For anyone who needs to submit a self-assessment tax return, the next payment is due on the 31st of January 2022. If you owe tax, now is the time to set up a payment plan ...
With the tax debt burden being so high right now, it's good that HMRC is targeting those that can afford to pay and supporting those in difficulty!
With over £42 billion owned to HMRC by millions of people, data from the National Audit Office shows that the UK's tax debt burden has jumped considerably. Over 2 million more people have fallen into debt with their taxes.
"This is no surprise to HMRC considering the pandemic we've just been through!"
The analysis shows that in January 2020, 3.8 million people owed tax, but in September 2021, over 6 million individuals were in arrears. The average amount owed is not £6,800 which is a 60% increase.
Most tax collection activities were paused as we entered the first lockdown in March 2020 and payments of VAT and self-assessment income tax were also deferred. HMRC now faces an uphill struggle to clear the backlog and get payment plans set up. It has already warned the government that it will need more staff to manage the workload.
HMRC now faces a very careful balancing act to recover tax debts from those that can pay while also being fair and supporting those that can't afford to make any sort of regular payments.
The NAO has made a number of recommendations to HMRC on the way it should go about getting the tax debt burden down and many debt charities praise it for the way it works with those in debt to support them, especially those who are classed as vulnerable.
They have also recommended HMRC changes from using complete debt recovery within a single tax period to looking at affordability at an individual level and making better use of independent debt advice.
However, the National Audit Office also recommended HMRC needs to be tougher with businesses, especially those who misuse insolvency rules, allowing them to attach business debts to owners who 'phoenix' their companies!
With the tax debt burden being so high right now, it's good that HMRC is targeting those that can afford to pay and supporting those in difficulty. Deliberate misuse of the tax system really does need to end.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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