Imagine getting a surprise bill for something you didn’t expect. This is what happens to many when they get a letter from HM Revenue & Customs (HMRC). Often, they’re informed they’ve underpaid their taxes and owe the government more money.
- Debt to the Taxman: More and more people are in debt to HMRC, especially those working for themselves (the self-employed). In fact, as of the last tax year mentioned, the government was owed £1.6 billion from late tax payments.
- Increasing Debt Trend: The amount of late tax payments owed has been growing over the years. In simple terms, this means more people are missing their tax deadlines.
- Why are so many people late?
- More Self-employed: The number of people working for themselves has grown from 3.3 million in 2001 to 4.8 million now. This rise can be attributed to the gig economy and people desiring more control over their work hours.
- Complicated System: Even seasoned financial experts find the online Self Assessment system, which is the method by which self-employed individuals declare their income, confusing and cumbersome.
- Cash Flow Problems: Self-employed folks often face delays in getting paid by clients. This means they might not have the money to pay their tax bill on time. Imagine a plumber who did a job but hasn’t been paid by several clients. He might not have the funds to pay his own bills, including taxes.
- Dealing with Late Payments: It’s a widespread problem. Many small businesses face late payments, often with weak excuses like, “Our accountant is on vacation”. This disrupts their finances, sometimes forcing them to use money meant for taxes to cover their daily expenses.
- Government’s Stance: The government seems to be less forgiving about late tax payments. Previously, they might cancel penalties for people who paid late, but now, they’re less likely to give such concessions.
- Controversial HMRC Tactics: A recent court case showed that HMRC might be getting too aggressive. They were accused of making up huge tax figures to intimidate people into paying. This article gives the example of Sebastian Cussens, who was billed for a huge sum based on exaggerated estimations. It’s like telling someone they owe thousands for a service they never used, just to see if they’ll pay up out of fear.
In a nutshell, while paying taxes on time is essential, it’s becoming more challenging for a growing number of self-employed individuals in the UK. They’re juggling a complex tax system, unpredictable incomes, and sometimes, an aggressive taxman. On top of this, some suspect that the taxman might be playing hardball and using scare tactics to get payments.