Tempted to treat your tax bill like a credit card bill?
by David Smy - Partner on 31 January 2012
Don’t is our advice!
None of us enjoy paying bills, particularly at this time of year, and if you are like me, then by the end of today you will have had to hand over a relatively large sum to HMRC.
Many of us will use a credit card when making a large purchase to give us the flexibility of paying the sum off over a period of time. Of course, there is an associated interest charge, but apart from that everything stays much the same and as long as you make the monthly payments, then the only thing that the credit card company is going to contact you with is the monthly statement.
HMRC want their money by the 31 January deadline. If you fail to pay what you owe by then, the consequences kick in. They will not only charge you interest, but paying late at this time of year may also mean a 5% surcharge, which of course attracts even more interest. And, unlike the credit companies, HMRC tends not to stay quiet for too long and will continue to pester and chase you until they have received payment. In very severe cases they will even resort to referring matters to commercial debt collectors, who are not easily dissuaded from putting on the pressure until the bill has been settled.
Life doesn’t always go as planned and sometimes events, such as a loss of a job, sickness, family problems, can mean that we are less prepared financially than we should be. If you do experience problems paying the tax you owe, then some of the measures I have highlighted can be avoided by contacting HMRC and arranging to pay over an extended period, although the interest charges do usually remain. The key to this is to ensure that you do it before payment is actually due rather than bury your head in the sand. Also, be realistic about what payments you can manage so that you don’t fall into arrears.
Since the only two certainties in life are death and taxes and you have no control over the first, try to do what you can in relation to the second!
Have you had to negotiate a payment plan with HMRC? Were they helpful? What was your experience?
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