Can’t Afford Your HMRC Tax Bill? Here’s Exactly What To Do
Struggling to pay a tax bill does not make you a bad business owner. It happens to many people at some point, especially when cash flow feels tight.
But ignoring it is the worst thing you can do.
HMRC will notice, and leaving it too long only leads to more stress, more interest, and more penalties.
The good news is there are clear steps you can take to get back on track.
Here is exactly what to do if you cannot afford your HMRC tax bill.
1. Do Not Panic, and Do Not Avoid It
HMRC’s goal is to collect the tax owed, not shut your business down. If you contact them early and explain the situation, they are usually willing to work with you.
Avoiding letters, emails, and deadlines only makes things worse. Open every letter, respond promptly, and be honest about your position.
2. Understand What Happens When You Miss the Deadline
Once a tax bill becomes overdue, HMRC start adding:
Daily interest
Possible penalties depending on the type of tax (VAT, Corporation Tax, PAYE, Self Assessment)
The longer you leave it, the larger the amount becomes. Knowing how the charges work helps you act quickly and stop the debt from growing.
3. Apply for a Time to Pay Arrangement
A Time to Pay plan allows you to spread the amount you owe over monthly instalments.
Depending on your circumstances, HMRC may offer three, six, twelve or even twenty four months.
You will need to show:
Why you cannot pay right now
What you can realistically afford each month
That you are committed to sticking to the plan
HMRC will assess affordability and usually work with you if you are compliant and cooperative.
4. Some Payment Plans Can Be Set Up Online
If your bill is for Self Assessment and under a specific amount, you may be able to set up a payment plan online as soon as your tax return is filed.
For other types of tax, such as VAT, Corporation Tax or PAYE, you will normally need to call the HMRC Payment Support Service to discuss your options.
5. File Your Return Even If You Cannot Pay
This is one of the most important points.
Filing late leads to penalties.
Paying late leads to interest.
These are separate charges.
Always file on time, even if you know you cannot pay immediately. This keeps penalties to a minimum and helps you access Time to Pay arrangements sooner.
6. Do Not Bury Your Head in the Sand
Ignoring the problem can lead to:
Enforcement officers
Bank account freezing
Court action
More penalties
A much higher bill overall
HMRC will always treat communication better than silence. Even a quick phone call can prevent enforcement action.
7. What To Do Today If You Are Worried
If you are feeling anxious about a tax bill, here are the immediate steps you should take:
✔ File your tax return
✔ Contact HMRC early
✔ Request a Time to Pay plan
✔ Review cash flow and cut non essential costs
✔ Pause dividends if the company cannot afford tax
✔ Speak to your accountant for guidance
Most tax payment issues are cash flow problems, not competence problems. With the right support and quick action, you can resolve the issue and move forward with confidence.
The Bottom Line
You are not alone if you are struggling to pay a tax bill. What matters most is how quickly you act.
Communicate early, file on time, explore Time to Pay options, and review your finances so you can avoid the same situation next year.
If you need support managing cash flow or speaking with HMRC, send us a message. We can help you navigate the situation and understand your options clearly.
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.
