Tax Debt and Mental Health
Reviewed by Finance Director, Jason Scrivens-Waghorn (FCCA)
Reviewed by Jason Scrivens-Waghorn (FCCA) Jason Scrivens-Waghorn (FCCA) LinkedIn
Jason is the Head of Finance at RIFT, where he's been steering the financial ship for over 11 years. His role is all about ensuring smooth operations, from making sure customers are paid quickly an...
Read More about Jason Scrivens-Waghorn (FCCA)What is tax debt?
Tax debt simply means you owe money to HMRC that hasn't been paid by the relevant deadline.
There are many reasons this can happen. For example, you might:
have tax due through Self Assessment
have underpaid tax
have missed a payment deadline
owe tax following a change or correction to your tax position
have received money from HMRC that they later determine needs to be repaid
be dealing with penalties or interest as well as the original tax due.
If HMRC says you owe money and you don't understand why, check the calculation or contact them rather than assuming it's correct or ignoring it.
If you agree that the debt is correct but can't afford to pay it in full, contact HMRC as early as possible.
What happens if I can't pay HMRC?
HMRC says it will work with people who can't pay their tax in full to find an affordable way of settling what they owe.
Depending on your circumstances, this could include a Time to Pay arrangement, which lets you repay an overdue tax bill in instalments.
HMRC will look at your financial position when deciding what you can afford. This can include your income, household spending, savings and other commitments. There isn't a standard payment-plan length that works for everyone.
If your circumstances change after agreeing a payment plan, contact HMRC rather than simply missing an instalment. HMRC says payment arrangements can sometimes be renegotiated where circumstances change.
Can HMRC charge penalties and interest?
Yes.
For Self Assessment, penalties can apply if you submit a return late or pay tax late. Interest can also be charged on unpaid tax.
The rules depend on the tax and obligation involved, and the penalty system is also changing for some taxpayers as Making Tax Digital for Income Tax is introduced from the 2026/27 tax year.
If you've received a penalty, check what it relates to rather than relying on a general list of charges. You may be able to appeal if you had a reasonable excuse.
Mental health can sometimes be relevant when HMRC considers whether someone had a reasonable excuse, but having a mental health condition doesn't automatically mean a penalty will be cancelled. HMRC considers how the person's circumstances affected their ability to meet the particular tax obligation.
What can HMRC do to recover tax debt?
Ignoring HMRC can make the situation more serious.
HMRC says it will normally try to contact you and agree a way forward before using enforcement powers, except in circumstances such as suspected fraud or criminal activity. Options can include a Time to Pay arrangement, using another tax repayment against an outstanding debt or, in some cases, adjusting a PAYE tax code.
If HMRC can't reach you or you refuse to pay, further action can include:
using a debt collection agency
visiting your home or business
taking control of certain possessions
recovering money through other enforcement powers
insolvency proceedings in serious cases.
The exact enforcement process differs across England, Wales, Scotland and Northern Ireland.
Direct Recovery of Debts
One important change since this article was originally published is the return of HMRC's Direct Recovery of Debts powers.
HMRC restarted their use on a controlled basis in September 2025, with a wider rollout from April 2026. They allow HMRC, in specific circumstances, to recover tax debt directly from bank and building society accounts.
This isn't a power HMRC says it uses simply because someone is struggling to pay.
HMRC says Direct Recovery of Debts is aimed at people and businesses who have the means to pay but don't engage or choose not to pay. There are safeguards, including only considering debts above £1,000 and leaving at least £5,000 available across an individual's accounts. HMRC also says the process should stop where someone is identified as needing extra support while that support is provided.
That makes engaging with HMRC particularly important if financial hardship or your mental health is affecting your ability to deal with the debt.
What if my mental health makes it difficult to deal with HMRC?
Tell HMRC what you're finding difficult and what help would make dealing with your tax easier.
HMRC's Extra Support Team can help people whose health or personal circumstances make contacting or dealing with HMRC more difficult. This specifically includes people experiencing depression, stress or anxiety, as well as people facing financial hardship.
Depending on your needs, support can include:
more time to deal with certain matters
additional help completing forms
using webchat or alternative communication methods
phone or video appointments
accessible information
arranging for another person to communicate with HMRC.
HMRC can also transfer eligible people to its Extra Support Team when they contact the usual HMRC service.
You don't need to wait until the situation has reached enforcement before asking for help.
Can someone speak to HMRC for me?
Yes, depending on what you need them to do.
If you're finding it difficult to deal with HMRC yourself, you can appoint someone such as a friend, relative or adviser from a voluntary organisation to talk to HMRC on your behalf.
There are different types of authorisation depending on how much access that person needs and which taxes are involved.
You can also formally authorise a professional tax agent to manage certain tax affairs for you.
How are debt and mental health connected?
The link can work in both directions.
Debt can contribute to stress, anxiety, low mood, sleep problems and feelings of hopelessness. Poor mental health can then make financial tasks such as opening letters, making telephone calls, tracking spending or making decisions much harder.
Research collected by the Money and Mental Health Policy Institute shows how closely the two can overlap. It reports that 46% of people experiencing problem debt also have a mental health problem, while people with mental health problems are substantially more likely to experience problem debt than those without.
More recent research published in May 2026 also found continuing pressure on households, including millions of people with mental health problems worrying about whether they could afford enough food.
Recognising that relationship matters because dealing with one side of the problem may make the other easier to manage.
What are some signs that money worries are affecting your mental health?
People respond to financial pressure differently, but signs that you may need more support can include:
persistent worry about money
losing sleep because of bills or debt
feeling unable to open letters or check your accounts
struggling to concentrate or make financial decisions
avoiding calls from creditors or HMRC
feeling increasingly anxious, irritable or overwhelmed
losing motivation to deal with everyday tasks
feeling hopeless about your financial situation.
You don't need to wait for symptoms to become severe before asking for help.
If you're having thoughts of suicide or feel that you may harm yourself, seek urgent support. Call 999 or go to A&E if you're in immediate danger. Samaritans is available free, 24 hours a day, on 116 123.
Can Breathing Space help if debt is affecting my mental health?
Potentially, if you live in England or Wales.
The Debt Respite Scheme, commonly called Breathing Space, gives people experiencing problem debt temporary legal protection from certain creditor action while they receive debt advice and work towards a solution.
A standard Breathing Space can last for up to 60 days. For qualifying debts, it can pause most enforcement action and creditor contact and freeze most interest and charges. It doesn't write the debt off.
Mental Health Crisis Breathing Space
There is a separate version for someone receiving qualifying mental health crisis treatment.
A Mental Health Crisis Breathing Space lasts for the duration of that crisis treatment plus 30 days. It also has stronger protections than the standard scheme.
An Approved Mental Health Professional needs to certify that qualifying crisis treatment is taking place. Someone else, such as a carer, social worker, mental health nurse or representative, can approach a debt adviser on the person's behalf in appropriate circumstances.
Breathing Space is an England and Wales scheme. Different debt solutions and protections apply in Scotland and Northern Ireland.
What other debt help is available?
If tax debt is part of a wider debt problem, get independent debt advice before choosing a formal debt solution.
A free debt adviser can look at the whole picture, including priority debts, essential household spending, benefits or support you may be missing and the different solutions available where you live.
MoneyHelper's Debt Advice Locator can help you find free and confidential advice online, by telephone or face to face.
Depending on your circumstances and where you live, options could include arrangements such as a Debt Management Plan or, in England and Wales, an IVA, Debt Relief Order or bankruptcy. These have very different eligibility requirements and consequences.
One major change since this article was written concerns Debt Relief Orders.
As of September 2026, the main financial criteria for a DRO in England and Wales include:
total qualifying debts below £50,000
usually less than £75 spare income each month
less than £2,000 in assets
a vehicle worth less than £4,000.
You must also meet the other eligibility conditions. Applications are made through an approved debt adviser and there is currently no application fee.
The original £20,000 debt limit, £1,000 assets limit and £90 application fee are therefore no longer current.
Should I borrow money to pay a tax debt?
Be careful about taking on new borrowing to deal with an existing debt.
Moving expensive borrowing to a genuinely cheaper product can sometimes reduce interest costs, but it can also create new risks. Securing previously unsecured debt against your home, for example, can have serious consequences if repayments become unaffordable.
If you're already struggling to meet essential bills or several debt repayments, speak to a free debt adviser before borrowing more.
MoneyHelper recommends getting free debt advice if you're concerned about missing priority payments, have already missed them or are facing an emergency debt situation.
Could a tax refund help?
If you've genuinely paid too much tax, it's sensible to check whether HMRC owes you money.
A tax refund may arise for a number of reasons, including certain allowable employment expenses or because too much Income Tax has been deducted.
However, a possible tax refund shouldn't be treated as a debt solution. Whether you're due money depends on your individual tax circumstances and HMRC's rules.
If you're experiencing serious or persistent debt problems, debt advice remains important even if you think you might also have overpaid tax.
RIFT can help you check whether you may be due an HMRC tax refund and explain the refund process where relevant.
Practical steps if tax debt is affecting your mental health
You don't need to solve everything in one sitting.
A useful starting point is to:
1. Check what HMRC says you owe. Make sure you understand the amount, tax period and reason for the debt.
2. Contact HMRC if you can't pay. Ask what payment options are available and tell them if your health is affecting your ability to deal with the situation.
3. Ask for extra support if you need it. HMRC has an Extra Support Team and can make adjustments depending on your circumstances.
4. Get independent debt advice. This is particularly important if HMRC is one of several organisations you owe money to.
5. Let someone help with the admin. A trusted person or authorised adviser may be able to help you communicate with HMRC.
6. Get mental health support as well. Financial problems and mental health problems can reinforce each other, so support with both may be valuable.
Where can I get help?
For debt and money support:
Offers free money guidance and can help you find free debt advice.
Provides free and confidential debt advice.
Provides free debt advice and support with debt solutions.
Can help with debt, benefits, housing and other financial issues.
Mental Health and Money Advice
Specialises in the relationship between mental health and money problems.
For mental health support:
If you need urgent mental health help in England, call NHS 111 and select the mental health option. If there is an immediate danger to life, call 999 or go to A&E.
Call 116 123 free at any time, day or night.
Support for people working in construction
The Lighthouse Charity provides free emotional, physical and financial wellbeing support to construction workers and their families.
Its UK helpline is available 24/7 on 0345 605 1956, and support includes mental health, debt management, budgeting and financial wellbeing.
Tax debt and mental health FAQs
Can HMRC give me more time because of my mental health?
Potentially. HMRC says people can ask for more time in certain circumstances, including where depression, stress, anxiety or another condition affects their ability to deal with their tax. What HMRC can offer will depend on the situation.
Does having depression automatically cancel an HMRC penalty?
No. Mental health can be relevant to a reasonable-excuse appeal, but HMRC looks at the circumstances of the individual case and how the condition affected the person's ability to meet the relevant obligation.
Can HMRC take money directly from my bank account?
HMRC has Direct Recovery of Debts powers, but they come with conditions and safeguards. HMRC says they are aimed at people who can afford to pay established debts but repeatedly fail to engage. Wider use of the power resumed from April 2026.
Can someone deal with HMRC for me if I'm struggling?
Yes. Depending on the circumstances, you can authorise a friend, relative, voluntary organisation or professional agent to help deal with HMRC. The type of authorisation needed depends on what you want them to do.
Can tax debt be included in Breathing Space?
Some debts owed to HMRC can qualify for Breathing Space protections, depending on the type of debt and your circumstances. A debt adviser should check which debts can be included.
Where should I start if I can't face dealing with my debts?
You can start with a free debt adviser. You don't need to have every balance, letter or figure organised before contacting them. MoneyHelper's Debt Advice Locator can connect you with free and confidential support.
RIFT roundup
Tax debt and mental health can feed into each other. Worry makes financial admin harder, while unanswered letters, growing balances and uncertainty can add further pressure.
If you owe HMRC money, engaging early usually gives you more opportunity to discuss how the debt can be dealt with. If your health is making that difficult, tell HMRC and ask what extra support is available.
If tax debt forms part of a wider financial problem, use a free debt adviser to understand your options.
And if you think you've paid too much tax, you can check separately whether an HMRC refund may be due. Keep the two issues distinct so you can get the right support for each.
