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What happens if I don't pay my self-assessment tax?

Updated: May 5, 2023

Self-assessment tax is the process of paying income tax directly to HM Revenue and Customs (HMRC) in the UK. It is used by individuals who have income that isn’t taxed at source, such as self-employed individuals, company directors, landlords, and high earners. However, what happens if you don’t pay your self-assessment tax?

What happens if I don't pay my self-assessment tax?

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In this blog post, we will explore the consequences of not paying your self-assessment tax and what steps you can take to avoid this.


Late Payment Penalties


If you don’t pay your self-assessment tax on time, HMRC will impose late payment penalties. The amount of the penalty will depend on how much tax you owe and how late the payment is.


The penalties are as follows:


1 day late: a penalty of 5% of the tax owed

30 days late: a penalty of £100 or 5% of the tax owed, whichever is greater

6 months late: a penalty of £300 or 5% of the tax owed, whichever is greater

12 months late: a penalty of £300 or 5% of the tax owed, whichever is greater

In addition to the late payment penalties, HMRC will also charge interest on the amount of tax owed. The interest rate is currently 2.6% per year.


Enforcement Action


If you don’t pay your self-assessment tax, HMRC may take enforcement action to recover the debt. This can include:


Issuing a County Court Judgement (CCJ) against you

Seizing assets, such as your home, car, or bank account

Taking legal action to make you bankrupt or wind up your company

Using debt collectors to recover the debt

These enforcement actions can have serious consequences and should be avoided at all costs.


Alternative Payment Arrangements


If you are struggling to pay your self-assessment tax, it is important to contact HMRC as soon as possible. They may be able to arrange a payment plan or alternative payment arrangements.


There are several options available, including:


Payment plan: You can spread the cost of your tax bill over a period of up to 12 months by setting up a payment plan with HMRC. This will help you avoid late payment penalties and interest charges.


Time to pay arrangement: If you are experiencing financial difficulties, HMRC may be able to offer you a time to pay arrangement. This allows you to pay your tax bill over a longer period of time, usually up to 12 months. However, interest will still be charged on the outstanding amount.


Voluntary disclosure: If you have made a mistake on your tax return and need to correct it, you can make a voluntary disclosure to HMRC. This will reduce the penalties you may incur for late payment or non-payment of tax.


Conclusion


In conclusion, failing to pay your self-assessment tax can result in serious consequences. HMRC will impose late payment penalties and charge interest on the amount of tax owed. They may also take enforcement action to recover the debt, which can have serious consequences.


However, if you are struggling to pay your self-assessment tax, there are alternative payment arrangements available. It is important to contact HMRC as soon as possible to discuss your options and avoid the penalties and enforcement actions associated with late payment or non-payment of tax.


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