With the rising costs of living and running a business, it’s becoming increasingly difficult to manage outgoing costs.
Rising interest rates and soaring petrol prices are having a major impact on everyone’s lives, while some businesses are feeling the effects of sector-specific tax changes.
If you’ve just been hit with a tax bill you can’t pay, there are options out there to manage it.
Here’s what you need to know.
How to avoid tax bill problems
Although some factors are out of your control, there are ways you can avoid falling behind on your tax bills.
Putting preventative measures in place is a good way to strengthen your financial security so that when the time comes to pay your bill, you’ll be able to meet your obligations.
The best place to start is by managing your payments. For businesses, it’s all about tracking your outgoings. If your suppliers are proving to be a bit costly, you might consider cutting down on your orders or shopping around for a better deal.
Similarly, if you’re spending too much on labour and it’s not particularly busy, you might be able to save some money by reducing hours. That said, make sure you’re not cutting back so much that your staff are overstretched, or your quality of service or product is impacted – otherwise, you could be causing yourself more problems down the line.
This is especially important for hospitality businesses, which saw their reduced 5% VAT rate return to 20% in April this year, following the end of lockdown measures.
Any business will benefit from managing its cashflow. Comparing your income to your outgoings, and drawing up forecasts to see how that could change in the future, will give you a better idea of where you can start to cut costs.
Having an expert accountant to help you plan your tax will also make things easier. By making use of your allowances and any other tax breaks available from the Government, you should be able to minimise your bill.
What can you do?
Usually, it’s best to face your problems head-on. If you know you’re not able to afford your tax bill, your best option is to contact HMRC.
If you either can’t pay or know you’re going to miss the deadline for your tax bill, HMRC will discuss your options with you. You might be able to pay what you owe in instalments, or as HMRC calls it, a ‘time to pay’ arrangement.
Always get in contact with HMRC in advance of the due date as well as file your taxes early. Once you have done this you should contact again before your bills are overdue.
If you file a self-assessment tax return, you can set up a payment plan using your Government Gateway account if you:
- have filed your latest tax return
- owe less than £30,000
- are within 60 days of the payment deadline
- plan to pay off your debt within the next 12 months or less.
If your company is in debt with HMRC, you’ll have to reduce your debt as much as possible before you can set up a time to pay arrangement. HMRC recommends that you release assets like stock, vehicles and shares.
HMRC may ask company directors to:
- put personal funds into the business
- accept lending
- extend credit.
In either case, the best thing to do is get ahead of your debt and call HMRC early. Before doing so, talk to your accountant and plan how much you can afford, when you’re likely to be able to repay your debt and whether you can manage your other ongoing commitments.
Your negotiations with HMRC will be much smoother if you go into the call with those details in mind.
Mayflower is here to help
It’s hard dealing with debt on your own. At Mayflower Accountancy, we can run your numbers and help to prevent this from happening.