Trusts and taxes

Overview

A trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of trusts and they are taxed differently.

Trusts involve:

the ‘settlor’ - the person who puts assets into a trust

the ‘trustee’ - the person who manages the trust

the ‘beneficiary’ - the person who benefits from the trust

This guide is also available in Welsh (Cymraeg).

What trusts are for

Trusts are set up for a number of reasons, including:

to control and protect family assets

when someone’s too young to handle their affairs

when someone cannot handle their affairs because they’re incapacitated

to pass on assets while you’re still alive

to pass on assets when you die (a ‘will trust’)

under the rules of inheritance if someone dies without a will (in England and Wales)

What the settlor does

The settlor decides how the assets in a trust should be used - this is usually set out in a document called the ‘trust deed’.

Sometimes the settlor can also benefit from the assets in a trust - this is called a ‘settlor-interested’ trust and has special tax rules. Find out more by reading the information on different types of trust.

What trustees do

The trustees are the legal owners of the assets held in a trust. Their role is to:

deal with the assets according to the settlor’s wishes, as set out in the trust deed or their will

manage the trust on a day-to-day basis and pay any tax due

decide how to invest or use the trust’s assets

If the trustees change, the trust can still continue, but there always has to be at least one trustee.

Beneficiaries

There might be more than one beneficiary, like a whole family or defined group of people. They may benefit from:

the income of a trust only, for example from renting out a house held in a trust

the capital only, for example getting shares held in a trust when they reach a certain age

both the income and capital of the trust

If you need help

Contact a solicitor or tax advisor. They can also talk to HM Revenue and Customs (HMRC) on your behalf if you give them permission.

You can also get help from the Society of Trust and Estate Practitioners.

Types of trust

The main types of trust are:

bare trusts

interest in possession trusts

discretionary trusts

accumulation trusts

mixed trusts

settlor-interested trusts

non-resident trusts

Each type of trust is taxed differently. Trusts involve a ‘trustee’, ‘settlor’ and ‘beneficiary’.

Bare trusts

Assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the capital and income of the trust at any time if they’re 18 or over (in England and Wales), or 16 or over (in Scotland). This means the assets set aside by the settlor will always go directly to the intended beneficiary.

Bare trusts are often used to pass assets to young people - the trustees look after them until the beneficiary is old enough.

Interest in possession trusts

These are trusts where the trustee must pass on all trust income to the beneficiary as it arises (less any expenses).

Discretionary trusts

These are where the trustees can make certain decisions about how to use the trust income, and sometimes the capital.

Depending on the trust deed, trustees can decide:

what gets paid out (income or capital)

which beneficiary to make payments to

how often payments are made

any conditions to impose on the beneficiaries

Discretionary trusts are sometimes set up to put assets aside for:

a future need, like a grandchild who may need more financial help than other beneficiaries at some point in their life

beneficiaries who are not capable or responsible enough to deal with money themselves

Accumulation trusts

This is where the trustees can accumulate income within the trust and add it to the trust’s capital. They may also be able to pay income out, as with discretionary trusts.

Mixed trusts

These are a combination of more than one type of trust. The different parts of the trust are treated according to the tax rules that apply to each part.

Settlor-interested trusts

These are where the settlor or their spouse or civil partner benefits from the trust. The trust could be:

an interest in possession trust

an accumulation trust

a discretionary trust

Non-resident trusts

This is a trust where the trustees are not resident in the UK for tax purposes. The tax rules for non-resident trusts are very complicated.

Parental trusts for children

These are trusts set up by parents for children under 18 who have never been married or in a civil partnership. They’re not a type of trust in their own right but will be either:

a bare trust

an interest in possession trust

an accumulation trust

a discretionary trust

Read the information on types of trust to find out more.

Income Tax

Income Tax on income from the trust is paid by the trustees, but the ‘settlor’ is responsible for it. This means:

The trustees pay Income Tax on the trust income by filling out a Trust and Estate Tax Return.

They give the settlor a statement of all the income and the rates of tax charged on it.

The settlor tells HM Revenue and Customs (HMRC) about the tax the trustees have paid on their behalf when filling out their Self Assessment tax return.

Trusts for vulnerable people

Some trusts for disabled people or children get special tax treatment. These are called ‘trusts for vulnerable beneficiaries’.

Who qualifies as a vulnerable beneficiary

A vulnerable beneficiary is either someone under 18 whose parent has died or a disabled person who is eligible for any of the following benefits (even if they do not receive them):

Attendance Allowance

Disability Living Allowance (either the care component at the highest or middle rate, or the mobility component at the higher rate)

Personal Independence Payment

an increased disablement pension

Constant Attendance Allowance

Armed Forces Independence Payment

A vulnerable beneficiary can also be someone who is unable to manage their own affairs because of a mental health condition - check with a medical professional that it’s covered by the Mental Health Act 1983.

Trusts that qualify for special tax treatment

A trust does not qualify for special Income Tax treatment if the person setting it up can benefit from the trust income. However, from 2008 to 2009 it would qualify for special Capital Gains Tax treatment.

Trusts for children who’ve lost a parent are usually set up by the parent’s will, or by special rules of inheritance if there’s no will.

If someone dies without a will in Scotland, a trust set up there for their children is usually treated as a bare trust for tax purposes.

If there’s more than one beneficiary

If there are beneficiaries who are not vulnerable, the assets and income for the vulnerable beneficiary must be:

identified and kept separate

used only for that person

Only that part of the trust gets special tax treatment.

Claiming special tax treatment

To claim special treatment for Income Tax and Capital Gains Tax, the trustees have to fill in the ‘Vulnerable Person Election’ form.

If there’s more than one vulnerable beneficiary, each needs a separate form.

The trustees and beneficiary must both sign the form.

If the vulnerable person dies or is no longer vulnerable, the trustees must tell HMRC.

Income Tax

In a trust with a vulnerable beneficiary, the trustees are entitled to a deduction of Income Tax. It’s calculated like this:

Trustees work out what their trust Income Tax would be if there was no claim for special treatment - this will vary according to which type of trust it is.

They then work out what Income Tax the vulnerable person would have paid if the trust income had been paid directly to them as an individual.

They can then claim the difference between these 2 figures as a deduction from their own Income Tax liability.

This is a complicated calculation but there’s a detailed worked example on the HMRC website.

Capital Gains Tax

Capital Gains Tax may be due if assets are sold, given away, exchanged or transferred in another way and they’ve gone up in value since being put into trust.

Tax is only paid by trustees if the assets have increased in value above the ‘annual exempt amount’, which is an allowance of £12,300 for people who have a mental or physical disability, or £6,150 for other trustees.

Trustees are responsible for paying any Capital Gains Tax due. If the trust is for vulnerable people, trustees can claim a reduction, which is calculated like this:

They work out what they would pay if there was no reduction.

They then work out what the beneficiary would have to pay if the gains had come directly to them.

They can claim the difference between these 2 amounts as a reduction on what they have to pay in Capital Gains Tax using form SA905.

This special Capital Gains Tax treatment does not apply in the tax year when the beneficiary dies.

Inheritance Tax

These are the situations when trusts for vulnerable people get special Inheritance Tax treatment:

for a disabled person whose trust was set up before 8 April 2013 - at least half of the payments from the trust must go to the disabled person during their lifetime

for a disabled person whose trust was set up on or after 8 April 2013 - all payments must go to the disabled person, except for up to £3,000 per year (or 3% of the assets, if that’s lower), which can be used for someone else’s benefit

when someone who has a condition that’s expected to make them disabled sets up a trust for themselves

for a bereaved minor - they must take all the assets and income at (or before becoming) 18

There’s no Inheritance Tax charge:

if the person who set up the trust survives 7 years from the date they set it up

on transfers made out of a trust to a vulnerable beneficiary

When the beneficiary dies, any assets held in the trust on their behalf are treated as part of their estate and Inheritance Tax may be charged.

Trusts usually have 10-year Inheritance Tax charges, but trusts with vulnerable beneficiaries are exempt.

Trusts and Income Tax

Different types of trust income have different rates of Income Tax.

Each type of trust is taxed differently. Trusts involve a ‘trustee’, ‘settlor’ and ‘beneficiary’.

Accumulation or discretionary trusts

Trustees are responsible for paying tax on income received by accumulation or discretionary trusts. The first £1,000 is taxed at the standard rate.

If the settlor has more than one trust, this £1,000 is divided by the number of trusts they have. However, if the settlor has set up 5 or more trusts, the standard rate band for each trust is £200.

The tax rates are below.

Trust income up to £1,000

Type of income | Tax rate

Dividend-type income | 7.5%

All other income | 20%

Trust income over £1,000

Type of income | Tax rate

Dividend-type income | 38.1%

All other income | 45%

Dividends

Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.

Interest in possession trusts

The trustees are responsible for paying Income Tax at the rates below.

Type of income | Income Tax rate

Dividend-type income | 7.5%

All other income | 20%

Sometimes the trustees ‘mandate’ income to the beneficiary. This means it goes to them directly instead of being passed through the trustees.

If this happens, the beneficiary needs to include this on their Self Assessment tax return and pay tax on it.

Bare trusts

If you’re the beneficiary of a bare trust you’re responsible for paying tax on income from it.

You need to tell HMRC about the income on a Self Assessment tax return.

If you do not usually send a tax return, you need to register for self-assessment by 5 October following the tax year you had the income.

Settlor-interested trusts

The settlor is responsible for Income Tax on these trusts, even if some of the income is not paid out to them. However, the Income Tax is paid by the trustees as they receive the income.

The trustees pay Income Tax on the trust income by filling out a Trust and Estate Tax Return.

They give the settlor a statement of all the income and the rates of tax charged on it.

The settlor tells HMRC about the tax the trustees have paid on their behalf on a Self Assessment tax return.

The rate of Income Tax depends on what type of trust the settlor-interested trust is.

Other types of trust

There are special tax rules for parental trusts for children, trusts for vulnerable people and trusts where the trustees are not resident in the UK for tax purposes. These are called non-resident trusts.

If you’re the beneficiary

Depending on the type of trust and your income, you might be able to claim some of the Income Tax back.

If you’re the trustee

Get help completing the Trust and Estate Tax return.

If you need more help

There’s more detailed guidance on trusts and Income Tax.

Contact HMRC or get professional tax advice if you need help.

Trusts and Capital Gains Tax

Capital Gains Tax is a tax on the profit (‘gain’) when something (an ‘asset’) that’s increased in value is taken out of or put into a trust.

When Capital Gains Tax might be payable

If assets are put into a trust

Tax is paid by either the person:

selling the asset to the trust

transferring the asset (the ‘settlor’)

If assets are taken out of a trust

The trustees usually have to pay the tax if they sell or transfer assets on behalf of the beneficiary.

There’s no tax to pay in bare trusts if the assets are transferred to the beneficiary.

Sometimes an asset might be transferred to someone else but Capital Gains Tax is not payable. This happens when someone dies and an ‘interest in possession’ ends.

A beneficiary gets some or all of the assets in a trust

Sometimes the beneficiary of a trust becomes ‘absolutely entitled’ and can tell the trustees what to do with the assets, for example when they reach a certain age.

In this case, the trustees pay Capital Gains Tax based on the assets’ market value when the beneficiary became entitled to them.

Non-UK resident trusts

The rules for Capital Gains Tax on non-UK resident trusts are complicated. You can get help with your tax.

Working out total gains

Trustees need to work out the total taxable gain to know if they have to pay Capital Gains Tax.

Allowable costs

Trustees can deduct costs to reduce gains, including:

the cost of the property (including any administration fees)

professional fees, for example for a solicitor or stockbroker

the cost of improving property or land to increase its value, for example building a conservatory (but not repairs or regular maintenance)

Tax reliefs

Trustees might be able to reduce or delay the amount of tax the trust pays if gains are eligible for tax relief.

Relief | Description

Private Residence Relief | Trustees pay no Capital Gains Tax when they sell a property the trust owns. It must be the main residence for someone allowed to live there under the rules of the trust.

Entrepreneurs’ Relief | Trustees pay 10% Capital Gains Tax on qualifying gains if they sell assets used in a beneficiary’s business, which has now ended. They may also get relief when they sell shares in a company where the beneficiary had at least 5% of shares and voting rights.

Hold-Over Relief | Trustees pay no tax if they transfer assets to beneficiaries (or other trustees in some cases). The recipient pays tax when they sell or dispose of the assets, unless they also claim relief.

Tax-free allowance

Trustees only have to pay Capital Gains Tax if the total taxable gain is above the trust’s tax-free allowance (called the Annual Exempt Amount).

The tax-free allowance for trusts is:

£12,300 if the beneficiary is vulnerable - a disabled person or a child whose parent has died

If there’s more than one beneficiary, the higher allowance may apply even if only one of them is vulnerable.

See tax-free allowances for previous years.

The tax-free allowance may be reduced if the trust’s settlor has set up more than one trust (‘settlement’) since 6 June 1978.

There’s more detailed information about Capital Gains Tax and Self Assessment for trusts.

Report gains to HMRC

If you’re the trustee, report any gains as part of your Trust and Estate Tax Return.

You’ll need to download and fill in form SA905 if you’re sending your tax return by post.

If you’re the beneficiary, you need to report and pay through a Self Assessment tax return.

The rules are different for reporting a loss.

If you need more help

There’s more detailed guidance on Capital Gains Tax.

Contact HMRC or get professional tax advice if you need help.

Trusts and Inheritance Tax

Inheritance Tax may have to be paid on a person’s estate (their money and possessions) when they die.

Inheritance Tax is due at 40% on anything above the threshold - but there’s a reduced rate of 36% if the person’s will leaves more than 10% of their estate to charity.

Inheritance Tax can also apply when you’re alive if you transfer some of your estate into a trust.

When Inheritance Tax is due

The main situations when Inheritance Tax is due are:

when assets are transferred into a trust

when a trust reaches a 10-year anniversary of when it was set up (there are 10-yearly Inheritance Tax charges)

when assets are transferred out of a trust (known as ‘exit charges’) or the trust ends

when someone dies and a trust is involved when sorting out their estate

What you pay Inheritance Tax on

You pay Inheritance Tax on ‘relevant property’ - assets like money, shares, houses or land. This includes the assets in most trusts.

There are some occasions where you may not have to pay Inheritance Tax - for example where the trust contains excluded property.

Special rules

Some types of trust are treated differently for Inheritance Tax purposes.

Bare trusts

These are where the assets in a trust are held in the name of a trustee but go directly to the beneficiary, who has a right to both the assets and income of the trust.

Transfers into a bare trust may also be exempt from Inheritance Tax, as long as the person making the transfer survives for 7 years after making the transfer.

Interest in possession trusts

These are trusts where the beneficiary is entitled to trust income as it’s produced - this is called their ‘interest in possession’.

On assets transferred into this type of trust before 22 March 2006, there’s no Inheritance Tax to pay.

On assets transferred on or after 22 March 2006, the 10-yearly Inheritance Tax charge may be due.

During the life of the trust there’s no Inheritance Tax to pay as long as the asset stays in the trust and remains the ‘interest’ of the beneficiary.

Between 22 March 2006 and 5 October 2008:

beneficiaries of an interest in possession trust could pass on their interest in possession to other beneficiaries, like their children

this was called making a ‘transitional serial interest’

there’s no Inheritance Tax to pay in this situation

From 5 October 2008:

beneficiaries of an interest in possession trust cannot pass their interest on as a transitional serial interest

if an interest is transferred after this date there may be a charge of 20% and a 10-yearly Inheritance Tax charge will be payable unless it’s a disabled trust

If you inherit an interest in possession trust from someone who has died, there’s no Inheritance Tax at the 10-year anniversary. Instead, 40% tax will be due when you die.

If the trust is set up by a will

Someone might ask that some or all of their assets are put into a trust. This is called a ‘will trust’.

The personal representative of the deceased person has to make sure that the trust is properly set up with all taxes paid, and the trustees make sure that Inheritance Tax is paid on any future charges.

If the deceased transferred assets into a trust before they died

If you’re valuing the estate of someone who has died, you’ll need to find out whether they made any transfers in the 7 years before they died. If they did, and they paid 20% Inheritance Tax, you’ll need to pay an extra 20% from the estate.

Even if no Inheritance Tax was due on the transfer, you still have to add its value to the person’s estate when you’re valuing it for Inheritance Tax purposes.

Trusts for bereaved minors

A bereaved minor is a person under 18 who has lost at least one parent or step-parent. Where a trust is set up for a bereaved minor, there are no Inheritance Tax charges if:

the assets in the trust are set aside just for bereaved minor

they become fully entitled to the assets by the age of 18

A trust for a bereaved young person can also be set up as an 18 to 25 trust - the 10-yearly charges do not apply. However, the main differences are:

the beneficiary must become fully entitled to the assets in the trust by the age of 25

when the beneficiary is aged between 18 and 25, Inheritance Tax exit charges may apply

Trusts for disabled beneficiaries

There’s no 10-yearly charge or exit charge on this type of trust as long as the asset stays in the trust and remains the ‘interest’ of the beneficiary.

You also do not have to pay Inheritance Tax on the transfer of assets into a trust for a disabled person as long as the person making the transfer survives for 7 years after making the transfer.

Paying Inheritance Tax

You pay Inheritance Tax using form IHT100.

If you’re valuing the estate of someone who’s died, you may have to value other assets apart from trusts to see if Inheritance Tax is due.

More help and information

There’s more detailed guidance on trusts and Inheritance Tax.

Contact HMRC or get professional tax advice if you need help.

Beneficiaries - paying and reclaiming tax on trusts

If you’re a trust beneficiary there are different rules depending on the type of trust. You might have to pay tax through Self Assessment or you might be entitled to a tax refund.

If you do not usually send a tax return and need to, you must register for Self Assessment by 5 October following the tax year you had the income.

Read the information on the different types of trust to understand the main differences between them. If you’re not sure what type of trust you have, ask the trustees.

If you’re the beneficiary of a bare trust you are responsible for declaring and paying tax on its income. Do this on a Self Assessment tax return.

Interest in possession trusts

If you’re the beneficiary of this type of trust, you’re entitled to its income (after expenses) as it arises.

If you ask for a statement, the trustees must tell you:

the different sources of income

how much income you’ve been given

how much tax has been paid on the income

You’ll usually get income sent through the trustees, but they might pass it to you directly without paying tax first. If this happens you need to include it on your Self Assessment tax return.

If you do not usually send a tax return you must register for Self Assessment by 5 October the year after you were given the income.

If you’re a basic rate taxpayer

You will not owe any extra tax. You’ll still need to complete a Self Assessment tax return to show the income you receive from an interest in possession trust but you will get a credit for the tax paid by the trustees. This means the income is not taxed twice.

If you’re a higher rate taxpayer

You’ll have to pay extra tax on the difference between what tax the trustees have paid and what you, as a higher rate taxpayer, are liable for. This will be calculated when you do your Self Assessment.

How to reclaim tax

You can reclaim tax paid on:

dividends (if you’re entitled to dividend allowance)

savings interest (if you’re entitled to personal savings allowance)

trade and property income (if you’re entitled to trading allowance or property allowance)

The allowance amount will be reduced if it’s already been used against some income. The allowance you have left is called the ‘available allowance’.

If the amount of income you receive is less than or equal to the available allowance, you can reclaim all of the tax paid.

If the amount of income you receive is more than the available allowance, you can only claim the tax paid on the available allowance.

If you’re a Self Assessment taxpayer the repayment will be calculated as part of your return.

If you’re not a Self Assessment taxpayer you can reclaim the tax using form R40.

You need to make a separate claim for each tax year.

Accumulation or discretionary trusts

With these trusts all income received by beneficiaries is treated as though it has already been taxed at 45%. If you’re an additional rate taxpayer there will be no more tax to pay.

You may be able to claim tax back on trust income you’ve received if any of the following apply:

you’re a non-taxpayer

you pay tax at the basic rate of 20%

you pay tax at the higher rate of 40%

You can reclaim the tax paid using form R40. If you complete a tax return, you can claim through Self Assessment.

Settlor-interested discretionary trusts

If a settlor-interested trust is a discretionary trust, payments made to the settlor’s spouse or civil partner are treated as though they’ve already been taxed at 45%. There’s no more tax to pay. However, unlike payments made from other types of trusts, the tax credit cannot be claimed back.

Non-resident trusts

This is a trust where the trustees are not resident in the UK for tax purposes. The tax rules for this type of trust are very complicated - there’s detailed guidance on non-resident trusts.

If a pension scheme pays into a trust

When a pension scheme pays a taxable lump sum into a trust after the pension holder dies, the payment is taxed at 45%.

If you’re a beneficiary and receive a payment funded by this lump sum, you’ll also be taxed.

You can claim back tax paid on the original lump sum - do this on your Self Assessment tax return if you complete one, or using form R40.

The trust will tell you the amount you need to report - this will normally be more than the amount you actually receive.

Trustees - tax responsibilities

As the trustee, you’re responsible for reporting and paying tax on behalf of the trust.

If there are 2 or more trustees, nominate one as the ‘principal acting trustee’ to manage its tax. The other trustees are still accountable, and can be charged tax and interest if the trust does not pay.

Registering a trust

Once a trust becomes liable for tax, you must register the trust with HM Revenue and Customs.

Sending tax returns

You must report the trust’s income and gains in a trust and estate Self Assessment tax return after the end of each tax year. You can either:

buy software to send it electronically by 31 January

fill in paper form SA900 and post it to HMRC by 31 October (3 months earlier)

You can also get help, for example from HMRC or by getting an accountant to do your return for you.

After you’ve sent your return, HMRC will tell you how much you owe. You’ll need to pay your Self Assessment bill by the deadline.

You’ll need to collect and keep records (for example bank statements) to complete your tax return.

Telling beneficiaries about tax and income

You must give the beneficiary a statement with the amount of income and tax paid by the trust, if they ask. You can use form R185 (trust) to do this. There’s a different form if you need to provide a statement to a settlor who retains an interest.

If there’s more than one beneficiary, you must give each of them this information relative to the amount they receive.

Death benefit payments from a pension scheme

You must give the beneficiary extra information if both the following apply:

you make a payment funded by a taxable lump sum from a pension scheme

the pension holder has died

Use form R185 (LSDB) if you’re a trustee. There’s a different form if you’re a pension administrator.

You must tell the beneficiary within 30 days.

Other responsibilities

You may have to report other things to HMRC. You need to:

use the online service to tell HMRC if there are any changes to the trust

fill in form IHT100 when the trust needs to pay Inheritance Tax

Your other responsibilities as a trustee depend on the type of trust and any instructions from the person who set up the trust in the trust deed.

When you must register a trust

You must register your trust with HM Revenue and Customs (HMRC) if it becomes liable for any of the following:

Capital Gains Tax

Income Tax

Inheritance Tax

Stamp Duty Land Tax or Land and Buildings Transaction Tax in Scotland

Stamp Duty Reserve Tax

You must also register a trust to claim tax relief.

Non-resident trusts

You must register a non-resident trust if it becomes liable for:

tax on UK income

tax on UK assets

You can get professional advice from a solicitor or tax advisor about registering a trust.

When you do not need to register your trust

You do not need to register your trust if:

it has to pay Income Tax of less than £100 on interest

only the settlor or beneficiary of the trust has to pay tax

it’s a bare trust

it’s a charitable trust

it’s a resulting trust and the assets go back to the settlor because all the beneficiaries have died

it’s a statutory trust created through legislation

it’s a constructive trust imposed by a court

it holds a pension scheme already registered with HMRC

You also do not need to register your trust if you have to file information:

under the Foreign Account Tax Compliance Act (FATCA)

for Common Reporting Standard (CRS) purposes

Deadlines for registering

The deadline depends on the tax your trust is liable for.

Trusts liable for Income Tax or Capital Gains Tax

If it’s the first time your trust is liable for either tax, the deadline is 5 October in the tax year after it first becomes liable for these taxes.

For example, if your trust first becomes liable for Income Tax during the 2020 to 2021 tax year, you must register by 5 October 2021.

If your trust has been liable for either tax before, the deadline is 31 January in the tax year after it’s again liable for these taxes.

For example, if your trust is liable for Income Tax during the 2020 to 2021 tax year and it has been liable for Income Tax before, you must register by 31 January 2022.

Trusts liable for other taxes

You must register by 31 January in the tax year after the one in which the trust is liable for any of the following:

Inheritance Tax

Stamp Duty Land Tax or Land and Buildings Transaction Tax in Scotland

Stamp Duty Reserve Tax

You must register by the earlier deadline if your trust is liable for more than one tax and both deadlines apply.

How to register

How you register a trust depends on whether you’re:

a trustee

an agent registering a trust for a client

There’s a different process if you need to register an estate of someone who’s died.


Apply to bankrupt someone who owes you money

Overview

You have to present a bankruptcy petition to a court if you want to bankrupt someone because they owe you money.

There are also other ways to recover money you’re owed.

A bankruptcy petition is an application to the court for someone’s assets to be taken and sold to pay their debts.

Presenting a petition can be complicated. Most people use a solicitor or other professional to help them.

Using a mediation service could be quicker and cheaper. Mediation is when an impartial person helps 2 sides work out an agreement.

You can contact the Insolvency Service if you have questions about making someone bankrupt.

How to present a petition

Prove you’re owed at least £5,000 or a share of debts totalling at least £5,000.

Check for other bankruptcy petitions against the person who owes you money (the ‘debtor’).

Fill in the forms and deliver them to the court.

Fees

The court fees to make someone bankrupt are:

£990 petition deposit (for managing the bankruptcy)

£280 for court costs

Pay the fees using cash, postal order or a cheque made payable to ‘HM Courts and Tribunals Service’. You can pay by credit or debit card if you apply online.

Prove you're owed £5,000 or more

To make someone bankrupt you must be owed one of the following:

at least £5,000

a share of debts that total at least £5,000

You must provide evidence to the court that you’re owed this money. There are 2 ways to do this.

If you’ve issued a statutory demand (a request for payment) to the debtor, confirm that you did this by filling in a certificate of service (form N215).

Alternatively, get a sheriff’s or bailiff’s statement showing:

you got a court judgment for the money

the sheriff or bailiff could not recover enough assets to pay the debt

Check for other bankruptcy petitions

You must check if the debtor has had any bankruptcy petitions against them in the past 18 months. These checks are called ‘searches’.

Most petitions are presented in the area where the debtor lives. Government departments, including HM Revenue and Customs (HMRC), present all petitions in London.

Check for petitions presented in London

Carry out checks using the public computers at either:

the Rolls Building of the Royal Courts of Justice

the Central London County Court

It costs £11 to use the computers for 15 minutes. You can pay by debit or credit card or with cash.

Check for petitions presented in a county court outside London

Contact the county court for the area where the debtor lives.

They’ll advise you how to check for petitions.

When you’ve made your checks

You must confirm you’ve carried out the searches by writing a declaration - use the wording below and fill in the petition number and the name of the court if applicable.

Sign and date the declaration and attach it to your petition form.

If there’s already a petition or bankruptcy order

It’s cheaper to support an existing petition than to present your own. Notify the petitioner using the contact details on the petition.

If there’s already a bankruptcy order, you cannot continue with your petition. Register as a creditor instead.

Apply

The bankruptcy petition form you fill in depends on whether:

the debtor has not responded to a statutory demand

You’ll also need to provide the following as part of the petition:

a statement of truth confirming the details of your petition

a declaration that you’ve carried out searches

evidence you’re owed money

Presenting the petition

How you present the petition will depend on the debtor’s circumstances.

Submit the petition online if the debtor either:

lives in London and owes you £50,000 or more

has ‘no fixed abode’ (no fixed or regular address)

It’ll go to the High Court.

Otherwise, give the petition in person to the county court nearest to where the debtor lives or works.

If the debtor owns a business

Choose the court nearest to the debtor’s business address unless this changed in the last 6 months and they’ve been at their home address longer.

After you apply

You’ll need to give (‘serve’) a copy of the petition to the debtor in person.

If the debtor has an individual voluntary arrangement (IVA) you’ll also need to give a copy to the supervisor.

Send the court a certificate of service (form N215) to confirm you’ve done this.

If your case is with the High Court you can only submit the certificate of service online. If it’s with another court you can send it there by post.

If you cannot serve the petition to the debtor in person

You can ask the court for permission to serve it in another way, for example by post.

You’ll have to provide a certificate of service confirming you’ve used a ‘substituted service’.

Court hearing

The court will tell you where and when the petition will be heard. This will be at least 14 days after you served the petition to the debtor.

The debtor can oppose the petition by giving the court a statement of truth at least 5 days before the hearing.

You must list the people that you want to appear and speak at the hearing.

The debtor and a supervisor of an IVA can also appear and speak at the hearing.

At the end of the hearing the court can:

stay (delay or stop) the petition

dismiss the petition

adjourn (postpone) the hearing

make a bankruptcy order

If the court dismisses your petition, you’ll get your petition deposit back.

Read more about what happens after a bankruptcy order is made.

After the hearing

An Official Receiver at the Insolvency Service will deal with the early stages of a bankruptcy. They will contact you within 12 weeks of the bankruptcy order being made.

Appeals

You can appeal to the court if your petition is rejected.

Check with the court where you made your petition for how to appeal.


Applying to become bankrupt

Overview

You can apply to make yourself bankrupt if you cannot pay your debts.

Check if there are other ways you can deal with your debts before you apply for bankruptcy.

Your application will be looked at by someone who works for the Insolvency Service called an ‘adjudicator’. They’ll decide if you should be made bankrupt.

The process is different if someone else is applying to make you bankrupt.

How to apply

You can only apply for bankruptcy online. It costs £680.

What happens when you go bankrupt

If the adjudicator makes you bankrupt:

you’ll receive a copy of the bankruptcy order  and may be interviewed about your situation

your assets can be used to pay your debts

you’ll have to follow the bankruptcy restrictions

your name and details will be published in the Individual Insolvency Register

You can apply to have your address removed from the Individual Insolvency Register if publishing it will put you at risk of violence. This will not affect your bankruptcy.

After 12 months you’re usually released (‘discharged’) from your bankruptcy restrictions and debts. Assets that were part of your estate during the bankruptcy period can still be used to pay your debts.

You might be able to cancel (‘annul’) your bankruptcy before you’re discharged.

Bankruptcy only applies to individuals. Find out what your options are if your limited company cannot pay its creditors.

Get help and information

Read the following:

the Citizens Advice bankruptcy advice guide

the Money Advice Service’s guide on options for writing off your debt

You can also contact the National Debtline for bankruptcy advice.

You can get free advice from a debt adviser to help you decide how to deal with your debts.

If you do not live in England or Wales

The process to become bankrupt is different if you live in Scotland or Northern Ireland.  You cannot apply to become bankrupt in England or Wales.

You might be able to apply if you live anywhere else - talk to a debt adviser.

You must not break the bankruptcy restrictions in England or Wales. These might also apply outside England and Wales - check the laws of the country you live in.

Get a person at risk of violence (PARV) order

When you’re made bankrupt, your name and address will be published in:

the Individual Insolvency Register

the London Gazette

If having your address published will put you at risk of violence, you can apply to the court for a person at risk of violence (PARV) order.

Your name will still be published, but your address will not be.

You can only apply for a PARV if you’ve already started a bankruptcy application.

How to apply

Download and fill in the application form.

Take your completed form to your nearest court that deals with bankruptcy. They’ll tell you if you need to pay a fee to apply.

You’ll have to go to a hearing to present your application to a judge - the court will tell you when and where this will take place. You’ll usually get a decision on the same day.

Submit your bankruptcy application once you have your PARV order.

After you apply

You’ll usually get an email or letter from the adjudicator within 28 days of submitting your application to say if you’ve been made bankrupt.

This can take longer if the adjudicator needs to ask more questions about your application.

They’ll then issue a bankruptcy order.

After you get your bankruptcy order

You’ll get a letter from the official receiver within 2 weeks of getting your bankruptcy order. The official receiver is an officer of the court who manages your bankruptcy.

You’ll also get an information pack that explains what you need to know and what you must do.

You might be asked to:

fill in a questionnaire

attend an interview with the official receiver

give the official receiver more information about your debts, creditors, assets and income

If you’re asked to attend an interview

The interview can be in person or over the phone. The official receiver will:

check the information they have about your debts and assets

ask for more details, for example about your pension or savings

ask how and why you became bankrupt

answer any questions you have about the bankruptcy process

Your release (‘discharge’) from bankruptcy may be delayed if you do not provide the information you’re asked for.

Restrictions

You have to follow bankruptcy restrictions when you’re bankrupt. This means you cannot:

borrow more than £500 without telling the lender you’re bankrupt

act as a director of a company without the court’s permission

create, manage or promote a company without the court’s permission

manage a business with a different name without telling people you do business with that you’re bankrupt

work as an insolvency practitioner (an authorised debt specialist)

It’s a criminal offence to break the restrictions - you might be prosecuted if you do.

You must co-operate with the people managing your bankruptcy, for example by providing them with the information they ask for.

How long the restrictions last

Restrictions last until your bankruptcy ends. This will happen sooner if you cancel your bankruptcy.

When the restrictions can be extended

Bankruptcy restrictions can be extended if you do not carry out your duties under the bankruptcy proceedings or if you’re found to have acted carelessly or dishonestly.

The official receiver will tell you if the restrictions will be extended.

You’ll be asked to agree to a Bankruptcy Restrictions Undertaking to extend the restrictions. If you do not agree, they’ll ask the court to issue a Bankruptcy Restrictions Order.

Your assets

Your assets might be sold to pay your bankruptcy debts. You have to hand over your assets to the person appointed to manage your bankruptcy (your ‘trustee’). They can be:

an official receiver - an officer of the court

an insolvency practitioner - an authorised debt specialist

The official receiver will usually act as your trustee to begin with.

Assets you can keep

You can usually keep:

items needed for your job, such as tools or a vehicle

household items, such as clothing, bedding or furniture

You might have to give these items up if they’re worth more than a reasonable replacement.

Your bank accounts

You must give the official receiver your bank cards, cheque books and credit cards for any accounts you’re no longer allowed to use. This includes any account that was overdrawn on the date you were made bankrupt.

Your accounts will be frozen but your trustee may release:

any money you need urgently, for example to buy food

your partner’s share of any money in a joint account

Your bank will decide whether to allow you to continue using your accounts.

Your pension

You usually keep any money you’ve put into a pension.

If you’re getting pension payments when you’re made bankrupt, those payments usually count as income.

Speak to your trustee or read the guidance to find out how bankruptcy will affect your pension.

You can get free advice on managing your money and how bankruptcy affects your credit rating from Citizens Advice or National Debtline.

Your home

Your home might be sold depending on your equity - your share after any secured debts (like a mortgage) have been paid.

You might have to give up:

your equity

legal ownership of the property if your equity is £1,000 or more

If your trustee has not put your home up for sale within 3 years it will be transferred back to you.

Sole owners

The equity and legal ownership are transferred to your trustee. This means you cannot sell the property or claim any money from a sale.

A bankruptcy restriction or notice is added to your property’s entry in the land register to say this.

It can only be removed if it’s been added to your property by mistake. Send HM Land Registry a signed statement saying you are not bankrupt and an application to change the register for a property.

Joint owners

The equity is transferred to your trustee.

A ‘Form J restriction’ is added to your property’s entry in the land register. This means your trustee will be told of any dealings connected with your home, for example if you try to sell it.

It can be removed if you can prove you (as the bankrupt) do not have a share in the property, for example if your partner owns the property. The owner has to send HM Land Registry a signed statement saying they are not the bankrupt person and an application for the cancellation of a Form J restriction.

Stop the sale of your home

You might be able to stop or delay the sale of your home if, for example:

the value of your equity is less than £1,000

the equity or legal title can be sold to someone else, such as a partner

you need to organise somewhere for children or a partner to live - the sale can be delayed for up to 1 year

You may want to get legal advice to find out if you can stop or delay the sale of your home.

Check if you can get legal aid to help with your legal costs. You can get advice from Civil Legal Advice if you’re eligible.

Rented property

Your landlord may be told that you’re bankrupt and your rental situation may be affected.

Your income

Your trustee will tell you if you have to make monthly payments from your spare income - you’ll only have to do this if you can afford it.

The arrangement can last for up to 3 years and is called an Income Payments Agreement (IPA).

If you do not agree to the IPA your trustee can ask the court to order you to make monthly payments. This is called an Income Payments Order (IPO).

Your official receiver will set up your IPA or IPO and charge a fee. The fee can be up to £150 and is taken out of your first payment.

How much you pay

The monthly amount you pay depends on how much you can afford after essential expenses like food and bills are paid.

Cancel a bankruptcy

You can apply to cancel (‘annul’) your bankruptcy if:

the bankruptcy order should not have been made

all your debts and bankruptcy fees have been paid or secured (guaranteed) by a third party

you‘ve made an Individual Voluntary Arrangement with your creditors to pay all or part of your debts

If your circumstances change and you can pay off all your debts, then you must pay it through your official receiver or a solicitor.

This means you will not have to follow the bankruptcy restrictions.

How to apply

Download and fill in the application form.

Send or take your completed form to your nearest court that deals with bankruptcy.

You must tell the court if you want details of your bankruptcy removed from the Land Charges register.

You’ll be given a date for a court hearing of your application, which you must attend.

You’ll still need to attend your interview with the official receiver if you’ve been asked to.

If the court agrees with your application, they’ll make an annulment order which cancels your bankruptcy.

Advertise your cancellation order

You can ask the official receiver to advertise your annulment order within 28 days of getting it. You cannot do this if your bankruptcy order has not been advertised yet.

Your annulment order will be advertised wherever your bankruptcy order was.

When bankruptcy ends

Your bankruptcy and the restrictions generally end when you’re ‘discharged’, which is usually automatic.

This is usually 12 months after the adjudicator made you bankrupt. It can be longer in some circumstances, for example if you do not co-operate with your trustee.

Check your discharge date online using the Individual Insolvency Register.

If you cancel your bankruptcy, all restrictions will end immediately and your details will be removed from the Individual Insolvency Register.

Proof of discharge

Email the Insolvency Service and ask for a ‘confirmation letter’ to prove your bankruptcy has ended. There’s no fee.

If you’re applying for a mortgage, you’ll need a Certificate of Discharge.

How you get it depends on how you applied for your bankruptcy.

If you applied:

at a court, contact the court and pay the £70 fee (£10 for each copy)

online, email the Insolvency Service - there’s no fee

Bankruptcy registers

The Individual Insolvency Register is updated within 3 months of your discharge.

You must apply to both Land Charges and HM Land Registry to have your bankruptcy entry removed from any properties you still own after paying your debts.

Bankruptcy entries are automatically removed from the Land Charges register after 5 years if they’re not renewed.

Apply to Land Charges

Send an application to cancel an entry in the Land Register (K11) to the Land Charges Department.

You need to include:

a copy of your court order permitting the cancellation (or ‘vacation’) of the entry

£1 for each entry you want to cancel

Apply to HM Land Registry

You need to send HM Land Registry either:

an application to change the register for a property, if you’re the sole owner of your property

an application for the cancellation of a Form J restriction, if you own your property with someone else

You must include a copy of your court order.

All forms sent will be destroyed once the registers are updated. You can send copies if you write “I certify that this is a true copy of the original” together with your signature on the first page.

Your credit record

Credit reference agencies will not be told directly when your bankruptcy ends - they’ll get this information from public records.

Get a copy of your credit reference report - contact a credit reference agency if it needs updating.

Your bankruptcy can stay on your credit reference file for 6 years from the date of your bankruptcy.

Debts that will not be written off

When you’re discharged you’ll be released from most, but not all, of the debts you owed at the date of the bankruptcy.

Debts you will not be released from include:

debts arising from fraud

anything you owe under family proceedings - unless the court decides otherwise

damages for personal injuries to anyone - unless the court decides otherwise

debts which were not included in the bankruptcy itself, for example a debt to the Student Loans Company


Having debt repayments taken from your wages

When repayments can be taken

You can have debt repayments taken out of your wages if you owe someone money from either:

unpaid maintenance payments

county court judgment (CCJ)

The person you owe money is called a ‘creditor’.

You can also have benefit overpayments taken from your wages by the Department for Work and Pensions (DWP) or your local council.

How you’re told

You and your employer will get a document (called an ‘attachment of earnings order’) from the court. This will tell you:

how much you owe

how much your employer takes from your wages - you can apply to get this changed if you cannot afford it

when and how the payments have to be made

You and your employer can be fined if they do not follow the order. You cannot ask them to ignore it.

Change how much you pay

You can apply to get the payments reduced if you cannot afford them. Download and fill in form N244 and send it to the court that issued the court order.

You have to do this within 14 days of getting the order.

You can also apply if the order has been in place for some time and your circumstances change.

Pay off the debt more quickly

Speak to the person or company you owe the money to if you want to pay more. They might either:

take extra payments directly

agree to put the order on hold so you can pay more directly to them

The court will tell you if your debt is put on hold.

Check how much you owe

Contact the Centralised Attachment of Earning Payments (CAPS) office to check how much you still owe. They can also send you a history of the payments you’ve made.

You’ll need to give your case number when you call.

Report a change in your circumstances

You must report any changes in your circumstances if you’re paying off a debt through your wages.

Change your name or address

If you need to change your name or address, tell:

the court who issued the court order

your creditor

If you change or lose your job

Tell the CAPS office your new employer’s details or that you’ve lost your job.

Download and fill in form N56 in full, and send it to the court who issued the court order.

When you’ve paid off the debt

The Centralised Attachment of Earning Payments (CAPS) office will send you a ‘notice of discharge’ when the debt has been paid off. Your employer and creditor will also get a copy.

Your employer will then stop making deductions from your wages.

If you think you’ve overpaid

Ask the CAPS office to check if you’ve overpaid.

You’ll get a refund if you’ve overpaid.


Make and serve a statutory demand, or challenge one

When you can make a statutory demand

You can make a statutory demand to ask for payment of a debt from an individual or company.

Anyone who’s owed money (the ‘creditor’) can make a statutory demand. You do not need a lawyer.

If the debt’s over 6 years old, you cannot usually make a statutory demand. You can get legal advice instead.

There may be faster ways of getting smaller debts paid than making a statutory demand.

When the individual or company that owes you money (the ‘debtor’) receives a statutory demand, they have 21 days to either:

pay the debt

reach an agreement to pay

You can apply to bankrupt your debtor or close (‘wind up’) their company if they do not respond to the statutory demand within 21 days.

Statutory demand forms

Choose the form you need, fill it in and deliver (‘serve’) it to the individual or company that owes you money.

You do not need to send a separate letter.

Serve a demand on an individual (including partners in a partnership)

Which form you need depends on whether you’re collecting a debt that’s:

payable now

payable now following a judgment or court order

payable in the future, if you think they will not be able to pay the debt when they need to

If you’re serving a demand on a business partnership, you need to download and fill in a form for each partner.

Serve a demand on a limited company

Use statutory demand form SD 1.

If you’re in Scotland

You must use a different form to make a statutory demand in Scotland.

How to serve a statutory demand

You must deliver (‘serve’) the statutory demand form by:

giving it to the individual who owes you money (you should try all their known addresses)

leaving it at the registered office of the company or partnership that owes money (or the main place of business if they do not have a registered office)

giving it to the company’s director, company secretary, manager or principal officer

get a ‘process server’ to serve it for you (a solicitor can arrange this)

You can only send it by registered post or put it through a letterbox if it cannot be delivered in person.

Records you must keep

You must keep a copy of the statutory demand and anything that confirms:

the time and date you served the statutory demand, for example a postage receipt or confirmation from your process server

the debtor has received the statutory demand

You’ll need this information if your demand is ignored.

If your demand is ignored

If your debtor does not pay the debt or agree to your statutory demand within 21 days, you can:

start bankruptcy proceedings against any individuals who owe you £5,000 or more

wind up a company that owes you £750 or more

You have 4 months to apply to bankrupt or wind up your debtor. If you’re late, explain why to the court named on the statutory demand.

Serve a statutory demand abroad

Get legal help if you want to serve a statutory demand in another country.

You need to serve a statutory demand according to local laws but also according to the UK rules.

Challenge a statutory demand

If you do not agree with a statutory demand you’ve been given, you can apply to challenge it and get it ‘set aside’.

You can be made bankrupt or your company wound up if you ignore a statutory demand.

You must apply to the court named on your statutory demand. Contact a solicitor or your nearest county court if you’re not sure where to send your application.

You cannot challenge a statutory demand if it was served on a company. You can apply to stop your creditors from winding up your company instead.

Any bankruptcy petitions the creditor has already filed against you will usually be suspended until the court reaches a decision.

The court will not usually set aside a statutory demand if it was served on you following the judgment of another court unless, for example:

you think the creditor owes you the same amount as your debt, or more

the amount on the statutory demand is secured

Deadlines

You must apply to challenge the statutory demand within either:

18 days if you were in the UK when you got the statutory demand

21 to 34 days if you were in another country when you got the statutory demand - check the table of countries for specific deadlines

If the deadline is during a weekend or on a bank holiday, you have until the next day the court is open to apply.

You might be able to get an extension in some circumstances - contact the court to find out what these are.

How to apply

Download and fill in form IAA.

Make 3 copies of the completed form and either post them to the court named on your statutory demand or give them to the court in person.

What happens next

You’ll usually hear back from the court within 10 working days of applying.

If the court does not agree with your application, it can give the creditor permission to issue a bankruptcy petition against you.

If the court agrees with your application, your case will be passed on to a bankruptcy registrar. They’ll look at your case and arrange a hearing.

What happens at the hearing

Both sides will present their case to a registrar or judge. They’ll either make a decision then, or ask you and the other party to give more evidence at another hearing.

You’ll usually get a decision at the end of the final hearing.

If you win your case, you’ll get an order from the court setting aside the statutory demand. The deadline for paying the debt will be suspended.

If you lose, you’ll have to pay back your debt within the 21 day time limit. The creditor can apply to bankrupt you if you do not pay in time and your debt is £5,000 or more.

Do not go to court if you have coronavirus (COVID-19) symptoms or if you’re self-isolating or in quarantine. Tell the court if you cannot attend.

Contact the Insolvency Service

Use the contact form to contact the Insolvency Service about delivering and challenging a statutory demand.

You cannot currently contact the Insolvency Service by telephone because of coronavirus (COVID-19).


Options for paying off your debts

Overview

If you owe people money (your ‘creditors’) you can make arrangements to pay your debts. Your options depend on the amount of money and assets you have.

Where you can get help

Speak to a debt adviser to get help choosing the best way to deal with your debt.

The Money Advice Service has information about debt management and free debt advisory services.

Paying off your debts

You can pay your debts in instalments by setting up:

a Debt Management Plan which is an agreement with your creditors managed by a financial company

an Administration Order  when you’ve had a county court judgment (CCJ) or a High Court judgment (HCJ) against you for debts under £5,000

an Individual Voluntary Arrangement which is managed by an insolvency practitioner

You can also get temporary protection from your creditors through the ‘Breathing Space’ scheme, while still making repayments. You’ll need to apply through a debt advisor.

In Scotland you can arrange a Debt Payment Programme from the Debt Arrangement Scheme.

You may also have the option of reaching an informal agreement with your creditors.

If you cannot pay off your debt

You can apply for a Debt Relief Order or Bankruptcy Order if you cannot pay your debts because you do not have enough money or assets you can sell.

If you cannot pay off your debts, you can be made bankrupt.

Breathing Space (Debt Respite Scheme)

If you live in England or Wales, you can get temporary protection from your creditors while you get debt advice and make a plan. This scheme is called ‘Breathing Space’.

You can get temporary protection for up to 60 days.

You’ll still need to make your debt repayments.

If you get it:

enforcement action cannot be taken against you

your creditors cannot contact you about debts included in your Breathing Space

your creditors cannot add interest or charges to your debt

If you’re getting mental health crisis treatment, your protection from creditors will be longer. It will last for the length of your treatment, plus another 30 days.

How to apply for the Breathing Space scheme

To apply for the ‘Breathing Space’ scheme, you need to talk to a debt adviser. They will submit an application on your behalf if it’s the right thing to do.

You can find a free debt adviser on the Money Advice Service website. You can get confidential advice online, over the phone or in person.

If you’re receiving mental health treatment and cannot speak to a debt adviser, someone else can do so on your behalf.

Costs

It’s free to apply for ‘Breathing Space’, but some debt advisers may charge you a fee.

Eligibility

You must:

not have a debt relief order (DRO), an individual voluntary arrangement (IVA), an interim order, or be an undischarged bankrupt at the time you apply

not already be using the ‘Breathing Space’ scheme

not have used the ‘Breathing Space’ scheme in the last 12 months, unless it was for a mental health crisis

Debt Management Plans

A Debt Management Plan is an agreement between you and your creditors to pay all of your debts.

Debt management plans are usually used when either:

you can only afford to pay creditors a small amount each month

you have debt problems but will be able to make repayments in a few months

You can arrange a plan with your creditors yourself or through a licensed debt management company for a fee. If you arrange this with a company:

you make regular payments to the company

the company shares the money out between your creditors

The Money Advice Service has information on organisations that can give you free advice about whether a Debt Management Plan is right for you.

Get a Debt Management Plan

Set up a plan with a debt management company authorised by the Financial Conduct Authority (FCA). Search the Financial Services Register for an authorised company.

The company works out your monthly payments. You’ll have to give details about your financial situation, for example your assets, debts, income and creditors.

The company contacts your creditors and asks them to agree to the plan (they do not have to).

Unless stated in the agreement, your creditors can still:

ask you to pay your full debt at a later date

take action to recover their money even if you keep up your payments

Costs

Some companies will charge:

a set up fee

a handling fee each time you make a payment

Make sure you understand the costs of your plan and how you pay for it.

Eligibility

Debt Management Plans can only be used to pay ‘unsecured’ debts, for example debts that have not been guaranteed against your property.

Your responsibilities

Your plan can be cancelled if you do not keep up your repayments.

Administration orders

An administration order is a way to deal with debt if you have a county court or High Court judgment against you and you cannot pay in full.

The debt must be less than £5,000.

You make 1 payment a month to your local court. The court will divide this money between your creditors.

Creditors listed on the administration order cannot take any further action against you without the court’s permission.

The Money Advice Service has information on organisations that can give you free advice about whether an administration order is right for you.

Get an administration order

Fill in an application for an administration order (form N92) and return it to your local court.

The court decides:

how much of your debt you have to repay, for example all or just part of it

how much your monthly repayments will be

how long the arrangement lasts

The arrangement is known as a ‘composition order’ if you cannot pay all your debts.

Costs

There’s a court fee each time you make a payment. This cannot be more than 10% of your debt.

Eligibility

You must:

owe less than £5,000, including any interest and charges

owe money to at least 2 creditors

prove you can afford regular repayments, for example by giving details of your income

have a county court or High Court judgment against you, which you cannot pay in full

Your responsibilities

You must keep up your repayments or the court can:

ask your employer take money from your wages – known as an ‘attachment of earnings order’

cancel the arrangement

You may still be able to keep your business running, if you have one.

Public records

Your administration order is added to the Register of Judgments, Orders and Fines.

It’s usually removed 6 years after the date the order was made.

Your entry is marked as ‘satisfied’ if you repay your debts in full.

You can also ask the court for a ‘certificate of satisfaction’. To do this, write to the court and send a cheque for £15 (made payable to Her Majesty’s Courts and Tribunal Service).

Individual Voluntary Arrangements

An Individual Voluntary Arrangement (IVA) is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors.

An IVA can give you more control of your assets than bankruptcy.

The Money Advice Service has information on organisations that can give you free advice about whether an IVA is right for you.

Get an Individual Voluntary Arrangement (IVA)

Use an insolvency practitioner to get an  IVA.

Your insolvency practitioner works out what you can afford to repay and how long the IVA lasts. You’ll have to give details about your financial situation, for example your assets, debts, income and creditors.

Your insolvency practitioner will contact your creditors. The IVA will start if the creditors holding 75% of your debts agree to it. It will apply to all your creditors, including any who disagreed to it.

An IVA will stop your creditors taking action against you for your debts.

Costs

There are usually 2 fees:

a set up fee

a handling fee each time you make a payment

Make sure you know how much it’s going to cost before asking an insolvency practitioner to act for you.

Your responsibilities

Your IVA can be cancelled by the insolvency practitioner if you do not keep up your repayments. The insolvency practitioner can make you bankrupt.

Public records

Your IVA will be added to the Individual Insolvency Register. It’s removed 3 months after the IVA ends.

Debt Relief Orders

Debt Relief Orders (DROs) are one way to deal with your debts if you owe less than £20,000, do not have much spare income and do not own your home.

If you get one:

your creditors cannot recover their money without the court’s permission

you’re usually freed (‘discharged’) from your debts after 12 months

Get a Debt Relief Order

You get a DRO from the official receiver, an officer of the bankruptcy court, but you must apply through an authorised debt adviser. They’ll help you fill in the paperwork.

There’s a list of organisations that can help you find an authorised debt adviser in the guide to DROs.

The Money Advice Service has information about where to get free debt advice.

Costs

The official receiver’s fee is £90. Your debt adviser can tell you how and when to pay it. In some cases a charity may be able to help you with the cost - ask your debt adviser.

Eligibility

You’re generally eligible if you meet all of these criteria:

you owe less than £20,000

you’ve less than £50 a month spare income

you’ve less than £1,000 worth of assets

you’ve lived or worked in England and Wales within the last 3 years

you have not applied for a DRO within the last 6 years

Restrictions

You must follow rules called ‘restrictions’ if you get a DRO.

This means you cannot:

borrow more than £500 without telling the lender about your DRO

act as the director of a company

create, manage or promote a company without the court’s permission

manage a business without telling those you do business with about your DRO

If you want to open a bank account, you may also have to tell the bank or building society about your DRO.

Check the Individual Insolvency Register to see when the restrictions end.

The restrictions usually last 12 months. They can be extended if careless or dishonest behaviour caused your debt problem. For example, you lied to get credit.

The official receiver will tell you if they should be extended. To extend them, you’ll be asked to agree to a ‘Debt Relief Restrictions Undertaking’. The court can issue a ‘Debt Relief Restrictions Order’ if you do not agree.

What you need to know

While you have a DRO you still have to pay:

your rent and bills

certain debts, for example student loans, court fines

DROs can be cancelled if:

your finances improve

you do not co-operate with the official receiver - for example you do not give them the information they ask for

If you get new debt after your DRO is approved you could:

get a bankruptcy order

be prosecuted if you do not tell new creditors about your DRO

Your DRO is added to the Individual Insolvency Register - it’s removed 3 months after the DRO ends.

Your DRO will stay on your credit record for 6 years.


Disagree with a tax decision

Overview

You can contact HM Revenue and Customs (HMRC) if you have a query about a tax decision. If you do not understand the decision you can also get advice from HMRC or professional help.

This guide is also available in Welsh (Cymraeg).

HMRC will send you a decision letter that will tell you if you can appeal against a tax decision.

You can appeal against some decisions about:

your tax bill (for example Self Assessment, Corporation Tax, VAT)

a claim for tax relief

a request for information or to check your business records

a penalty (for example if you paid your tax late or filed your tax return late)

Your appeal can be made by someone who deals with your taxes, for example an accountant.

You’ll usually have to pay your own costs if you appeal a tax decision. You may be able to delay the payment of a penalty or any tax you owe until your appeal’s been resolved.

If HMRC did not act on information

You may be able to ask HMRC to cancel tax you owe if they did not act on information that you, your employer or the Department for Work and Pensions (DWP) gave them.

You can do this if you owe:

Income Tax, for example because you were on the wrong tax code

Capital Gains Tax

Class 4 National Insurance contributions

Appeal against a tax decision

HM Revenue and Customs (HMRC) will write to tell you if you can appeal. You can use the appeal form you got with your decision letter, or write to HMRC at the address on the letter. You usually have 30 days to appeal.

If you or your business have been affected by coronavirus (COVID-19), HMRC will give you an extra 3 months to appeal any decision dated February 2020 or later. Send your appeal as soon as you can, and explain the delay is because of coronavirus.

You must include:

your name or business name

your tax reference number (this will be on the decision letter)

what you disagree with and why

what you think the correct figures are and how you’ve calculated them

your signature

You should also tell HMRC if you have any extra information or if you think they’ve missed something.

If you do not have a letter you can write to the HMRC office related to your return.

If you want to appeal a decision about ‘indirect tax’ (for example VAT, excise duty, customs duty) you can request a review by HMRC or appeal straight to the tax tribunal.

If customs has seized your things because you have not paid duty or VAT, you can ask for your things back.

What happens next

When you appeal you can accept HMRC’s offer of a review, or request one (if it’s for direct tax). HMRC will tell you what to do next.

A review will be carried out by someone who was not involved in the original decision. This usually takes 45 days, but HMRC will contact you if it will take longer.

If you disagree with HMRC’s review

You can:

ask the tax tribunal to hear your appeal - you must usually do this within 30 days of the review decision

consider alternative dispute resolution (ADR)

Because of coronavirus, HMRC will not object if you ask the tribunal to hear your appeal after 30 days, if both:

your review decision is dated February 2020 or later

you ask within 3 months of the normal deadline

Appeal against a penalty

You can appeal to HM Revenue and Customs (HMRC) against a penalty, for example for:

an inaccurate return

sending in your tax return late

paying tax late

failing to keep adequate records

A HMRC officer who was not previously involved with your penalty decision will carry out a review if you appeal.

If you want to appeal a penalty about ‘indirect tax’ (for example VAT, excise duty, customs duty) you can either:

request a review from HMRC

appeal straight to the tax tribunal

Your penalty may be cancelled or amended if you have a reasonable excuse.

How to appeal

If HMRC sends you a penalty letter by post, use the appeal form that comes with it or follow the instructions on the letter.

For Self Assessment, PAYE, VAT and Corporation Tax, there are extra documents you can use or alternative ways to appeal.

If you’re appealing a Self Assessment penalty

You can get your penalty cancelled if you did not send a tax return because you no longer needed to. Tell HMRC online you do not need to be self assessed or call the helpline.

Otherwise, to appeal you’ll need:

the date the penalty was issued

the date you filed your Self Assessment tax return

details of your reasonable excuse for late filing

If you’re appealing a £100 late filing penalty from tax year 2015 to 2016 onwards, you can appeal online or by post. You’ll need to set up a Government Gateway account if you do not have one to appeal online.

For other penalties, you need to appeal by post. Send a completed form SA370 or a letter explaining your appeal to HMRC Self Assessment.

If you’re appealing a penalty to a partnership for a late tax return, appeal by post using form SA371. Only the nominated partner can appeal.

If you’re an employer appealing a PAYE penalty

You can appeal online if you’re registered for HMRC’s PAYE for employers service. Once you’ve logged in, select ‘Appeal a penalty’. You’ll get an immediate acknowledgment when you submit your appeal.

If you filed a late VAT or Corporation Tax return

You can also use these specific forms for:

VAT if you had a reasonable excuse for filing late

Corporation Tax if you filed late because of computer problems

If you do not have an appeal form

You can send a signed letter to HMRC instead. Your letter must include:

your name

your reference number, for example your Self Assessment Unique Taxpayer Reference (UTR) or VAT registration number

a full explanation of why your return or payment was late, including dates

If you could not file or pay because of computer problems, you should include the date you tried to file or pay online with details of any system error message.

Send your claim to the HMRC office related to your return.

Deadlines

You must usually appeal within 30 days of the date of the penalty notice.

If you miss this deadline you must explain the reason for the delay so that HMRC can decide if they’ll consider your appeal.

If you or your business have been affected by coronavirus (COVID-19), HMRC will give you an extra 3 months to appeal any penalty dated February 2020 or later. Send your appeal as soon as you can, and explain the delay is because of coronavirus.

If you disagree with HMRC’s review

You can:

consider alternative dispute resolution (ADR)

your review decision is dated February 2020 or later

you ask within 3 months of the normal deadline

Delay payment while appealing

You may be able to delay paying a tax bill or penalty if you disagree with the amount.

Direct tax

If you’ve appealed to HM Revenue and Customs (HMRC) against a direct tax decision (such as Income Tax, Corporation Tax or Capital Gains Tax) write to the HMRC office that sent you the decision, telling them:

why you think the amount you’ve been asked to pay is too much

what you think the correct amount is and when you’ll pay it

HMRC will tell you in writing if they agree.

Penalty

If you’ve appealed against a penalty you will not have to pay until your appeal has been settled.

Indirect tax

If you’ve asked HMRC to review an indirect tax decision, for example VAT or Insurance Premium Tax, you will not need to pay until the review has finished.

If you appeal to the tax tribunal you’ll usually have to pay the tax before they will hear your appeal. You can ask to delay paying the tax if it would cause you extreme financial difficulty (for example, bankruptcy or liquidation).

Once a final decision has been reached, you must pay any money that you owe in full including interest.

Penalty

If you’ve asked for a review, or appealed to the tribunal about a penalty, HMRC will not ask you to pay it until your appeal has been settled.

If you disagree with HMRC’s decision

You can ask for the decision to be reviewed if you do not agree with the outcome.

Reasonable excuses

You can appeal against some penalties if you have a reasonable excuse, for example for your return or payment being late.

What may count as a reasonable excuse

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

your partner or another close relative died shortly before the tax return or payment deadline

you had an unexpected stay in hospital that prevented you from dealing with your tax affairs

you had a serious or life-threatening illness

your computer or software failed just before or while you were preparing your online return

service issues with HM Revenue and Customs (HMRC) online services

a fire, flood or theft prevented you from completing your tax return

postal delays that you could not have predicted

delays related to a disability you have

You must send your return or payment as soon as possible after your reasonable excuse is resolved.

If you’re affected by coronavirus (COVID-19)

HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing dates).

Explain how you were affected by coronavirus in your appeal. You must still make the return or payment as soon as you can.

What will not count as a reasonable excuse

The following will not be accepted as a reasonable excuse:

you relied on someone else to send your return and they did not

your cheque bounced or payment failed because you did not have enough money

you found the HMRC online system too difficult to use

you did not get a reminder from HMRC

you made a mistake on your tax return


Get help from HMRC if you need extra support

Help you can get

HM Revenue and Customs (HMRC) can help you if you need extra support because of your condition or circumstances. You might need extra support if:

you have dyslexia, autism or cognitive difficulties

you have reduced mobility or physical disabilities

you have sensory disabilities, like a visual, hearing or speech impairment

you have mental health conditions, like depression, stress or anxiety

you’re experiencing financial hardship - for example you cannot afford essentials like food, bills or rent

you’re a victim of domestic abuse, including economic abuse

you’re in hospital

This guide is also available in Welsh (Cymraeg).

There are different ways to contact HMRC if you need:

to use textphone, webchat or BSL

information in a different format

help filling in forms

more time because of your circumstances

information in another language

to appoint someone to talk to HMRC on your behalf

If you have a scheduled face-to-face appointment, you should not go to it at the moment because of coronavirus (COVID-19). HMRC will contact you instead.

If you cannot use a telephone and need a different way to contact HMRC

There are other ways to contact HM Revenue and Customs (HMRC) than by telephone. You might need to use another form of contact if:

you’re deaf, hearing impaired or hard of hearing

you have a speech impairment

you use British Sign Language (BSL)

you have difficulty using the telephone

Text Service (Relay UK)

Dial 18001 then the relevant contact number to use the Relay UK Text Service.

HMRC also offers a textphone service for some of its helplines.

Webchat

You can contact HMRC’s extra support team using webchat.

If you use British Sign Language (BSL)

The Royal Association for Deaf people provides:

webcam appointments with their tax adviser

a video interpreting service

BSL-captioned video clips linked to HMRC guidance

Home visits and appointments

Because of coronavirus (COVID-19), HMRC cannot do home visits and face-to-face appointments at the moment.

If you need information in a different format

HM Revenue and Customs (HMRC) information is available in accessible formats. You might need an alternative format if:

you’re visually impaired

you have dyslexia or autism

you have another condition which makes standard print difficult

Contact HMRC if you need a form, leaflet or other information in any of the following formats:

Braille

large print

audio on CD

text on CD (standard or large print)

other formats, for example coloured paper

Call the relevant contact number and tell HMRC what help you need. For example, call ‘Self Assessment: general enquiries’ if you need a large-print tax return. They will transfer you to HMRC’s extra support team.

You can also contact HMRC’s extra support team using webchat.

If you need help filling in forms

HM Revenue and Customs (HMRC) can help you with filling in forms. You might need help if:

you have a mental health condition, like depression, stress or anxiety

you have a visual impairment, dyslexia, autism or cognitive difficulties

you have another condition which makes filling in forms difficult

To get help with filling in forms, call the relevant contact number and tell HMRC what help you need. They will transfer you to HMRC’s extra support team.

If you need more time because of your circumstances

In certain circumstances, HM Revenue and Customs (HMRC) can give you an extension to a deadline or spend more time with you on the phone. You can ask for more time if, for example:

you have another condition which means you need more time

you’re experiencing financial difficulties - for example, if you’ve been laid off because of coronavirus (COVID-19)

you’re in hospital (someone else can ask HMRC for you)

To ask for more time because of your circumstances, call the relevant contact number and tell HMRC what help you need. They will transfer you to HMRC’s extra support team. You may need to prove why you need more time.

If you need information in another language

You can use a friend or family member as an interpreter when you phone HM Revenue and Customs (HMRC).

They must be over 16 and will need to be in the same room as you when you call HMRC.

HMRC may also be able to organise an interpreter for you.

Use the relevant contact number, for example the Self Assessment helpline, if you need help with your tax return.

You can also ask for information in another language using webchat.

If you need someone to talk to HMRC for you

If you find it difficult to deal with HM Revenue and Customs (HMRC) yourself, you can appoint someone to talk to HMRC for you. This can be a friend, relative or an adviser from a voluntary organisation.


If you cannot pay your tax bill on time

What to do

You must arrange to pay your tax bill with HM Revenue and Customs (HMRC) if you either:

miss a payment

know you cannot pay on time

If you pay a tax bill late you must pay interest on the amount you owe until it’s paid off. You can avoid penalties by arranging a payment plan with HMRC before the tax is due  – or by 1 April for Self Assessment.

If you owe Self Assessment tax and your bill is less than £30,000 you may be able to pay in monthly instalments.

For any other bills or problems paying, you must contact HMRC to discuss your options. How you contact HMRC depends on what you need to pay.

This guide is also available in Welsh (Cymraeg).

If you cannot pay because of coronavirus (COVID-19)

You may be able to pay your Self Assessment tax in monthly instalments. This includes any delayed (deferred) ‘payments on account’ that were due in July 2020, if you did not pay them at the time.

Contact the HMRC coronavirus (COVID-19) helpline if you cannot pay any other tax bills because of coronavirus.

If you’re self-employed

If your business has been affected by coronavirus (COVID-19), you may be able to claim a grant through the Self-Employment Income Support Scheme.

If you cannot pay your Self Assessment tax bill

You can set up a payment plan online to spread the cost of your latest Self Assessment bill if:

you owe £30,000 or less

you do not have any other payment plans or debts with HMRC

your tax returns are up to date

it’s less than 60 days after the payment deadline

You do not need to contact HMRC if you set up a payment plan.

Call the Self Assessment helpline if you’re not eligible for a payment plan or cannot use the online service.

If you cannot pay other taxes

You might be able to set up a Time to Pay Arrangement with HMRC if you’re unable to pay any other taxes in full. This lets you spread the cost of your tax bill by paying what you owe in instalments.

How you do this depends on whether you’ve received a payment demand.

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter.

If you’ve not received a bill or letter, call the Payment Support Service (PSS).

Nominated partners in business partnerships can negotiate a Time to Pay Arrangement with HMRC on behalf of the partnership or individual partners.

Before you contact HMRC

You’ll need to know:

your reference number (for example, your 10-digit Unique Taxpayer Reference or VAT reference number)

the amount of the tax bill you’re finding it difficult to pay and the reasons why

what you’ve done to try to get the money to pay the bill

how much you can pay immediately and how long you may need to pay the rest

your bank account details

What happens when you contact HMRC

HM Revenue and Customs (HMRC) will ask you about:

your income and expenditure

your assets, like savings and investments

what you’re doing to get your tax payments back in order

HMRC will decide whether you should be able to pay immediately. If you cannot, they’ll decide whether you’ll be able to get your payments back on track with more time.

You’ll be asked more in-depth questions if you’ve been given more time to pay before. In more complex cases HMRC may ask for evidence before they make a decision.

What happens next

You’ll have to pay immediately if HMRC think you can when you call. You can pay by Direct Debit, corporate credit card or debit card over the phone.

You’ll be charged a fee if you pay by credit card. The fee is not refundable.

If you cannot pay all your tax bill, you may be able to:

pay your bill in instalments by Direct Debit

get more time to pay

When you might get more time to pay

HMRC may offer you extra time to pay if they think you genuinely cannot pay in full now but will be able to pay in the future.

You can set up a plan to pay in instalments by Direct Debit on dates they agree with you.

Tell HMRC as soon as possible if your circumstances change and you can pay your tax bill faster.

You’ll have to pay interest on the amount you pay late.

You must keep these payments up to date and pay your other tax. If you do not, HMRC will normally cancel the arrangement and take legal action against you straight away.

When you will not get more time to pay

If HMRC do not think you can get your payments on track with more time, they will not make an arrangement with you - they’ll expect you to pay your tax bill straight away.

If you do not, HMRC will start ‘enforcement action’ to get the money from you.

Help and advice

The Money Advice Service has more information about debt management and where you can get free debt advice.

You can also contact HMRC.

Making a complaint

You cannot appeal against HMRC’s decision, but you can make a complaint if you’re unhappy about how you were treated.


If you do not pay your tax bill

Overview

If you do not pay your tax bill on time and cannot make an alternative arrangement to pay, HM Revenue and Customs (HMRC) can take ‘enforcement action’ to recover any tax you owe.

You can usually avoid enforcement action by contacting HMRC as soon as you know you’ve missed a tax payment or cannot pay on time.

They may agree to let you pay what you owe in instalments, or give you more time to pay.

Otherwise, there are a number of enforcement actions HMRC can take to get the tax you owe. They can:

collect what you owe through your earnings or pension

ask debt collection agencies to collect the money

take things you own and sell them (if you live in England, Wales or Northern Ireland)

take money directly from your bank account or building society (if you live in England, Wales or Northern Ireland)

take you to court

make you bankrupt

close down your business

If you do not pay your tax on time, you’ll probably have to pay interest on the outstanding amount. You may also have to pay a penalty or surcharge.

Through your earnings or pension

HM Revenue and Customs (HMRC) can make deductions from your salary or pension for debts for:

Self Assessment tax

Class 2 National Insurance

They’ll change your tax code to do this.

If you’ve been paid too much in tax credits, HMRC can also take back the money in this way, or by making deductions from your Universal Credit payments.

How much

HMRC can take up to £3,000 each tax year if you earn less than £30,000.

If you earn more than this, HMRC can take higher amounts depending on your salary. They can take up to £17,000 each tax year if you earn £90,000 or more.

When you’ll start repaying the debt

HMRC will write to you before making changes to your tax code.

They can change your code immediately, which means you’ll receive less money the next time you’re paid or get income from a pension.

If you’ve not repaid the debt by the end of the tax year, HMRC can continue to collect what you owe through next year’s tax code.

If you do not want debt included in your tax code

You’ll need to either:

pay the full amount you owe

contact HMRC to arrange a payment plan

Debt collection agencies

HM Revenue and Customs (HMRC) can collect your debt through a private debt collection agency.

The agency will write to you and you should pay them directly.

Debt collection agencies used by HMRC are:

1st Locate (trading as LCS)

Advantis Credit Ltd

Bluestone Consumer Finance Limited (trading as Bluestone Credit Management)

BPO Collections Ltd

CCS Collect (also known as Commercial Collection Services Ltd)

Moorcroft

Oriel Collections Limited

Past Due Credit Solutions (PDCS)

Taking control of goods (distraint)

If you live in England, Wales or Northern Ireland, HM Revenue and Customs (HMRC) can take things you own, and sell them to pay your debt.

This is called ‘taking control of goods’ (or ‘distraint’ in Northern Ireland). You’ll also be charged certain fees.

What happens when HMRC visits

An officer from HMRC will visit you and ask you to pay your debt.

If you do not pay, the officer will make a list of your possessions that could be sold to cover both your debt and the costs of selling them, for example fees for auctioneers or advertising.

These possessions can then be either:

taken immediately by the officer

left with you under a ‘Controlled Goods Agreement’ (‘Walking Possession’ in Northern Ireland)

They can be sold if you do not pay within 7 days of the visit. If they sell for more than you owe, you’ll be paid anything over. If they sell for less, you’ll have to pay the difference.

Enforcement action fees

England and Wales

| Flat fee | Plus

Issuing a notice of enforcement | £75 | -

Take control of goods | £235 | 7.5% of the proportion of the main debt over £1,500

Goods taken and sold at auction | £110 | 7.5% of the proportion of the main debt over £1,500

Northern Ireland

| Fee

If you owe under £100 | £12.50

If you owe more than £100 | Between 0.25 to 12.5% depending on debt amount

Goods taken and sold at auction | Between 7.5% to 15% depending on auction

From your bank or building society account

If you live in England, Wales or Northern Ireland, HM Revenue and Customs (HMRC) can take the money you owe directly from your bank or building society account. This is called ‘direct recovery of debts’.

HMRC will only do this if you:

have repeatedly refused to pay what you owe

have received a face-to-face visit from them to discuss your debt

would have at least £5,000 in your account after they’ve taken the debt

If HMRC plans to take money from your account

HMRC will write to tell you:

what they plan to do

what the process will involve

how to contact them with any queries

Court action

If HM Revenue and Customs (HMRC) takes you to court, you may have to pay court fees and HMRC’s costs as well as the tax you owe.

Magistrates court (England, Wales and Northern Ireland)

HMRC can start magistrates court proceedings against you if:

you have separate debts of £2,000 each or less

you’ve owed the money for under a year

You’ll get a summons before the hearing explaining what you owe and where and when the hearing will be. If you pay, you will not have to go to court.

If you disagree with the amount on the summons, you’ll need to contact HMRC before your case goes to court.

If you do not pay, HMRC can ask the court to:

send bailiffs to take and sell things that you own to cover the debt

make you bankrupt or close down your company

County court (England and Wales)

The court will write to you explaining how much you owe and what you need to do.

If you disagree with the amount you’re being asked to pay, you may need to go to court to explain why.

take the money directly from your earnings

order someone who owes you money to pay your debt

place a charge on your property

Sheriff court (Scotland)

HMRC will apply to the court for a warrant to collect your debt. You’ll have 14 days to pay from the date of the warrant.

take the money you owe directly from your pay or from your bank account

take and sell certain goods from your business premises or your property