HMRC Tax Debt
HMRC is one of the UK's largest creditors and has powers that go beyond ordinary lenders – including taking money directly from wages and bank accounts. HMRC will usually negotiate, but it expects to be contacted early.
Types of HMRC debt
- Self Assessment income tax and payments on account
- VAT and PAYE for self-employed and company directors
- Tax credit and Child Benefit overpayments
- National Insurance arrears
- Penalties and interest for late filing or payment
Time to Pay arrangements
HMRC can agree a Time to Pay (TTP) plan spreading the debt over months. Self Assessment debts under £30,000 can often be set up online within 60 days of the deadline. Larger or older debts require a phone conversation about your income and expenditure. Interest continues to accrue during a TTP, but penalties for late payment are usually avoided.
HMRC enforcement powers
If you don't engage, HMRC can use field force collectors (who, unlike council tax enforcement agents, have broader powers for tax debt), apply for a County Court Judgment, use direct recovery of debts from bank accounts (for debts over £1,000 where you have £5,000 remaining), adjust your tax code to collect through PAYE, or petition for bankruptcy.
Including HMRC debt in a solution
HMRC debts are unsecured and can be included in an IVA (HMRC is a frequent voting creditor), DRO or bankruptcy, and in Scottish solutions. HMRC will expect ongoing tax to be paid on time while any arrangement is in place.
Frequently asked questions
Can HMRC take money from my bank account?
Yes, under Direct Recovery of Debts rules for established debts over £1,000, provided at least £5,000 is left across your accounts. HMRC must attempt to contact you first.
Does HMRC accept IVAs?
HMRC regularly votes on IVA proposals and will accept well-prepared ones, but it expects accurate returns to be filed and future liabilities to be paid as they fall due.
Can tax credit overpayments be written off?
They can be included in a DRO, IVA or bankruptcy. Outside insolvency, HMRC may remit an overpayment in cases of genuine hardship or where it made an error – ask for a dispute or hardship review.
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