Help! I haven’t paid tax in two years – what do I do?

by | Dec 22, 2020 | Tax

For various reasons, people sometimes overlook paying tax, and the longer they leave it, the more stressful it becomes. Coming clean is always the best policy, though, so here’s how we can help get you out of a pickle and sort things with HMRC.

Over the years, I’ve spoken to lots of people running small businesses who have got themselves into a difficult situation by failing to complete a tax return, or getting their tax calculations wrong.

Tax law can be overwhelming and confusing, especially when you’re building your first business, and so innocent mistakes do happen.

Some people don’t realise they have to pay tax on the income from a side hustle because they’ve only ever been taxed through PAYE in a permanent job.

Or it might be that they knew they were supposed to file a return but life just ran away with them and it didn’t happen. Then the fear of having to own up to HMRC made it harder and harder to deal with.

Whatever the reason, the anxiety it causes can be quite upsetting to see – decent people worrying themselves sick.

Most people want to do the right thing and hate feeling guilty. And that sense of having lost control is almost the definition of stress.

Who has to pay tax?

If you have income that isn’t taxed at source, such as through an employer’s PAYE scheme, you’ll definitely need to complete a personal tax return.

Whether you pay tax, and how much, depends on how profitable your business is.

Since 2017, there’s been a £1,000 tax-free trading allowance to take account of all those people making a few pounds on the side selling on websites such as eBay.

Basically, the Government decided it would be more expensive to process tax payments on these relatively tiny amounts than it is to just write them off.

There’s a separate £1,000 allowance for property income, too, and you can claim both in the same year.

If you’re running any kind of serious business, though – if you’re making a living from it, essentially – it’s more likely you’ll have to pay tax, unless your business is making a loss.

Why should I disclose unpaid tax?

The short answer is that if you don’t and HMRC finds out, you’ll get much harsher treatment than if you’d come forward of your own accord.

Under those circumstances, you could end up paying all the tax you owe going back 20 years and potentially face criminal prosecution, too.

And, of course, the longer you leave it, the more tax you’ll owe when you do eventually end up having to confront the issue.

Disclosing non-payment to HMRC

If you’re burdened with the knowledge of unpaid tax, you can and should make a voluntary disclosure to HMRC using the Digital Disclosure Service (DDS).

It’s a good idea to talk to us first so we can help you get your numbers straight before submitting your information to the taxman, or, as registered tax agents, we can handle all this on your behalf.

Here’s how the process goes:

  • notify HMRC that you’ve got a disclosure to make
  • provide details of the income you haven’t previously disclosed
  • tell them what you think you owe
  • then pay it, within 90 days of the initial notification.

It sounds pretty scary, paying several years tax in one go, but if HMRC is convinced you’re really being open and honest and genuinely struggling, they’ll often give you more time to pay.

They might also be willing to agree to an installment plan.

Liberate yourself from unpaid tax

Unpaid tax weighs people down. I know, I’ve seen it. Equally, getting it sorted is always a massive relief.

I’ve helped many clients dig themselves out of a hole and go on to run successful, growing businesses with everything tidy and above board.

That’s where you want to be.

If you want a sympathetic ear and a helping hand to get your tax affairs in order, get in touch today.

Ready to start the journey?

To get help with your accounts and start freeing up your time to focus on growth, talk to the Mayflower team today.

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