A study conducted by Premium Credit has indicated a growing trend among clients facing challenges in settling their tax obligations, with the average amount owed reported at £120,000 ($161,563).

The findings indicate that 94% of accountants and financial advisers have noticed an uptick in clients struggling to pay their taxes over the past year.

More than 60% of respondents noted a rise of 10% or more in the number of clients experiencing such challenges.

The most significant rise has been seen in issues related to income tax, as reported by 70% of the respondents.

Additionally, 40% noted an increase in clients unable to meet VAT payments, while 39% cited difficulties with Corporation Tax.

On an average, 13% of clients are currently experiencing issues with tax payments, according to the study.

The main factors contributing to these difficulties include tax increases and anticipated future rises, identified by 50% of the professionals surveyed.

A further 43% attributed the struggles to reduced profit margins. This represents a shift from 2024’s data, where 37% pointed to tax increases as the primary concern, and around 40% mentioned a decline in revenues.

In 2024, 54% of respondents indicated that cost of living pressures were a significant factor, but this year, that figure has decreased to 30%.

Looking forward, there is an expectation among accountants and financial advisers for an increased utilisation of HMRC’s Time to Pay (TTP) scheme, which provides businesses with additional time to address tax arrears.

Currently, only 25% of accountants and advisers report that 5% or more of their clients utilise TTP. However, nearly two-thirds (63%) anticipate that this figure will rise within the next three years.

Furthermore, there is a prevailing belief that the involvement of HMRC bailiffs in seizing assets for unpaid corporation tax will rise, with 81% of respondents predicting an increase in such actions over the next five years, and 19% expecting a significant escalation.

The research also revealed that 94% of accountants and financial advisers think their clients would be open to using a service that allows them to spread the cost of tax bills for a small fee, regardless of their current financial difficulties.

Jennie Hill, Chief Commercial Officer, Premium Credit (Specialist Finance) said: “Almost all the accountants and financial advisers in our research are seeing an increase in clients struggling with tax bills and the average bill is substantial.

“Accountants and financial advisers need to engage with clients facing tax problems and offer them practical solutions such as spreading the cost into convenient monthly payments.”