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HMRC Debt Collection Process Explained – Do You Have to Pay?

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Learn more about Scott
&
Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Jan 16th, 2024
Could you legally write off some debt? Answer below to get started.

Total amount of debt?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

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hmrc debt collection letter

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Dealing with an unexpected letter from HMRC debt collectors can be a bit scary. But don’t worry, we’re here to help.

Every month, over 170,000 people find answers to their debt questions on our website. You’re not alone.

In this easy-to-read guide, we’ll explain: 

  •  What HMRC debt is and how the collection process works.
  •  How to check if your HMRC debt is real.
  •  Ways to get help if you can’t afford to pay.
  •  What a Time to Pay Arrangement is.
  •  Other solutions for dealing with debt.

We understand that dealing with HMRC debt can be hard. We have lots of information to help you make the best choices. 

Ready to learn more about how to handle your HMRC debt? Let’s get started.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

What is HMRC Debt?

HM Revenue and Customs (HMRC) is the part of the UK government that’s responsible for collecting taxes and paying benefits.

If you end up with HMRC debt, you’ve likely either underpaid your taxes or over-claimed for things like tax credits.

How to dispute an HMRC debt

HMRC sends you a ‘decision letter’ letting you know whether you can appeal a tax decision.

It’s worth noting there’s a procedure to follow when appealing HMRC Debt.

You could appeal against:

  • A tax bill which includes Income Tax, VAT, Corporation Tax
  • Claims for tax relief
  • A request for details or to check through your business records
  • A penalty you received for late tax payments or late tax return submission

An appeal can be made by an accountant or someone else who manages your taxes. This can be helpful as understanding Tax Codes is important.

You typically have to pay the costs of appealing a tax decision. Plus, it may be possible to delay payment of your taxes or a penalty until the appeal is resolved.

» TAKE ACTION NOW: Fill out the short debt form

Consequences of ignoring HMRC debt

The consequences of ignoring an HMRC debt could lead to more stress and anxiety.

I’ve listed what may happen here:

  • Enforcement officers (bailiffs) will enforce the debt
  • An application for a County Court Judgement (CCJ) could be made against you
  • A summons to appear in a magistrates’ court could be issued
  • Bankruptcy proceedings could be started against you
  • Money could be taken directly from your wages
  • Money could be taken from your savings

What other debt solutions are there?

If you can’t afford to pay what’s owed, seek advice from a debt expert.

I’ve listed other debt solutions that could be worth considering as well as HMRC Debt Relief Options.

Formal solutions are legal processes which include:

  • A Debt Relief Order (DRO)
  • An Individual Voluntary Arrangement (IVA)
  • Bankruptcy

Informal solutions are options if you can repay creditors in full and which allow them to agree on an arrangement with creditors to pay repayments over time.

They are not legally binding which means creditors can demand full payment if they change their minds.

Informal solutions are:

Is extra help available?

Of course, in some cases, you might need extra help when it comes to dealing with your debts.

In such a case, you’ll find that HMRC debt management staff are all trained to know when you might need extra help with tax arrears.

You can also nominate someone you know and trust to deal with your tax affairs if you are unsure. 

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get Started

What is a Time to Pay Arrangement?

A Time To Pay Arrangement lets you pay back what you owe to HMRC in monthly instalments over 12 months.

That said, some arrangements can be longer depending on affordability and circumstances.

The role of independent financial advisors

A financial advisor will look at your circumstances and financial plans before recommending which product meets your unique needs.

They also provide advice on self-assessment HMRC Debt for the self employed.

There are two sorts of financial advisors which I’ve listed here:

  • An independent financial advisor (IFA) provides unbiased advice on a whole range of financial products. It includes tax arrears
  • A restricted advisor provides advice or a limited range of financial products which is typically in one area such as pensions

Case study: HMRC debt

See the message a person posted on a popular online forum.

Source: Moneysavingexpert

Other Debt Collectors 

You should check for more outstanding debts that you may have with other companies or debt collectors. Here are four steps you could take: 

  1. Check your credit report for other defaults 
  2. Check your email and post for reminders or overdue notices
  3. Check the court records for CCJs against you
  4. Check your bank statements for the names of other debt collectors 

There are hundreds of debt collectors in the UK and each works with different companies to collect debts.

For example, Cabot Financial have been known to collect for the DVLA while Lowell Financial and PRA Group buy debts from various credit card companies like Barclaycard.

If you see a name on your bank statement that you don’t recognise then you can search MoneyNerd to see if they’re a debt collector. 

Thousands have already tackled their debt

Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.

Natasha

I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.

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HMRC Contact Details

Post: Pay As You Earn and Self Assessment
HM Revenue and Customs, BX9 1AS, United Kingdom
Phone: 0300 200 3300
+44 135 535 9022 outside UK
Relay UK: dial 18001 then 0300 200 3300.
Official app: official HMRC app
Website: https://www.gov.uk/government/organisations/hm-revenue-customs
Debt collectors link: www.hmrc.gov.uk/payinghmrc/debt collectors

County Court proceedings

If the previous methods still haven’t worked, HMRC will start County Court proceedings against you.

There are various approaches they can take, including: 

  • Charging orders. This means that any assets you sell must be used to pay your debts. It also gives HMRC the power to recover debts from property sales. 
  • Attachment of Earnings. With this method, HMRC will take money directly from your paycheque each month to repay your debt. 
  • Third Party Debt Order. If someone owes you money, HMRC can reclaim the debt from this third party. 
  • Pensions. In some circumstances, pension payments may be considered an income. As such, HMRC could recover money from your pension payments. 

There are other methods they might use too, although these are usually only for the most extreme cases.

Things like insolvency or voluntary arrangements can sometimes be used.

Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.