Paying your tax bill
The impact of the COVID-19 pandemic is still being felt today. While a handful of retail giants such as Amazon and supermarket chains prospered, many workers lost their jobs and smaller businesses had to close their doors. In the aftermath of lockdowns, reduced trading and furloughs – and now in the midst of a cost of living crisis – research shows that individuals and organisations are struggling to pay their tax bills. So if you are facing late payment penalties or utilising the taxman’s Time to Pay schemes, you’re certainly not alone.
SMEs struggling
Research by Premium Credit showed that in 2024 there were more than 430,000 SMEs that experienced challenges with paying their tax bills. The study, conducted in March 2024, found that 17% of SME owners and managers were finding it harder to settle their debts with the taxman. The average amount owed was approximately £50,400.
In December 2024, unpaid tax liabilities due to HMRC totalled more than £44bn – a reduction from the peak of £66bn on 30 September 2020, but still three times higher than before the pandemic.
To make matters worse, the government implemented an increase in penalties in the Spring Statement of 2025, raising the penalty for payments made 16-30 days late from 2% to 3% of the amount owed at day 15.
For those with payments outstanding for more than 31 days, penalties get much harsher, combining the sums of:
- 3% of the amount owed at day 15 (up from 2%)
- 3% of the amount owed at day 30 (up from 2%)
- Penalties calculated daily from day 31 at the rate of 10% pa on the outstanding balance (up from 4%)
Using Time to Pay
Many businesses struggling with their tax bills can take advantage of the Time to Pay arrangement with HMRC. Indeed, in a 2024 survey conducted by Premium Credit, one in three accountants and financial advisors said they already had clients on the Time to Pay scheme; 60% of respondents expected this to be the case by 2027.
Time to Pay is open to businesses that owe less than £30,000 in tax, and enables them to set up an online payment plan to spread the cost of their bill. In order to be eligible, you must:
- Be up to date with all your tax returns
- Not have any other payment plans or debts with HMRC
- Apply less than 60 days after the payment deadline
If you don’t meet any part of the above criteria, you can still contact HMRC to find a solution. Call 0300 200 3310 for Self Assessment solutions or 0300 200 3835 for the Payment Support Service.
Reliable tax calculation
In order to get tax returns submitted and payments made on time, it’s vital to stay on top of your financial record keeping and reporting. A reputable accountant can ensure your tax returns are prepared and filed on time, giving you more time to assess your finances and find an appropriate solution for payment.
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