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# When You Can't Pay Your Tax Bill
Don't ignore it. Don't stuff the letter behind the dashboard. Don't hope it goes away. HMRC doesn't forget, and the longer you leave it, the worse it gets. If you can't pay your tax bill, there are options. But only if you act before the deadline, not after.
Rule of thumb: call HMRC before you miss the payment date. They're far more helpful when you call them than when they have to chase you.
Why Construction Workers Get Caught Out
CIS lads often get caught out because they think the 20% deduction covers everything. It doesn't always.
If you've earned well and your expenses are low, you can still owe on top of what CIS has already taken. The 20% deduction is a payment on account of your tax, not a guarantee that your tax is fully covered.
Example: A subbie grosses £50,000 in the year. CIS deductions at 20% = £10,000 paid to HMRC. Expenses are only £5,000. Taxable profit is £45,000. Income tax on that is roughly £6,486. National Insurance Class 4 is roughly £2,500. Total tax due: about £8,986. CIS already paid: £10,000. In this case, you're getting a refund.
But change the numbers. Expenses drop to £2,000. Taxable profit is £48,000. Tax and NI: roughly £10,300. CIS paid: £10,000. You owe £300 on top.
And if you're on 30% CIS because you're unverified, the maths shifts again. Get verified. It's free.
Time to Pay: Your First Call
HMRC's Time to Pay service lets you spread your bill over monthly instalments. You can set this up:
Online (self-serve): if your bill is £30,000 or less, you have no other payment plans with HMRC, and your return is filed. Go to gov.uk/difficulties-paying-hmrc. You can set up a plan in about 15 minutes without speaking to anyone.
By phone: call the Self-Assessment Payment Helpline on 0300 200 3835. Call BEFORE the payment deadline. They'll ask what you can afford per month, and they'll usually work with you.
What they'll want to know:
- How much you owe
- Why you can't pay
- What you can afford monthly
- When you expect to clear the balance
They're not trying to punish you. They want the money eventually. A payment plan is better for them than chasing someone who's gone off the radar.
Tip for new starters: if January is coming and you know you won't have enough, call in December. Calling early shows good faith and gives you more time to negotiate.
What Interest and Penalties Look Like
Interest
HMRC charges interest on late payments at the current rate of approximately 7.5% (2025-26 rates). This runs from the day after the payment deadline until you pay.
Penalties
Penalties stack up fast:
| When | Penalty |
|---|---|
| 30 days late | 5% of the tax unpaid at that date |
| 6 months late | Another 5% of the tax still unpaid |
| 12 months late | Another 5% of the tax still unpaid |
On a £5,000 bill left unpaid for a year: that's £750 in penalties alone, plus interest on top.
Important: if you set up a Time to Pay arrangement before the deadline, the 5% penalties don't apply. You still pay interest, but the interest on a managed plan is far less painful than the penalties for ignoring it.
What If You've Already Missed the Deadline?
Call anyway. Today. Not tomorrow, not next week. The penalties have started, but you can stop them getting worse.
HMRC can still set up a payment plan after the deadline. They're less flexible, but it's still possible. The longer you wait, the harder the conversation gets.
If you've had a genuine reason for not paying on time (illness, bereavement, a disaster), you can appeal the penalties. "I forgot" is not a reasonable excuse. "I was in hospital for three weeks" might be.
Budgeting So This Doesn't Happen Again
The fix is simple even if it doesn't feel easy.
- Open a separate tax savings account. Any basic instant-access account will do.
- Put 30% of every payment you receive into it. This covers income tax, NI, and student loan if you have one.
- Don't touch it. Not for a new tool. Not for a holiday. Not for van repairs. It's HMRC's money, you're just holding it.
- When January comes, the money is there.
If you're CIS and 20% is already being deducted, putting away an extra 10% on top gives you a solid buffer.
Tip for new starters: set up an automatic standing order from your business account to your tax savings account. Make it happen the day after your main contractor pays you. If you never see the money in your spending account, you won't miss it.
What If You Genuinely Can't Afford Anything?
If you're in serious financial difficulty, not just tight but genuinely unable to pay anything, there's more help available:
- Citizens Advice can help you work out what you can afford and negotiate with HMRC on your behalf.
- TaxAid provides free tax advice to people on low incomes.
- Business Debtline gives free advice on business debts including tax.
HMRC also has a policy of not making people destitute. If paying would leave you unable to eat or keep a roof over your head, they'll consider your circumstances. But you have to tell them. They can't help if they don't know.
What HMRC Can Do If You Ignore Them
This is the bit people don't want to hear.
- Take money directly from your bank account (Direct Recovery of Debts, for debts over £1,000)
- Send bailiffs (enforcement agents)
- Put a charge on your property
- Make you bankrupt (for debts over £5,000)
- Report to credit reference agencies (from 2025, HMRC can share debt information)
None of this happens overnight. There are warnings and letters first. But it does happen, and it happens to real tradespeople every year.
Sources
- HMRC, "If you cannot pay your tax bill on time," 2025
- HMRC, "Self-Assessment penalties for late payment," 2025
- gov.uk, "Set up a Self-Assessment payment plan"
- HMRC, "Interest rates for late and early payments," 2025-26
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