For individuals and businesses in the UK, meeting tax obligations on time is a crucial aspect of financial management. However, financial difficulties can arise unexpectedly, making it challenging to settle tax bills on time. If you find yourself unable to pay your UK tax bill by the due date, you may be wondering whether you can request an extension. Fortunately, HM Revenue & Customs (HMRC) does offer options for those facing financial hardship. In this article, we will explore the procedures and options available for requesting an extension or arranging a payment plan for your UK tax bill.
Understanding UK Tax Deadlines and Obligations
In the UK, tax payments vary depending on the type of tax you owe. Some of the common tax obligations include:
- Income Tax (Self Assessment) – Due by 31 January each year
- Corporation Tax – Due nine months and one day after the end of the company’s accounting period
- VAT – Due one month and seven days after the end of the VAT quarter
- PAYE & National Insurance – Due monthly or quarterly for businesses with employees
Failing to pay your taxes on time can result in penalties and interest charges. However, if you are experiencing financial difficulties, HMRC may offer flexibility through their Time to Pay arrangements.
Can You Request an Extension to Pay Your Tax Bill?
HMRC does not typically grant direct extensions for tax payments. However, they do offer alternative arrangements, such as Time to Pay plans, which allow taxpayers to spread payments over an extended period. This means that instead of an outright extension, you may be able to negotiate an affordable repayment plan with HMRC.
The Time to Pay Arrangement
A Time to Pay arrangement is a formal agreement between a taxpayer and HMRC that allows outstanding tax debts to be paid in manageable installments rather than as a lump sum. This option is available for individuals, self-employed persons, and businesses facing temporary financial hardship.
Eligibility for a Time to Pay Arrangement
To be eligible for a Time to Pay arrangement, you must:
- Be unable to pay your tax bill in full by the due date.
- Be willing to demonstrate your financial situation and inability to pay immediately.
- Have a reasonable proposal for repaying the tax owed over an agreed period.
- Not have a history of repeated late payments or tax evasion.
If you meet these criteria, you can negotiate a payment plan that suits your financial circumstances.
How to Apply for a Time to Pay Arrangement
Self-Assessment Taxpayers
If you cannot pay your Self-Assessment tax bill by the 31 January deadline, you can apply for a Time to Pay arrangement online, provided you:
- Owe less than £30,000.
- Do not have any other payment plans or debts with HMRC.
- Apply within 60 days of the due date.
- Can clear the debt within 12 months.
To apply, log in to your HMRC online account and follow the prompts to set up a payment plan.
If your tax debt exceeds £30,000, or if you need longer than 12 months to pay, you must contact HMRC directly by calling their Self-Assessment Payment Support Service.
Businesses and Employers
Businesses struggling to pay VAT, Corporation Tax, or PAYE can also request a Time to Pay arrangement by contacting HMRC’s Business Payment Support Service. When calling HMRC, be prepared to provide details such as:
- Your business’s financial situation.
- The amount of tax owed.
- The reason for financial difficulty.
- A proposed repayment plan.
HMRC will assess your request based on your ability to pay and may agree to an installment plan that spreads the tax liability over a reasonable period.
Consequences of Not Paying Your Tax Bill
If you fail to settle your tax bill on time and do not make arrangements with HMRC, you may face several consequences, including:
- Interest Charges – HMRC charges interest on late payments, which can increase the amount owed.
- Late Payment Penalties – These vary depending on the length of the delay:
- 5% penalty on outstanding tax after 30 days.
- An additional 5% penalty after six months.
- Another 5% penalty after 12 months.
- Debt Collection Action – HMRC may take enforcement actions, such as:
- Sending debt collection agencies after you.
- Seizing assets through distraint.
- Issuing court proceedings.
- Applying for bankruptcy or insolvency.
Tips for Negotiating with HMRC
When requesting a Time to Pay arrangement, consider the following tips:
- Act Early – Contact HMRC as soon as you realize you cannot pay on time. The earlier you act, the better your chances of reaching a favorable agreement.
- Be Honest – Provide an accurate account of your financial situation and your ability to pay over time.
- Offer a Realistic Repayment Plan – HMRC is more likely to accept your proposal if it is reasonable and affordable.
- Keep Up with Agreed Payments – Once an arrangement is in place, ensure you make payments as agreed to avoid further penalties.
- Maintain Future Compliance – Avoid missing future tax payments, as repeated delays could result in HMRC rejecting further requests for flexibility.
Alternative Options if You Can’t Agree with HMRC
If HMRC refuses to grant a Time to Pay arrangement, consider the following options:
- Seek Professional Advice – Consult an accountant or tax adviser who can negotiate on your behalf.
- Consider a Loan – Taking out a short-term loan may be an option if you can repay it under manageable terms.
- Look into Insolvency Options – If you are unable to pay your debts, insolvency solutions such as Individual Voluntary Arrangements (IVAs) or bankruptcy may be necessary.
Conclusion
While HMRC does not offer direct extensions for tax payments, they provide Time to Pay arrangements that allow individuals and businesses to spread their tax payments over time. If you are struggling to pay your UK tax bill, it is essential to act quickly, communicate with HMRC, and explore available options. By proactively managing your tax obligations and seeking assistance where needed, you can avoid severe penalties and maintain financial stability. If in doubt, consulting a tax professional can provide valuable guidance in navigating tax payment challenges.