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HMRC debt is any government debts, fines or penalties issued by the government or local council.
HMRC debts are typically issued for council tax or any outstanding tax payments but can include any government fines.

What is HMRC and Government debt?

All residents living in the UK must make council tax payments to their local area each month. These monthly payments can range depending on location and area based on the valuation band your local council has placed on your property.

If you’ve failed to repay your HMRC and government debts, you could find yourself falling into debt with the government. HMRC and government debts are serious and failing to respond to government issued debts can lead to serious repercussions if these debts are left unpaid.

Dealing with HMRC and government debts can be stressful. Luckily, we may be able to answer some questions you have regarding your HMRC and government debt and help you find the support and assistance you need.

Are HMRC and Government debts priority debts?

HMRC and government debts are considered priority bills meaning there can be serious repercussions for people who fall behind on their payments, and, unlike other forms of debt recovery, councils can enact more severe action against those who, for whatever reason, fail to pay.

This will start with letters but escalate to hearings in court, bailiff action and even prison time if you continue to miss payments or refuse to pay.

What happens if I don’t pay my HMRC and Government debts?

If you find yourself falling behind on HMRC debt payments or missing a payment, your council will first send you a reminder notice. Once you receive this notice, you’ll have seven days to settle up and pay the amount owed. Failure to repay this amount within that deadline could see you receiving a court summons.

In some cases, payments will be taken directly from your account or monthly payments will be taken from your place of work.

Your local council can also send bailiffs to your residence and, if necessary, seize your property in an effort to offset your debts.

Your local council will send you a maximum of two reminders in a single financial year. Following that, if you continue to miss payments your local council may move to take legal action against you.

HMRC and government debt liability order

If legal action is taken against you, this will take the form of a ‘liability order’ from the magistrate court. A liability order is a legal request for payment which may include extra costs such as legal fees, lawyers’ fees and any other expenses associated with retrieving your debts. You can plead your case in court for not paying.

After this, if you keep avoiding payment, your local council may take the outstanding amount from your wages directly, or it may take it from any benefits you receive, such as Employment and Support Allowance, Income Support or Jobseeker’s Allowance.

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Can you go to prison for not paying your HMRC and Government debt?

Though the punishment for not repaying your HMRC and government debt can vary, it’s a possibility that a court may decide to serve you up to three months’ jail time as a result of your unpaid HMRC and government debts.

However, there are only certain debts in which prison time is a possible outcome and even in these cases it’s generally seen as a last resort which will only be taken when all other options have been provided to you.

Debts that can lead to jail time include:

Debts that can’t result in prison time are:

  • Loans
  • Mortgage/Rent Arrears
  • Overdraft
  • Utility Bills

 Prison is a more extreme punishment and would be reserved for people who are actively refusing to pay rather than someone who is unable to afford it.

Can I get a reduction on my HMRC and Government debts?

This can vary depending on your government debts.

If you’re struggling to make Council Tax debt payments, there are several options that may be available to you to help.

Your local council may agree to let you to spread your payments over 12 months instead of the usual 10 months to make monthly payments more manageable.

If your situation qualifies, you may be given a one-off discount which may help you get back on the right track if you’ve fallen on hard times.

You might also qualify for certain rent reduction schemes for vulnerable households in need. These include:

  • A reduced council tax bill for homes with only one resident adult, or in homes where nobody in the household is over 18
  • HMRC and government debt reduction for low-income households/households on benefits

Can I get HMRC debt advice?

If you’re finding it difficult to manage payments to HMRC and feel like you need advice on what to do, you may benefit from speaking to your local Citizens Advice Bureaux or an independent, impartial debt advisor, who can help you discuss your debts and give you expert advice on how to manage your finances and any financial options that may be right for you to repay your debts.

For free confidential debt advice, visit MoneyHelper.

Can Government debt be written off?

Though it is more the exception than the rule, there are scenarios where you can potentially write off your HMRC debt.

To have your government debt written off, you’ll need to provide a strong case for why you’re currently unable to repay your debt with no realistic means of coming up with the outstanding amount. Under the Local Government Finance Act 1992, Section 13A local councils do have the power to either lower or forgive debts under extreme circumstances. These may include severe financial difficulties, disability, or individuals suffering from acute mental or physical health conditions.

Though generally you will be expected to repay your HMRC debts, you may be able to get support by contacting your local council and explaining your current situation. Different debts have different criteria and implications, so it’s important to know which type of debt you are currently dealing with.

Debt solutions for Government debt

You may also be able to write off HMRC and government debts as part of a debt solution such as an IVA, Bankruptcy or through a Debt Relief Order.

IVA – An IVA is a formal debt solution that consolidates all of your outstanding debts into one affordable monthly repayment. It’s a legally binding debt repayment agreement that lasts over a set period (usually up to six years). Once you have reached the end of your repayment period, any outstanding debts are written off.

Debt Relief Order – A Debt Relief Order is a debt solution designed for people with debts up to £30,000 (£20,000 in Northern Ireland) with no viable means of repayment. During a Debt Relief Order you’re given a 12-month grace period from your debts, after which you’ll either need to begin making payments towards your debts or, if you’re still unable to repay the amount, your debts will officially be written off.

Bankruptcy –  Bankruptcy is a formal insolvency solution available to residents of England, Wales, and Northern Ireland (the equivalent in Scotland is Sequestration) where your outstanding debts are written off.

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