Things to Know If You Can’t Pay your Self Assessment Tax Bill
Self-assessment taxes are a part of almost every business, something we are legally obliged to do. Yet, they are also a big headache for us, since they seem to come at the worst of times- when we don’t have any funds to pay it.
Naturally, your first response would be panic; who would want their business to be penalized over such an issue? But fortunately, there are multiple alternatives available to deal with such a situation. Here are some solutions to ease off your burden:
Tax reliefs, at your service
One thing that people often (wrongly) do is remain painfully ignorant about their tax allowances. Either they are unaware of them or saving them for some unforeseeable future. My advice: use up the allowances as soon as you suspect that it would be tough for you to pay up the taxes this year.
One example would be to know about the amount of earning you must have before paying the taxes. The threshold is at the much higher limit than the National Insurance, so probably you were worried about the taxes without any reason.
Also, calculate the amount of your earnings that was expended on your business. For instance, if half the talk time on your phone was used upon for business calls, you can cite it as a business expense and claim tax relief against it.
Face it instead of ignoring it
It might be that even after checking for every possible allowance, you are still unable to pay your taxes. And then you might be tempted to do perhaps the stupidest thing ever: ignoring the taxes. It is stupid, because your taxes would still be there; only, they would keep on increasing with the interests and fine upon it.
Your best chance of survival is to approach Her majesty’s Revenue and Customs (HMRC). All you have to do is make them believe that you are capable of paying the taxes later on. This could be done by sharing your income and expenditure charts to prove that you are not anywhere near the risk of getting bankrupt. Also, if it is the case, you can tell the HMRC that you are only temporarily low on funds due to a situation like a failure of payment on a client’s behalf etc. However, you must keep this in mind that HMRC is entitled to legally prosecute you if you fail to pay the taxes even after assuring them; hence, it is better to keep them in the loop if any difficult situation arises.
Setting up future precautions
Like they say “a burnt child dreads fire”. So once you have handled this situation, you will have to set up measures so that something similar doesn’t happen in the future. One such approach is to split the annual tax returns into two semesters. This way, you can instead focus on building up the tax returns for the next 6 months instead of the entire year. This system doesn’t take into account the surplus income (if any) of the previous year, but it is still much better than having to pay the entire annual tax at one go.