You’ve filed your Self Assessment return, and the number on the screen is bigger than you expected. Much bigger. You can’t afford it. Your stomach drops.
Don’t panic. And whatever you do, don’t ignore it.
HMRC is one of the most powerful creditors in the UK — they don’t need a court order to collect most debts, and ignoring them makes things dramatically worse. But they’re also surprisingly willing to work with you if you engage early. This guide maps every option and links to the detailed walkthrough for each one — work through the list in order.
1. Don’t ignore it — what HMRC does when a bill goes unpaid
According to HMRC’s debt management guidance, if you don’t pay or contact them, the escalation ladder looks like this:
- Take it from your pay — HMRC can adjust your PAYE tax code to collect the debt from your salary before you see it (“coding out”), for debts up to £3,000 (or higher with your consent).
- Take it from your benefits — if you claim Universal Credit or other benefits, HMRC can deduct from your payments.
- Send debt collectors (Distraint) — bailiffs can seize your possessions to sell at auction, without a court order.
- File a County Court Judgment (CCJ) — damages your credit rating and stays on your credit file for 6 years.
- Petition for bankruptcy — for large debts, HMRC can petition to make you bankrupt, which can cost you your home and assets.
- Charge escalating penalties — late payment surcharges of 5% at 30 days, 6 months, and 12 months, plus daily interest.
Every one of these outcomes is worse than a payment plan. The earlier you contact HMRC, the more options you have and the less it costs. For the full penalty ladder and how it interacts with late filing, see our Self Assessment penalties guide.
2. Check your bill is right before you contact HMRC
Before you ask for a payment plan, make sure the bill is actually correct. Many people overpay because they haven’t claimed all their allowable expenses and reliefs — the £1,000 trading allowance, capital allowances on equipment, home office costs, and MTD software costs are the most common misses. If you realise you’ve missed something, you have 12 months after the filing deadline to amend your return. See our trading allowance guide, our MTD software costs guide, and our guide to making a mistake on your Self Assessment for the amendment process.
3. Pay what you can, then spread the rest with Time to Pay
Even if you can’t afford the full bill, pay as much as you can immediately — interest is charged on the unpaid balance, the 5% surcharges are percentage-based, and a partial payment shows HMRC you’re engaging. Then set up a Time to Pay arrangement: an online payment plan if you owe under £30,000 and have no other tax debts (instant, no phone call), or a phone-based arrangement with the Payment Support Service on 0300 200 3835 for larger or more complex debts. The key is to propose a plan you can actually stick to — defaulting triggers immediate enforcement. For the full step-by-step setup, eligibility checklist, and what to have ready before you call, see our HMRC Time to Pay arrangement guide.
4. What it costs to be on a plan (interest vs surcharges)
Being on a payment plan saves you the surcharges but not the interest. Here’s what applies while you’re on a Time to Pay arrangement:
| Charge | Still applies? | Details |
|---|---|---|
| Late payment interest (7.25%) | ✅ Yes | Accrues on the unpaid balance until it’s fully paid |
| 30-day late payment surcharge (5%) | ❌ Suspended | Waived once you’re on a plan |
| 6-month late payment surcharge (5%) | ❌ Suspended | As long as you keep up with the plan |
| 12-month late payment surcharge (5%) | ❌ Suspended | As long as you keep up with the plan |
| Late filing penalties | Separate issue | If you also filed late, those still apply — see our filed late guide |
So a plan can save you £750+ in surcharges on a £5,000 bill — you still pay interest, but the sooner you clear the balance the less it costs. If your circumstances change while you’re on a plan, contact HMRC before you miss a payment: they can reduce your monthly amount, extend the period, or pause payments temporarily. For the detail on each option, see our Time to Pay guide. To see exactly how much your late payment penalties and interest add up to, use our Self Assessment penalty calculator.
5. If the 31 July payment on account is the problem
If your cashflow crisis is specifically the 31 July payment on account — the advance payment HMRC demands halfway through the year — the options are the same in principle (pay what you can, then negotiate), but there’s one extra lever: you can ask HMRC to reduce your payments on account if you expect your next bill to be lower. Be careful, though — if you reduce them and then underpay, HMRC charges interest on the shortfall. For what payments on account actually are, see our payment on account explained guide; for the action steps when you can’t cover the 31 July bill, see our can’t pay your payment on account guide.
6. Work out your debt priorities — where tax sits
If you owe HMRC and other creditors, don’t just throw money at whoever shouts loudest. UK debt advice splits debts into priority and non-priority, and tax sits in the priority camp — but it’s not the only priority, and it’s not always the most urgent.
Priority debts (deal with these first, because the consequences of non-payment are severe): rent or mortgage arrears (you can lose your home), council tax (bailiffs, prison in extreme cases), court fines, gas and electricity (disconnection), and tax/NIC. Non-priority debts (still need paying, but the consequences are slower and less severe): credit cards, personal loans, overdrafts, and most catalogue or store card debts.
The practical framework: list everything you owe, split it into priority vs non-priority, cover your essential living costs (rent, food, energy) first, then negotiate the priority debts — including HMRC — with whatever’s left, and offer token payments (£1/month) to non-priority creditors while you stabilise. HMRC is powerful, but they’re required to follow the HMRC Charter and treat customers in financial difficulty fairly; they should also signpost you to free debt advice. You cannot pay anyone — including HMRC — if you’re homeless, so don’t sacrifice rent to pay a tax bill.
7. If HMRC has already moved to enforcement
If you’ve missed payments and not engaged, enforcement moves through stages — and you still have rights and options at each one:
- Reminder and surcharge letters — the first stage. You’ll get reminder letters, then 5% surcharge notices at 30 days, 6 months, and 12 months after the due date. You can appeal a surcharge if you have a reasonable excuse — see our appeal an HMRC penalty guide.
- Coding out — HMRC collects the debt through your PAYE tax code. For most people the limit is £3,000; for those with only PAYE income it can go higher. You can object if it would cause hardship.
- Distraint — bailiffs seize goods to sell at auction. They must give you at least 7 days’ notice of a visit, you can refuse entry to your home (they can only enter if you invite them in or they have a court warrant), and you have 5 days after a distraint notice to pay and reclaim your goods.
- County Court Judgment — HMRC can file a claim in the county court. A CCJ stays on your credit file for 6 years and makes borrowing harder and more expensive.
- Bankruptcy petition — for debts over £5,000, HMRC can petition for your bankruptcy. This is the most serious outcome and can cost you your home and assets.
The critical point: you can still negotiate a Time to Pay arrangement even after enforcement has started — it’s not too late until a bankruptcy petition is actually heard. Pick up the phone to the Payment Support Service on 0300 200 3835 the moment any of these lands. For the full penalty and appeal framework behind these stages, see our Self Assessment penalties guide.
8. If you genuinely can’t pay anything — suspension, insolvency and write-off
If your income is so low that no monthly payment is affordable, there are three routes beyond an ordinary payment plan:
- Temporary suspension (“hold”) — HMRC can agree not to pursue enforcement for 6–12 months if you can demonstrate genuine financial hardship. Interest usually still accrues, and you’ll need to show detailed income and expenditure. Call the Payment Support Service to request it.
- Formal insolvency (IVA or bankruptcy) — tax debt can be included in an Individual Voluntary Arrangement, a legally binding deal with all your creditors supervised by an insolvency practitioner, typically lasting 5–6 years. Bankruptcy writes off most debts including tax, but it’s a last resort with severe consequences for your home, assets, and some professions. Either route needs professional advice.
- Write-off — rare, but HMRC may write off a debt if they decide it’s not economically viable to collect, usually a very small amount combined with severe long-term hardship. It is never something you can assume or rely on.
None of these are DIY decisions. If you’re at this stage, get free advice first (see the next section) before you contact HMRC, so you know which route to ask for.
9. Where to get free, independent help
You don’t have to figure this out alone, and you don’t need to pay for advice at the outset:
- TaxAid — a charity for people on low incomes with tax problems, including tax debt. They offer free, confidential advice from tax professionals.
- StepChange — the UK’s biggest free debt advice charity. They can help you prioritise tax debt against everything else and set up a debt management plan if needed.
- Citizens Advice — free general help, including with HMRC debt and dealing with bailiffs.
- MoneyHelper — the government-backed free money advice service, with guides on priority debts and dealing with creditors.
For complex cases — large debts, an IVA, or a bankruptcy petition — a licensed insolvency practitioner or a tax adviser is worth the cost, but get the free advice first so you go in knowing your options.
10. Stop it happening next year
Once the immediate crisis is handled, put a system in place so January isn’t a shock again. The four levers that make the biggest difference: save 25–30% of your self-employment income into a separate account as you go; file early (you can file as soon as the tax year ends on 5 April) so you know the bill months ahead; file by 30 December if you owe under £3,000 and have PAYE income, so HMRC collects it through your tax code instead of a lump sum; and budget for your payments on account in January and July. Keeping digital records throughout the year removes the surprise factor — see our MTD quarterly updates guide for a system that works, and our check your tax code guide if you want to spread the cost through PAYE. Accounting software like FreeAgent (10% off with this link) or Account OS (AI accounting for UK micro-businesses) estimates your bill in real time — and the cost is itself an allowable expense.
The bottom line
Can’t afford your tax bill? Here’s the action plan:
- Check your return — make sure you’ve claimed all expenses and reliefs.
- Pay what you can — even a partial payment reduces interest and surcharges.
- Set up a Time to Pay plan — online if under £30,000, by phone if over.
- Work out your debt priorities — don’t sacrifice rent or council tax to pay HMRC.
- Get free advice — TaxAid or StepChange before you do anything drastic.
- Don’t ignore it — enforcement is far worse than a payment plan, and you can still negotiate even after it starts.
HMRC would rather you pay slowly than not at all. They have systems designed to help you spread the cost. But they only work if you engage.
If your tax bill is large or you’re behind on multiple years, an accountant can negotiate with HMRC on your behalf, set up a Time to Pay arrangement, and check whether you’ve missed any reliefs that would reduce what you owe. Find an accountant through our free matching service — mention you’re struggling with your tax bill and we’ll match you with someone who handles HMRC debt cases.
For the full list of Self Assessment deadlines, penalties, and payment options, see our Self Assessment deadlines and payment hub.
For the complete overview of all Self Assessment penalties, interest, and the pay-vs-appeal decision tree, see our Self Assessment penalties guide. For the full step-by-step guide to setting up a payment plan, see our HMRC Time to Pay arrangement guide. If you’ve also missed the filing deadline, see what to do when you miss the Self Assessment deadline. Once you’ve dealt with the bill, the Relief Files cover fixing mistakes and chasing refunds — or browse the complete Self Assessment guide for everything in one place.