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
  • JellyBean
    Re: Are DVLA Car Tax Rates Fair?
    A one-litre Ford Fiesta petrol Ecoboost at the average 12,000 miles per annum, puts out exactly the same CO2 in 12 months as, for…
    18 October 2019
  • Cherral
    Re: How Will My Second Job Be Taxed?
    I am a director of my husband's company getting paid £1500 per month. I would like to have a casual 25hr job at 8.60 per…
    16 October 2019
  • Lazarus
    Re: How Will My Second Job Be Taxed?
    I have two part time jobs 1st job 18hrs a week at £8.21 2nd job 12hrs a week at £8.65 an hour, both paid monthly... Anybody…
    1 October 2019
  • leigh
    Re: How Will My Second Job Be Taxed?
    I have been looking for a cleaning job two hours on a morning and two on an evening. I'm on working tax credits. I have been…
    26 September 2019
  • Bev
    Re: What is My Tax Code?
    My tax code is 506L which I think is incorrect. how do I check this?
    26 September 2019
  • davel
    Re: Paying for Training Can I Claim Tax Allowance?
    I have just paid for my son to carry out his pilot training £38,000 plus I have kept him for the last 2…
    24 September 2019
  • mac
    Re: How Will My Second Job Be Taxed?
    Hello, I have 2 jobs - 1 full time (my main job) through an employer that pays me £80k a year, then I have another, which…
    9 September 2019
  • Chris
    Re: How Will My Second Job Be Taxed?
    I'm an apprentice earning £8,482 a year. I also have a second job, 5 hours a week, earning £2,000 a year. As both wages total…
    8 September 2019
  • Laura
    Re: How Will My Second Job Be Taxed?
    Good afternoon, I have two full time jobs one 25,272 per year and second 24,591£ how much tax I pay in one year? . Thank you .
    7 September 2019
  • Jan
    Re: Payment of Pensions
    I would like the frequency of my State Pension payments changed to weekly from four weekly. How do I do this?
    30 August 2019