Home > Case Studies > I Couldn't Pay My Self Assessment: A Case Study

I Couldn't Pay My Self Assessment: A Case Study

By: J.A.J Aaronson - Updated: 4 Jul 2013 | comments*Discuss
 
Self Assessment Can't Pay Bill Tax

For many taxpayers, the annual Self Assessment tax bill comes as something of a shock. Many people fall in and out of self-employment, or have self-employed earnings one year but not the next. In this way, it is not uncommon for Self Assessment taxpayers to be presented with a bill that they simply cannot pay.

Unpaid Bill

A looming tax bill is a stressful prospect. HM Revenue and Customs (HMRC) has become progressively more aggressive in its pursuit of unpaid tax and, eventually, legal proceedings will be brought against those who do not pay. We spoke to Mark, a Self Assessment taxpayer who experienced the difficulties that an unpaid bill can bring.

“I became self-employed for the first time two years ago,” Mark said. “I had spent most of my working life in IT, building up contacts, so I was lucky enough to do quite well for myself in my first year of self-employment.

“I was putting aside money each month, knowing that I would have to pay my tax in January. I got my Self Assessment in on time. But then I ended up with a bill that was much, much bigger than I expected.”

Payment on Account

Mark had enough money set aside to pay his balancing payment – that is, the outstanding tax due for the tax year just gone. What he had forgotten, though, was that he would also be required to make a payment on account.

“I basically hadn’t factored the payment on account into my budget. So I ended up with a tax bill that was 50% higher than I thought it was going to be.”

Sensibly, Mark contacted HMRC as soon as he realised his mistake. “I phoned the Tax Office, and explained the situation. They were actually remarkably helpful, although I’ve heard other people have had very unpleasant experiences with them. They told me that I would need to propose a payment settlement. So I went away and worked out how much I could afford to pay each month.

“I called them back, and offered to pay the balance over five months. They were reticent about the process taking this long initially, but over the course of the conversation they realised that was about as quickly as I could afford to do it.”

Paying the Bill

After five months, Mark had paid off his outstanding balance. But the problems weren’t over.

“By this time, my second payment on account was coming around, and because I’d been paying off the first, I hadn’t been putting aside enough money to pay the second. So, again, I ended up being a couple of months late with my second payment on account.

“It ended up being an expensive mistake. You get charged interest from day one, and then there are 5% penalties at certain points throughout the year. So I ended up paying several hundred pounds more than I originally owed.”

So, Does Mark Have Any Advice for New Self Assessment Taxpayers?

“Make sure that you understand the system. This is the only way that you can be sure that you pay on time. And, if you can’t afford to pay your bill, contact HMRC quickly. The longer you leave it, the more expensive it will get.”

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Sbuj
    Re: How Will My Second Job Be Taxed?
    Hi I have full time job plus extra part time if I will start working for agency tax for one of my extra jobs will b change…
    16 October 2018
  • Lizzie
    Re: Children's Bonus Bond
    I was bought a £25 Children's Bonus Bond as a christening present in 2001 and was wondering how much it is worth now and when it matures.
    8 October 2018
  • Storm
    Re: What Does Road Tax Pay For?
    I see a fair bit of pothole repairs, the biggest problem I see is the work carried out is very poor indeed more often than not as…
    26 September 2018
  • PETA
    Re: Payment of Pensions
    Can I change my pension to weekly how does this work
    20 September 2018
  • Kaz
    Re: How Will My Second Job Be Taxed?
    Up until june this year i only had 1 job of 14 hrs a wk at minimum.wage, i now have 3 jobs, the 2nd one being 6.7 hrs a wk @…
    19 September 2018
  • Dom
    Re: Claiming Tax Relief on Mileage
    I am paid a £250 per month travel allowance with my salary, and claim monthly travel expenses each month from the company for…
    13 September 2018
  • Fifi
    Re: How Will My Second Job Be Taxed?
    Hi I’m working 22hrs a week at 7.85ph but also signed up to an agency to work as and when, how much tax would I pay
    11 September 2018
  • Littledigidi
    Re: Claiming Tax Relief on Mileage
    Hi - I have a fuel card, the majority of my mileage is work related. can i claim any tax back on this. My company pay for all my…
    10 September 2018
  • TheTaxGuide
    Re: How Will My Second Job Be Taxed?
    B - Your Question:I have two jobs the first is as and when and the second is 12 hrs a week, combined I am nowhere near the…
    4 September 2018
  • Loui
    Re: How Will My Second Job Be Taxed?
    I am employed working 15hrs at £8.20 but get paid monthly and I'm self employed for 2 hrs a week at £8.00 a week. Would I get…
    3 September 2018