HMRC Time to Pay: how to spread a tax bill you cannot pay

What Time to Pay is

Time to Pay is a negotiated arrangement to pay tax in instalments rather than in one sum. It is available for most taxes, including Self Assessment, VAT, employer PAYE and Corporation Tax. The arrangement is agreed rather than automatic. HMRC decides whether to accept a proposal based on what you owe and what you can afford. You are asking HMRC to defer payment, and HMRC has to agree to that request.

Because it is agreed, the terms matter. A plan sets a monthly amount and a date each month when the payment leaves your account. It does not reduce the tax itself. It changes when the tax is paid, not how much is owed. Interest continues to build on the unpaid balance while the plan runs, so the total cost is higher than paying in full on time. That is the trade-off: you avoid a single unmanageable demand, and you accept a longer, more expensive path to clearing the bill.

GOV.UK does not set a fixed maximum length for a payment plan. The length depends on how much is owed and what you can afford each month. A larger debt over a longer period means more interest, but a monthly figure you can actually sustain. The aim is an arrangement that survives to the end, because a defaulted arrangement is worse than none at all.

The online route for Self Assessment

HMRC's self-serve Time to Pay facility for Self Assessment requires the debt to be between 32 pounds and 30,000 pounds. There must be no outstanding tax returns, no other tax debts, and no other HMRC payment plans already set up. The plan must be set up no later than 60 days after the due date of the debt. If any of those conditions is not met, the online service will not accept the arrangement and you have to speak to HMRC instead.

The online Self Assessment payment plan is paid by Direct Debit. You can also pay a lump sum up front to reduce the monthly instalments. That option is worth considering if you have some money available but not the full amount, because a smaller balance means less interest over the life of the plan. HMRC increased the online Self Assessment payment plan threshold from 10,000 pounds to 30,000 pounds on 1 October 2020, which brought many more people within the self-serve route.

Before you start, have your Unique Taxpayer Reference and your bank details ready. The service calculates a proposed schedule, and you can adjust the monthly amount within limits. If the figure it suggests is not affordable, do not simply accept it. A plan that fails in month three leaves you in a worse position than a longer plan you can keep to.

What it costs: interest and penalties

The HMRC late payment interest rate is 7.75 percent a year, in force from 9 January 2026. It is set at the Bank of England base rate plus 4 percentage points under a formula in effect from April 2025. The rate changes when the base rate changes. Late payment interest is charged from the first day a payment is late until it is paid in full, and it continues to accrue while a Time to Pay arrangement is running. A plan does not pause interest.

Self Assessment late payment penalties are 5 percent of the tax still unpaid at 30 days, at 6 months and at 12 months after the deadline. Those three charges can add 15 percent to the tax you owe if nothing is agreed. Under Schedule 56 of the Finance Act 2009, where a person asks HMRC to defer payment before a penalty arises and HMRC agrees, the person is not liable to a late payment penalty that would otherwise have arisen between the request and the end of the deferral period.

That legal point is the practical one. Acting before day 30 is the decision that saves the most money. A request made and agreed before the first penalty date removes the 5 percent charge that would otherwise land at 30 days, and it protects against the later charges too, provided the arrangement is kept. Waiting until after a penalty has been issued means that charge stands.

If you cannot use the online service

You have to phone HMRC when the debt is above 30,000 pounds, when returns are outstanding, when there are other tax debts or an existing HMRC payment plan, or when more than 60 days have passed since the due date. The number to call is on your Self Assessment statement or on GOV.UK. Have your reference numbers, the amount owed and the tax year to hand before you dial, because the call is quicker and calmer when the facts are in front of you.

HMRC asks for income and expenditure, bank statements and details of other debts. This is an affordability check, not an interrogation. You are showing what is left each month after essentials such as rent or mortgage, council tax, utilities, food, transport and existing credit commitments. Be accurate. Figures that cannot be supported by statements weaken your case and can lead to a plan being revised or refused.

Where an independent debt adviser such as Citizens Advice has prepared a Standard Financial Statement, HMRC accepts it as evidence of income and spending. That document carries weight because it has been prepared independently. If your finances are complicated, or you have several creditors, getting one prepared before you call can make the conversation shorter and the outcome more realistic.

How much HMRC expects you to pay each month

The affordability assessment works from your surplus: income minus essential outgoings. HMRC is not looking for the largest number you can survive for one month. It is looking for an amount you can sustain across the whole plan. Propose a figure you can keep to in a bad month as well as a good one, because the arrangement is judged on whether it completes, not on how ambitious it looked at the start.

If the surplus is small, say so plainly and show the working. A modest monthly payment over a longer period is normally preferable to a large payment that collapses. Remember that interest at 7.75 percent continues throughout, so a longer plan costs more in total. That is a reason to pay more when you can, not a reason to promise more than you can manage.

A defaulted arrangement is worse than none. If a plan is cancelled, the full balance becomes payable and enforcement can follow. You can usually ask to vary a plan if your circumstances change, but it is far better to agree a realistic figure at the outset than to renegotiate after a missed payment.

Business taxes and what to do next

VAT, employer PAYE and Corporation Tax each have their own route and threshold. HMRC also operates online payment plan services for VAT and employer PAYE, each with its own eligibility conditions and threshold, and Corporation Tax arrangements are agreed by telephone. These change, so check GOV.UK or call the Business Payment Support Service for the current position rather than relying on an old figure.

Missing an instalment risks the arrangement being cancelled and the full balance becoming payable. If you know a payment will be missed, contact HMRC before the date rather than after it. Early contact keeps the arrangement alive and shows the plan is being taken seriously. Ignoring the problem is what turns a manageable schedule into an enforcement case.

Free debt advice is available from Citizens Advice, StepChange and National Debtline. In one year HMRC reported that nearly 44,800 Self Assessment customers set up payment plans covering almost 148 million pounds of tax ahead of the January deadline. That number is a reminder that this is a routine process used by many people, not an unusual admission of failure. Start with the online service if you qualify, and phone if you do not.

Source: GOV.UK: if you cannot pay your tax bill on time.

Related coverage on Kael Tripton: Self Assessment: register by 5 October or face a penalty, HMRC July 2026 Self Assessment Deadline: Second Payment on Account Due 31 July, Self Assessment Tax Return UK 2025/26: Deadlines, Who Must File and How to Submit, Late Inheritance Tax Return UK: Penalties, Interest and How to Appeal, UK Fines and Enforcement Ledger: FCA, ICO, Ofgem, HMRC.

Frequently asked questions

Can I set up an HMRC payment plan online for Self Assessment?

Yes, if the debt is between 32 pounds and 30,000 pounds, your returns are filed, there are no other tax debts and no other HMRC payment plans, and you apply no later than 60 days after the due date. The plan is paid by Direct Debit, and you can pay a lump sum up front to reduce the monthly instalments.

Does interest stop when a Time to Pay arrangement is agreed?

No. Late payment interest is charged from the first day a payment is late until it is paid in full, and it continues to accrue while a Time to Pay arrangement is running. The rate is 7.75 percent a year, in force from 9 January 2026, set at the Bank of England base rate plus 4 percentage points.

What penalties apply if I do not agree a plan?

Self Assessment late payment penalties are 5 percent of the tax still unpaid at 30 days, at 6 months and at 12 months after the deadline. Under Schedule 56 of the Finance Act 2009, where a person asks HMRC to defer payment before a penalty arises and HMRC agrees, the person is not liable to a late payment penalty that would otherwise have arisen between the request and the end of the deferral period.

What does HMRC ask for if I have to phone?

HMRC asks for income and expenditure, bank statements and details of other debts. Where an independent debt adviser such as Citizens Advice has prepared a Standard Financial Statement, HMRC accepts it as evidence of income and spending.

What happens if I miss an instalment?

Missing an instalment risks the arrangement being cancelled and the full balance becoming payable. Contact HMRC before the payment date if you know a payment will be missed.