What could happen if you don't pay HMRC

HM Revenue & Customs (HMRC) is responsible for making sure that money is available to fund the UK's public services and expects people to pay their tax in full and on time.

If you are unable to pay your bill in full and on time you should contact HMRC as soon as possible. HMRC's contact details will be clearly shown on the paperwork you receive.

The most important thing is to contact HMRC straight away. The sooner you contact HMRC the sooner they can begin working with you to find a solution. HMRC may, in some circumstances, allow you additional time to pay.

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What happens if you ignore a payment demand

Ignoring a demand does not make the debt go away. If you don't respond you may be charged additional interest, penalties and surcharges. Your debt may be referred to a private debt collection agency and HMRC will be using the following agencies to pursue some debts on their behalf:

Advantis Credit Ltd
Akinika Debt Recovery Ltd
Apex Credit Management Ltd
Bluestone Credit Management Ltd
Commercial Collection Services Ltd (trading as CCS Collect)
Credit Solutions Ltd
dlc (formerly Direct Legal & Collections)
Drydensfairfax Solicitors
Equita Ltd
1st Locate (trading as LCS)
Fredrickson International Ltd
Past Due Credit Solutions (PDCS)
Rossendales Ltd
Sigma Red (formerly known as Commercial Credit Services Group)

HMRC may take legal action to recover the debt and costs.

If HMRC believe you or your business are insolvent they may start bankruptcy action or winding up proceedings.

The longer you delay contacting HMRC the less likely HMRC is to allow you any extra time and the more serious the consequences are likely to be.

Find out what to do if you can't pay your bill

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Failure to pay a demand - England and Wales

Collecting debts through your PAYE tax code

If you are in Pay As You Earn (PAYE) employment or receive a UK-based pension HMRC can reduce your tax code to collect your debt, if you owe less than £3,000.

HMRC will send you a letter telling you that they intend to try to recover the money owed in this way from the 6 April of the following year. You will be sent a PAYE Coding Notice between January and March immediately before the start of the tax year on 6 April to say that your tax code includes the collection of the outstanding debt.

Taking Control of Goods

This is where your possessions can be taken and auctioned to pay your debt and fees incurred from this process.

HMRC will visit your premises and ask you once more for payment. If you don't pay, they will list your possessions to the value of the debt (and fees) and costs and ask you to sign it.

If you sign it, you have five days to pay the demand before your possessions are removed to sell at auction, at which point additional fees are applied.

If you don't sign, you'll still have five days to pay before your possessions are auctioned, but your possessions will be removed there and then. You will also have to pay extra fees.

If your possessions are auctioned for more than the amount you owe (including any extra costs of removing and selling them) you'll be paid anything left over. If they're sold for less, you will still have to pay the difference.

Find out more about taking control of goods (PDF 275K)

What to expect when we visit you (version for England and Wales) (PDF 482K)

Get advice on distraint from TaxAid (Opens new window)

Magistrates court proceedings

HMRC can start magistrates' court proceedings against you if:

  • you owe £2,000 or less
  • you've owed it for no more than a year

You'll get a summons before the hearing detailing what you owe and where and when the hearing will be.

If you're able to pay what you owe you won't have to go to court. If you disagree with the amount on the summons, contact HMRC. Magistrates can't settle arguments about the size of your bill.

The magistrates can order you to pay your bill plus costs. If you don't, they can send bailiffs to take your possessions.

Read the factsheet on magistrates court proceedings in England and Wales (PDF 48K)

County court proceedings

All legal proceedings are stopped when you pay what you owe, so it's advisable to pay as soon as possible.

If you can't pay straight away, you have the opportunity to make an offer within 14 days outlining how you'll be able to pay by a certain date or in instalments.

If you disagree with the amount on the claim form, you can do so by following the instructions on the form you get from the issuing court. However you may have to go to court to give your reasons.

If you don't reply or pay what you owe, you can be ordered to pay additional court fees and our costs on top of the claim form. Your details will be put on a Register of Judgments, Orders and Fines, which may mean you'll find it more difficult to open a bank account or borrow money. But if you pay within one month of the judgment you can ask to have such an entry removed.

Read the factsheet about county court proceedings in England and Wales (PDF 45K)

Learn more about county court proceedings on the TaxAid website (Opens new window)

Learn more about our costs and how these are reflected on the claim form (Opens new window)

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Failure to pay a demand - Northern Ireland

Collecting debts through your PAYE tax code

If you are in Pay As You Earn (PAYE) employment or receive a UK-based pension HMRC can reduce your tax code to collect your debt, if you owe less than £3,000.

HMRC will send you a letter telling you that they intend to try to recover the money owed in this way from the 6 April of the following year. You will be sent a PAYE Coding Notice between January and March immediately before the start of the tax year on 6 April to say that your tax code includes the collection of the outstanding debt.

Distraint

This is where your possessions can be taken and auctioned to pay your debt and costs.

HMRC will visit your premises and ask you once more for payment. If you don't pay, they will list your possessions to the value of the debt and costs and ask you to sign it.

If you sign it, you have five days to pay the demand before your possessions are removed to sell at auction.

If you don't sign, you'll still have five days to pay before your possessions are auctioned, but your possessions will be removed there and then. You will also have to pay extra costs.

If your possessions are auctioned for more than the amount you owe (including any extra costs of removing and selling them) you'll be paid anything left over. If they're sold for less, you will still have to pay the difference.

Find out more about distraint proceedings (PDF 272K)

What to expect when we visit you (version for Northern Ireland) (PDF 485K)

Get advice on distraint from TaxAid (Opens new window)

Magistrates court proceedings

HMRC can start magistrates' court proceedings against you if:

  • you owe £2,000 or less
  • you've owed it for no more than a year

You'll get a summons before the hearing detailing what you owe and where and when the hearing will be.

If you're able to pay what you owe you won't have to go to court. If you disagree with the amount on the summons, contact HMRC. Magistrates can't settle arguments about the size of your bill.

The magistrates can order you to pay your bill plus costs. If you don't, they can send bailiffs to take your possessions.

Read the factsheet on magistrates court proceedings in Northern Ireland (PDF 63K)

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Failure to pay a demand - Scotland

Collecting debts through your PAYE tax code

If you are in Pay As You Earn (PAYE) employment or receive a UK-based pension HMRC can reduce your tax code to collect your debt, if you owe less than £3,000.

HMRC will send you a letter telling you that they intend to try to recover the money owed in this way from the 6 April of the following year. You will be sent a PAYE Coding Notice between January and March immediately before the start of the tax year on 6 April to say that your tax code includes the collection of the outstanding debt.

Sheriff's court

If you fail to pay what you owe, HMRC will apply to the sheriff's court as soon as possible after the date of the demand letter for a warrant to collect all outstanding debts.

You will have 14 calendar days in which to pay your debt from the date of the warrant. If you still don't pay the debt HMRC will:

  • take the money directly from your pay or bank account
  • take and sell certain goods (within your business premises or kept externally on your property)
  • make you bankrupt

What to expect when we visit you (version for Scotland) (PDF 465K)

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Insolvency proceedings in the UK

Personal bankruptcy

Any sole traders or individuals in a partnership who fail to meet all requests to settle their debt can be petitioned for bankruptcy by HMRC.

If the court makes a bankruptcy order, it may mean that:

  • you can be forced to cease trading or you lose control of your business
  • the court appoints someone to investigate your financial affairs
  • your goods and/or assets are sold to pay the debt (plus costs)
  • you may be unable to obtain credit over a certain amount
  • future income is used to settle current debts

Find out more about bankruptcy in the factsheet - EF5 (PDF 79K)

Find out more about bankruptcy in Northern Ireland - EF5 (NI) (PDF 79K)

Winding up your company

HMRC may petition the court for the winding up of incorporated companies and partnerships that fail to pay their debts.

If the court makes a winding up order, it may mean that:

  • your company/partnership is forced to cease trading or you lose control of your business
  • goods and/or assets are sold to pay your debt plus costs
  • the court appoints someone to investigate your financial affairs
  • you may be disqualified from acting as a company director

Learn more about winding up a company - EF6 (PDF 81K)

Learn more about winding up a company in Northern Ireland - EF6 (NI) (PDF 82K)

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More useful links

Find information on what to do if you can't pay your bill

Find out how to complain about an HMRC decision

Find out how to make an appeal against an HMRC decision

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