What Happens If You Never Pay HMRC? (2026 Guide)

Many directors believe delaying tax payments buys time, but in 2026, HMRC is more aggressive than ever. Chris Worden explains the real risks and what you should do instead.

Why Not Paying HMRC Is No Longer a Strategy

In the past, some directors delayed paying VAT, PAYE, or corporation tax, hoping HMRC would be lenient. In 2026, this approach is dangerous. HMRC now adds penalties, interest, and pursues enforcement much faster.

What Actually Happens If You Don’t Pay?

• Penalties: Start quickly, with VAT penalties from day 15 and daily charges from day 31.
• Interest: Charged at Bank of England base rate plus 4%.
• Enforcement: HMRC can seize business assets, issue statutory demands, and file winding up petitions.
• Personal Risk: Directors may become personally liable if they mix finances or act irresponsibly.

Common Mistakes Directors Make

• Not filing returns because they can’t pay.
• Ignoring HMRC letters and calls.
• Agreeing to unrealistic payment plans just to get HMRC off their back.
• Assuming a limited company structure protects them personally in all cases.

What Should You Do Instead?

1. Face Reality Early: Accept the problem isn’t temporary and act quickly.
2. File Returns: Always file, even if you can’t pay. Not filing triggers harsher action.
3. Engage with HMRC: Contact them before enforcement starts. Discuss a realistic Time to Pay arrangement.
4. Negotiate Strongly: Don’t agree to a plan you can’t maintain. Push for the longest realistic term.
5. Consider Insolvency Options: If recovery isn’t possible, a controlled insolvency process (like liquidation or administration) may protect you better than waiting for HMRC to act.

Personal Liability Risks

Chris Worden warns that directors who mix personal and business finances, overdraw director’s loan accounts, or trade while insolvent may face personal liability. HMRC can issue joint and several liability notices in some cases.

Key Takeaways

• HMRC enforcement is tougher than ever in 2026.
• Penalties and interest escalate quickly.
• Ignoring HMRC can lead to asset seizure, insolvency, and personal risk.
• File returns and engage early, even if you can’t pay.
• Seek professional advice if you’re struggling with tax debts.

FAQs

What happens if I ignore HMRC tax debts?

Ignoring HMRC leads to penalties, interest, enforcement action, and potentially insolvency or personal liability.

Can HMRC seize my business assets?

Yes, HMRC can legally seize business assets if debts remain unpaid.

Will I be personally liable for company tax debts?

Directors may be personally liable if they mix finances, overdraw loan accounts, or act irresponsibly.

What is a Time to Pay arrangement?

It’s a payment plan agreed with HMRC to spread tax debts over time. It must be realistic to succeed.

Should I file returns if I can’t pay?

Yes, always file returns. Not filing triggers harsher penalties and enforcement.