Personal Tax Debts
Owing money to HMRC is a common consequence of poor financial planning amongst sole traders. However acting quickly can allow for ‘Time to Pay’ or other debt management agreements to be made.
Personal Tax Debts
Personal tax debts can occur for a number of reasons, however, by far the most common group of people who find themselves burdened with them are sole traders. Perhaps they have calculated the amount owed incorrectly, or maybe they have simply failed to put any money aside to cover their self-assessment bill. While for those businesses operating under a limited company structure, tax arrears are seen as debts of the company rather than the individual, for sole traders, the situation is different. Any debts amassed by a sole trader are the responsibility of that individual; this includes debts to HMRC. Even if a sole trader decides to cease trading, any outstanding debts will still need to be paid back from their own personal funds.
Depending on the amount you owe, HMRC may allow you to enter into what is known as a ‘Time to Pay’ arrangement. As the name suggests, this gives you additional time in which to pay the money you owe through a series of monthly instalments. However, this is only an option worth considering if you are sure you can clear the money owed in the agreed time-frame, which tends to be within a year. HMRC are not obliged to give you any extra time to pay what you owe, and they may well turn down your request for this if they have any doubt over your ability to keep to the agreement.
If your HMRC debts are particularly large, or you have no way of paying the outstanding amount, you may have no choice but to consider a formal debt solution such as an IVA or bankruptcy. While owing money to HMRC may seem scary, the good news is this debt can be included as part of most popular formal debt solutions and in this respect is treated in the same way as money owed on credit cards and loans. The most important thing is to take action as soon as you know you are struggling. This leaves you with more options as creditors are likely to be more receptive to payment plans if you have been open and honest about the situation rather than burying your head in the sand.
If you have fallen behind on your payments to HMRC regarding your personal tax, you should make it a priority to seek professional advice. Northern Ireland Debt Solutions can help you to understand all the options available to you and ensure you make the best decision for you and your situation.
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After losing my job, I started relying on credit cards and payday loans to get me through the month. As the debt build up, I found it increasingly difficult to keep up with the monthly payments and was hit with late penalties and added interest which only made the problem worse.
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My adviser was sympathetic to my problems and I never felt as though I was being judged. He explained all of the options which were available to me and explained how each would work in my situation. While bankruptcy is a big step, I knew it was the best thing for my circumstances. I paid off what I could afford and the rest was written off. Three years on, I am in a much better place financially and able to look forward to the future.
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