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Business Planning - Tips to avoid a Tax Debt! As we all love paying this!!

TaxDebtsHelpAndAdviceTaxDebtsHelpAndAdvice subscriber Posts: 4 Member


Tax arrears play an ever increasing part in today’s larger debt problems across the UK.

With many banks & lenders offering large overdrafts & extended credit facilities to more individuals & business than ever, it’s perhaps not difficult to see why.

As of March 2015 there was £13billion outstanding to HMRC & this total doesn’t include what HMRC refer to as aged debt which is £4billion too.

The old adage that ‘prevention is better than cure’ has never been truer than in the context of HMRC & tax debts.

Here are our tips for taxpayers & businesses to avoid owing arrears to the tax man.

Register for tax : Many newly self-employed or those with 2nd incomes from other sources are aware they need to register with HM revenue & Customs, yet fail to do this!

Some may think this helps defer a tax bill, lets them get some income in firstly, before worrying about paying taxes. However, this can result in penalties, interest & charges & in more serious instances of tax avoidance prosecution.

Just remember its far better to get everything set up correctly day one & notify HMRC in every instance.

Keep Up-to-date : If you receive a tax return from HMRC, deal with it on time. Apart from the fact you can incur penalties & surcharges for late filings, HMRC can also decide how much tax an individual should pay – This will be an estimated bill unless you get your return in, preferably on time.

In addition, if there is tax owing from earlier years, the Revenue will not generally consider allowing time to pay unless all outstanding tax returns have been submitted.

Complete paperwork on time : There are time limits set with HMRC not only for the filing of individual or business based returns but also for notifications about changes, make sure you are aware of what applies to you & your business (dependant on how it’s set up to trade).

If you are newly self-employed you need to register with HMRC within 3months of the business commencing trading. As a rule the tax man waits for no one.

Check all paperwork : HM Revenue & Customs may be asking you to pay a bill, doesn’t always mean that the bill is correct!

Always check any calculations & statements of account against your tax returns and check against any payments you have made. In some instances penalties & charges could be reduced owing to errors – Don’t be afraid to query anything with HMRC.

Save & plan for your next tax bill : This may sound obvious but some people are too tempted to spend the money they work hard to make, sometimes a little more too. However, even something as easy as opening a separate bank account for your upcoming tax & saving on a regular basis could help ease the pain of that next tax bill! Don’t forget too about National Insurance payments – If you have an accountant they can help or basic information is available online.

Don’t bury your head in the sand : Escalating debts can have a paralysing effect on some individuals and businesses. So many clients come to us after ‘burying their head in the sand.’

It may be tempting to ignore the issue and hope that it goes away! Of course, life isn’t that simple. Arrears to HMRC can quickly escalate as charges & penalties will be applied. Meaning that a small amount originally owed, once ignored, can become unmanageable.

If in doubt or in difficulties – Get help : Preparing & filing returns can be daunting. Sometimes tax payers are reluctant to seek help owing to concerns over costs of hiring a ‘professional.’ Trying to save that cost is probably false economy!

The cost of ‘getting it wrong’ could be a huge, unexpected bill off HMRC!

Many accountants & professional firms offer fixed fee rates nowadays and they will work with you to build a support package that suits you & your business.

There are also free organisations & charities out there can help advise you, such as: TaxAid & The Low Incomes Tax Reform Group.

If you can’t pay a tax bill – Seek help : If you do find that you genuinely can’t pay a tax bill in full & on time, don’t wait for HMRC to start chasing you. It’s better to confront this issue head on.

If the problem is tackled quickly & arrangements agreed upon, surcharges’ could be suspended. HMRC are more likely to be receptive and sympathetic towards temporary cash flow issues if you try & resolve the problem & keep the lines of communication open. You may feel intimidated or lack the confidence to deal directly with HMRC, if so, seek help as soon as possible. There are professionals in this area that could help you negotiate with HMRC.

There is help at hand

Many taxpayers are in the same situation when they end up in arrears with HMRC.

Everyone’s goal is to be able to afford to pay all their bills on time & in full but sometimes things don’t go to plan.

Surfing the ‘world wide web’ can be informative & HMRC’s own site can be of help too: gov.uk

There are also specialised companies out there such as TDHA who will happily chat over your situation & offer any help they can.

Following the above tips should help to ensure that paying your tax bill is as painless as it can be!

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