Outrage as 1.4million Brits hit by huge tax bill as HMRC cashes in – check if you’re affected

THE taxman has been accused of cashing in on struggling Brits who can’t pay their tax bill on time by charging exorbitant interest rates.

HM Revenue & Customs (HMRC) raked in a record £346million in interest from taxpayers who made late payments in the year to October 2023.

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This was a huge increase from the £159million paid the previous year, according to a freedom of information (FOI) request by accountancy firm RSM.

Around 1.4million self-employed taxpayers made late payments in the tax year 2020/21, according to a separate FOI by broker AJ Bell.

Assuming this figure has stayed consistent, taxpayers who paid their bill late were charged an average of £247 each in interest last year and £456 over the past three years.

Those affected are people who file a self-assessment tax return. This tends to be self-employed people or those with a side hustle.

You have to file a self-assessment tax return on January 31 each year for the previous tax year.

If you can’t pay any tax due at the time, you can set up a repayment plan to pay it back over time.

If you don’t take action, you’ll immediately be fined £100, or more if it’s over three months late.

HMRC announced last week that almost 45,000 people had set up a repayment plan since April 2023 because they couldn’t afford their tax bill up front.

But the cost of delaying payments has soared as interest rates have increased over the past few years.

The taxman charges interest based on the Bank of England’s rate, plus an extra 2.5 percentage points.

The bank rate has hugely increased over the past few years. In November 2021, it was 0.1%.

But it’s currently 5.25%, meaning HMRC now charges a hefty 7.75% in interest on late tax.

This is despite HMRC only currently paying 4.25% interest to customers where it owes them money, for example because they have overpaid tax and are due a refund.

Chris Hetherington, of RSM, said: “Some taxpayers may be oblivious to the amount of interest HMRC applies for late payments.

“But it’s those already facing money troubles who end up deferring paying tax, so they need to be aware of the high cost of doing so.

“This can end up compounding their financial difficulties, leading them into a debt spiral.

“HMRC should consider reducing these questionably high rates for those who are willing to engage with them and set up a repayment plan.”

An HMRC spokesperson said: “The interest we charge and pay is fair.

“It ensures people are not encouraged to overpay their tax to secure a higher interest rate than available commercially, while those paying late don’t get an unfair financial advantage over those paying on time.”

What if I’m struggling to pay my tax bill?

If you’re struggling to pay a tax bill, you can set up a “Time to Pay” plan with HMRC to pay it back over time.

You will be charged interest, but setting up a plan means you won’t be hit with penalties for simply not paying on time.

You can apply online through your Government Gateway acount or by visiting https://www.gov.uk/difficulties-paying-hmrc or call 0300 200 3820.

Bear in mind you can only set up a payment plan if HMRC deems you’ll be able to keep up with the repayments.

If you can’t agree to an affordable amount, it will ask you to pay in full.

To register for a Government Gateway account, you’ll need your National Insurance number and two of any of the following:

• a valid UK passport
• a UK photocard driving licence
• a payslip from the last three months, or a P60 from your employer
• details of a tax credit claim
• details from a self assessment tax return
• your credit record information

Do you have a money problem that needs sorting? Get in touch by emailing [email protected].

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This post first appeared on thesun.co.uk