What happens if I don’t pay tax to HMRC? Can HMRC take my house?

HMRC has significantly stepped up enforcement action in recent years. If you’ve received a tax bill or penalty and haven’t paid, they have extensive powers to recover the debt. In extreme cases, this includes forcing the sale of your property to settle what you owe.

If you don’t pay your tax bill and don’t engage with HMRC, they may visit your home or business address or instruct a debt collection agency to discuss settling your debt. If you receive a letter about an HMRC Notice of Enforcement or stating HMRC will pass your debt to a debt enforcement team, this is serious. HMRC will take further action and you should seek legal advice immediately. If you believe the debt is incorrect, see our guidance on late or out-of-time appeals.

What are your options?What happens if I don't pay tax?

If you’ve received an HMRC tax bill or penalty, you have three options:

  1. Pay the debt in full – the quickest way to resolve the matter
  2. Negotiate a payment arrangement – HMRC may agree to instalments based on your financial situation
  3. Challenge the debt – if you believe it’s incorrect, you can request a review of HMRC’s decision

If HMRC visit you, they will ask about your financial situation and your ability to pay. They’ll try to agree how best to settle the debt with you, either via one full payment or through instalments. HMRC can take payment directly from you during a home visit and carry card payment machines to allow them to take payment at your home or business address.

If you cannot reach an agreement and continue to refuse payment, HMRC may use their enforcement powers to collect the debt.

HMRC’s enforcement powers

If you haven’t settled the debt after the first visit, HMRC may use further enforcement powers. In recent years, we are seeing these being used more frequently. And HMRC are taking action in faster timescales than previously seen. Here are some of HMRC’s powers and questions we often get asked:

Will HMRC arrest me if I don’t pay?

No. Non-payment of tax is a civil matter, not a criminal one. HMRC will not arrest you for owing tax. However, bailiffs or enforcement officers may visit your home or business to discuss the debt and, in some cases, take possession of goods. Arrest is only a possibility in criminal tax evasion cases where there has been deliberate fraud.

Can HMRC enter my house to take my possessions without a warrant?

Yes, they can. HMRC can take your possessions to sell to cover the debt. They can instruct private auctioneers to collect the goods and use a locksmith to enter your premises, if necessary. No warrant from the courts is required and they don’t need to give you any notice beforehand. Certain fees will apply to remove and sell the goods and these will be covered by the sale of your possessions.

Can HMRC take money directly from my bank account without my permission?

Yes. HMRC can recover debt directly from your bank account. This is called ‘direct recovery of debt’. HMRC can do this when you owe £1,000 or more and have enough funds in your bank accounts to cover the debt and your reasonable living costs.

Can HMRC adjust my tax code to recover debt?

Yes. HMRC can recover debt through adjusting your tax code. HMRC can tax up to 50% of your gross income through this process.

Can HMRC add penalties and interest to my tax debt?

If you do not engage with HMRC and do not pay your tax bill on time, you may have to pay interest on the outstanding amount as well as a penalty or surcharge. If you were unaware of the debt or believe you have a reasonable excuse as to why it is disputed, see our guidance on late or out-of-time HMRC appeals. Once you understand your position, you can engage with HMRC and either appeal their decision or come to an arrangement to avoid enforcement action.

Our specialist HMRC and Tax Disputes Solicitors know that the enquiries we receive are often complex and time sensitive. In certain cases if you wish to discuss if a tax liability can be appealed out of time or if you have a reasonable excuse, we can offer fixed price consultations and our specialist HMRC and Tax Disputes Lawyers would be happy to discuss if your enquiry would be suitable for this route.

Can HMRC take me to court?

Yes. HMRC will seek to recover debt through county court proceedings. They can ask the court to grant an order against you, which could include:

  • Statutory Demands – HMRC may issue a Statutory Demand as a formal request for payment. If you don’t respond within the required timeframe, this can lead to further enforcement action including charging orders or insolvency proceedings.
  • Charging orders – usually placed on an asset such as your property. HMRC has the power to recover debts from the sale of your property when you sell or through a court action known as an ‘order for sale’ they can force you to sell the property. This is how HMRC can take your house.
  • Attachment of Earnings Order – These allow regular deductions to be taken from your PAYE wages to pay your debt. This is separate to adjusting your tax code. Your employer will know about the debt. In certain sectors, this could impact financial propriety checks and future employment opportunities.
  • Third Party Debt Order – The order allows HMRC to take money directly from your bank or from whoever owes you money to pay what you owe to HMRC.
  • Insolvency – HMRC will only apply to the courts to make a person or company insolvent as a final course of action (bankruptcy for individuals, insolvency for companies). Insolvency processes open to HMRC include, but are not limited to:
    • Voluntary arrangements
    • Company moratoriums using the Corporate Insolvency and Governance Act
    • Debt restructuring plans or schemes
    • Bankruptcy and winding up orders

If you or your business are taken to court and you’re not successful, you may have to pay some or all of HMRC’s legal costs. There are often additional costs to consider before commencing action in the courts.

When should I seek legal advice?

If you’ve received an HMRC tax bill or penalty that you can’t pay or believe is incorrect, act quickly. The quicker you act the more options you will have available to you. The enforcement powers outlined above can be deployed rapidly once HMRC begins collection proceedings.

Some people assume they can negotiate settlements over the phone with HMRC or that HMRC might forget about the debt if they stay quiet. Neither is true. HMRC do not forget. Their systems are much better than people believe. Hoping they have forgotten is an expensive choice to make. Do not mistake silence for non-action.

There are deadlines where HMRC cannot pursue certain liabilities, but these are case specific. We can do an initial fixed cost review to see if HMRC are in time to pursue the action and advise on your best course of action. Whether you need to negotiate a payment arrangement, challenge the debt, or understand your options, early legal advice can help you avoid the most serious consequences.

Our specialist HMRC and Tax Disputes Solicitors know that the enquiries we receive are often complex and time sensitive.

For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.