking for payment then you should contact the office listed on any correspondence.
You may still be able to negotiate an instalment plan, but HMRC is at liberty to issue a fine and start charging interest on any debt. If you ignore HMRC, interest and penalties will begin to pile up and enforcement action will be taken against you.
If you are struggling to pay HMRC and other creditors
People struggling to pay their personal tax liability often struggle with other debts too. If you have multiple creditors then it can be difficult to know how to repay them.
How do you judge which debts are the most important? Which credit cards should you pay back first? Should you concentrate on paying back one creditor or split payment across multiple lenders?
All are valid questions and can be difficult to answer, particularly if you feel bogged down by debt.
Independent debt charities offer advice on how to repay debt. They can help you make a debt repayment plan to get out of debt in the most efficient way possible.
If you are struggling with more serious debts then you may want to consider an Individual Voluntary Arrangement (IVA). An IVA is an agreement between you and your creditors to pay back your debt in affordable amounts over a set period.
For more information about IVAs and whether they may be suitable for your situation, contact a member of our debt team. Call: 0800 611 8888.