Accounting Blog for Business
Taxes are legal priority bills that are considered the most important financial transaction a citizen makes. However, tax bills are also some of the most infamous types of debts people struggle with in the UK.
Developing effective tax strategies you can incorporate in tax planning is the best way to go about and get out of a tax debt. It will not be easy, but with the assistance of professionals and experts, you can pay your debts of while still being in compliance with the HMRC.
You can try reducing your tax bill through one of these four ways:
- Disability reduction – If you are living with a disabled child or adult, you may qualify for this.
- Single person discount – If you are living alone, you have the benefit of a 25% reduction on your council tax.
- Transitional reduction scheme – If you are living in an area undergoing local government reorganisation, you may qualify for this.
- Council tax benefit – If your income is low, the council may cover all or part of your bill.
You can also try debt management solutions such as a Debt Management Plan (DMP) or a Debt Relief Order (DRO).
Debt Management Plan
This is an agreement between you and your creditors to have you pay all your debts on a set of terms. You coordinate with a licensed debt management agency or company to develop a suitable monthly payment option that is perfect for your financial situation.
Your agency will provide you with expert advice on reducing debt and cash flow management. With their help, you can also come up with a better budget plan customised to your business’s unique situation.
The agency offers the following services under the debt management plan package:
- Budgeting assistance
- Liaison between the client and the creditor—which, in this case, is the government
- Processing of payments – disbursement of funds to creditors/government
- Progress report – how much has the client paid off so far, and how much more debt is left
Debt Relief Order
This is a debt solution for citizens who are unable to pay their tax debts due to limited assets and relatively low disposable income. An authorised debt adviser handles the processing for you. However, to be able to acquire this solution, you must fall under these specifications:
- Business owner in Wales or England within the past three years
- Debts do not total more than £15,000
- Total asset value must be less than £300
- Not involved in another insolvency issue
The DRO allows you to be relieved from paying covered debts for a total of 12 months. And if you still are still unable to repay the debt at the end of the period, they will be written off. However, it will be very difficult for your business to get new credit for up to six years.
The government gives you these and other solutions to tax debt problems. However, it is important to note that the best solution is still prevention. Efficient tax planning and cash flow forecast are still your best weapons in the race against tax deadlines and keeping track of your cash flow. It is better to protect your business’s credibility and operations by avoiding any trouble with the government.
Manage your taxes to manage your business better with the help of our experts and professionals. Contact our team of specialists now to receive advice and assistance for all your accounting and business queries and concerns.