Overdrawn and don't know what to do

[overdrawn]

I'm a regular poster on MN but have NC for this post.

I'm self employed and the last two financial years earned a good income compared to what I had earned when employed full time (up by around 40%). At the end of last year I had what can only be described as a kind of breakdown. DP and I found out we can't have children and I fell into a deep depression. I found it incredibly difficult to keep up with work and just spent all day crying. I have sought help and am on antidepressants now and having counselling through the NHS. In the midst of all this we also moved house, which was expensive. I hadn't previously done tax on account and was paying it as it came up, but had to do tax on account the previous financial year. It was a large amount and so I split the payments over 12 months and am currently paying c. £1.5k / month to HMRC. I am still trying to catch up with work and my income has been barely anything this year. I have gone through any savings with these monthly tax payments and contributing £1.8k / month to shared household expenses. I have also put £8k on a balance transfer credit card and am paying back £500 / month. Today I have woken up to a notice on my bank app saying I'm overdrawn by £1.1k on my account and I feel so panicked. I don't know what to do. I've never been in this position in my life as I've always been fairly responsible with finances but this past 8 months has just destroyed me. I'm sitting here crying and I just don't know what to do. I can't ask DP for help even though he has a lot more money than me as he is paying for the house, which is very expensive. I've basically just been putting off this situation by using my savings, but they are now all gone. I've also lost a lot of clients due to how unreliable I have been in the past months. I used to be so reliable and so on top of things. Does anyone have any advice? I don't know what to do about the overdrawn amount.

thanks so much everyone for replying. After seeing everyone's messages I did end up speaking to DP and he instantly helped with my overdraft, which is a huge relief. We have also spoken about what I need to do to relieve some financial pressures and get back on top of things. I think I had built everything up in my head and was so angry at myself that I assumed he would be angry with me. I now need to work out a plan to get myself back on track financially and build up some savings again so I have a safety net – and I need to make sure I've got money in my account before the next HMRC bill... thank you again for the support. It helped so much.

Been self employed is harder to financially plan …

I am so glad you got to speak to him .

can I suggest you look at all your monthly outings so you know roughly what you have each month . It will be more realistic

Oh that's a relief! I'm glad you spoke with him.

Hope all goes well - glad you opened up to your partner and that he supported you. I know the fear of believing everyone will be angry with you because you're angry/disappointed in yourself. But equally I know that the opposite is true and people want to help.

@CommonVetch @Starlightstarbright2 @TheCountessofLocksley I don't actually think I would have spoken to him if not for this thread – just hearing outside perspectives made me feel better, so thank you. @Starlightstarbright2 I've already started updating my outgoings spreadsheet and am determined to catch up with my outstanding deadlines this month and start fresh in September. I am hoping I can also reach out to some of the clients that have fallen away.

You're very welcome.

I am not an accountant but had a similar situation with tax on account. Do you have an accountant? It may be possible to reduce payment if you are earning less. I also contacted HMRC to agree a payment plan, that also helped. Good luck, tax on account is horrible l.

Glad you have a plan

@sonicmum2002 it really is isn't it?? For a few years I just clicked the box saying I didn't know what my income would be the following year and didn't pay it – then HMRC rang and said I have to pay. It's basically paying tax twice for a year which as a freelancer is just so difficult to do. I really hate it. I always paid my full tax bill as soon as I was able to (ie. in April each year) and now I'm having to be on a payment plan, paying interest on my tax bill, and really struggling because they want a year up front. It's an awful system.

Have you done your tax return to 5 April 2023 yet? If not, as your income decreased, get it done, as you might end up overpaying your tax and this would help x

Dear OP, I am so sorry you have been through such stressful times. You sound like a lovely, responsible person who has temporary financial issues due to ill health.

I have had similar issues to yours. My advice might seem odd, but hear me out. I suggest you take a very basic job three evenings a week - working in a pub or restaurant. Since Brexit, there's a lot of these jobs available. All the money from this job goes to paying off your debt. It's a temporary plan. It will get you out into the world and socialising in a very superficial way which can help with depression. If it doesn't fit your social profile, tell people you are doing it as a challenge to yourself for personal reasons.

I would explain to your Dp what has happened, and reassure him and you that it is temporary. Ask if he would loan you the money to pay the overdraft off in full, then use the casual job pay to repay him regularly. If you like, stick with the job for a few months to rebuild a bit of extra cash.

You might want to consider insurance against illness for the future though they may not allow depression as an existing condition.

Meanwhile, if you have long-standing clients, I'd be honest. Write a professional letter to say that you fell behind with work this year due to a sudden and acute illness (depression is an illness - do not add guilt or shame to your existing pain load). You tried to keep on top but fell behind. You are now recovering and returning to work.

Schedule a gradual return. Take on projects that are easy or quick or with clients you trust to build up your energy and confidence.

And of course schedule a lot of self-care - physical exercise, some sort of mental support through meditation, journalling, counselling etc.

I really hope you recover soon. You have been through such a sad time.

Hi all, I just wanted to give a quick update on this and say thank you again for your advice. I set up an overdraft on my account as a temporary measure to avoid so that I had an agreed overdraft and have contacted HMRC. It turns out that I have overpaid the payment on account by £5,300+ which is a huge relief! It means I can pay off the overdraft and once again have a bit of a buffer. I will keep paying off the zero balance card monthly. Does anyone know how long it takes HMRC to process a refund? I will submit it tomorrow as I need documents that are at home and I'm currently working from an office.

I also went through my wardrobe yesterday and made a list of things I no longer wear (I have quite a few high value bags & shoes that I've bought second hand as very good deals over the years and can likely sell for quite a bit more than I've bought for) so I'm going to spend some time next week organising that (c. £500 - 800). I feel much more in control and like I have an actual plan in place to get through this debt.

Thank you again for all the kind words and advice. I was in such a state when I posted before.

@overdrawn - really pleased things are working out for you and thank you for updating us x

Oh dear OP. Sorry. So practically

1. tell your DP 2)get a “real job
2. investigate debt management plans
3. sell what you can
4. see if you can increase your overdraft

@overdrawn

It's almost a necessity to keep on top of your book-keeping and submit tax returns as soon as the year ends to try to keep on top of the tax/NIC payments.

It's basically paying tax twice for a year which as a freelancer is just so difficult to do. I really hate it. I always paid my full tax bill as soon as I was able to (ie. in April each year) and now I'm having to be on a payment plan, paying interest on my tax bill, and really struggling because they want a year up front.

That's not really how it works. You're never paying in advance. Your January payment on account is basically for the first six months of the tax year (April to September) and your July payment on accounts is basically for the last six months of the tax year (October to March), so even with POAs, you're still paying in arrears, just not as far behind as you would if you earned less and only paid yearly (which would be 10 months in arrears).

With fluctuating income/profits, up or down, you've got to be on top of it otherwise it gets out of control and you don't know where you are. Rather than spreadsheets, I'd suggest some proper book-keeping software which will help with invoices and credit control as well as keeping you informed as to profitability for the year to date. I tend to recommend freeagent which also gives tax forecasts and you can submit the tax return directly from the software without having to use HMRCs woeful online system.