HMRC Time to Pay Arrangements: Eligibility, Costs, and How to Apply

An HMRC Time to Pay arrangement lets you clear an overdue tax bill in monthly instalments instead of paying the full amount by the deadline. For Self Assessment debts up to £30,000, you can set the plan up online in one sitting without speaking to anyone.¹ Larger debts, and debts other than Self Assessment, need a phone call. HMRC treats these plans as discretionary rather than a right, but approval is routine when you contact them early and can show a realistic monthly figure.

Who Can Get One

There is no fixed eligibility checklist. Each request is judged on its facts, and the core question is whether you genuinely cannot pay in full on time and whether your proposed schedule matches your income and outgoings. A clean filing history helps. So does an honest financial picture. Someone who has ignored past deadlines, or who has savings sitting in an account that would cover the bill, will have a much harder conversation.

Self Assessment, VAT, PAYE, and Corporation Tax debts can all be covered.² There is no fixed maximum repayment period; HMRC says the length depends on how much you owe and what you can afford each month.³ Shorter plans are easier to get through. Once you start proposing repayment over multiple years, expect more scrutiny and heavier disclosure.

Timing matters. For Self Assessment, the payment deadline is typically 31 January, and the first late payment penalty hits 30 days after that. A plan agreed inside those first 30 days prevents that first penalty entirely.⁴ Wait longer, and you can still block the later penalties, but the first one is locked in.

One thing that catches people out: for Self Assessment, you cannot set up a plan until your tax return has been submitted. The bill has to exist before you can arrange to pay it in stages. If you have not filed yet, file first.

What a Plan Actually Costs

A Time to Pay arrangement stops enforcement action and can prevent penalties, but it does not freeze interest. Late payment interest keeps running on the outstanding balance for the whole repayment period, currently 7.75% from 9 January 2026.⁵ The rate is set at the Bank of England base rate plus 4%, so it moves when the base rate moves. On a £10,000 balance repaid over a year, that interest adds several hundred pounds to what you owe.

The penalties you avoid, though, are the real prize. Without a plan, late Self Assessment payment attracts:

5% of the unpaid tax at 30 days late
A further 5% at 6 months
A further 5% at 12 months

Those stack on top of interest, so £10,000 left untouched for a year would draw £1,500 in penalties alone.⁶ Agree a plan within 30 days of the payment deadline and keep to it, and no late payment penalties are charged at all.⁴ Proposals made after that first trigger but before six months can still see off the second and third charges.

What to Have Ready Before You Apply

HMRC will want a specific picture of your finances, not a vague sense that money is tight. Before you start, gather:

Your tax reference number — Unique Taxpayer Reference for Self Assessment, VAT registration number, or employer PAYE reference, depending on the debt
Bank details for the account that will fund the Direct Debit (you must be authorised to set one up on it)
A monthly income and spending breakdown, split between essentials such as housing, utilities, food, and insurance, and non-essentials
Balances of savings and the value of investments, property equity, and high-value possessions
Details of other debts you are paying, including loans and credit cards

If you have had independent debt advice, for example from Citizens Advice, HMRC will accept a Standard Financial Statement as evidence of your position.² Where you have savings or realisable assets, HMRC will expect you to use them to bring the debt down before instalment terms are offered. Sitting on £20,000 and asking to spread a £5,000 bill is not going to fly.

For business debts, have recent profit and loss statements and cash flow forecasts. HMRC may ask directors to put personal funds into the business, take on lending, or chase in customer credit before extended terms are agreed.² The starting position is that the business exhausts realistic options first.

Applying Online for Self Assessment

If your Self Assessment debt is £30,000 or less, you can set the plan up entirely online through GOV.UK.¹ The service takes you through screens confirming your income and spending, picks the monthly amount, and sets the Direct Debit. Decisions are typically instant: a confirmation appears on screen and the plan is live.

The online route is Self Assessment only. If you owe more than £30,000, need a longer plan than the tool allows, or the debt is VAT, PAYE, or Corporation Tax, you will need the phone.¹

Applying by Phone

For debts outside the online service, call HMRC’s payment enquiries line for the relevant tax:

Self Assessment: 0300 200 3820
VAT: 0300 200 3831
Employer’s PAYE: 0300 200 3819
Corporation Tax: 0300 200 3840

Lines are open Monday to Friday, 8am to 6pm, and closed on bank holidays.⁷ The officer will go through your income, outgoings, assets, and what you can afford each month. Be ready to explain why you cannot pay in full and what has changed. The call settles on a monthly amount, a start date, and the Direct Debit collection day.

Phone applications take longer to finalise. HMRC will normally send a letter confirming the total debt covered, the interest that will apply, and the repayment schedule. Keep it. If a dispute over what was agreed comes up later, that letter is your evidence.

After the Plan Is Approved

Making the monthly payments is not the only obligation. You also have to file every future tax return on time and pay any new tax liability in full by its due date. HMRC treats the plan as a concession, and if you miss an instalment or fail to file a future return, the arrangement can be cancelled. When that happens, the full remaining balance becomes due at once and enforcement can start.

HMRC’s preferred enforcement route is distraint: seizing and selling your goods to cover the debt and costs. Distraint does not require a court order, which makes it faster than other routes.⁸ County court proceedings and, for larger debts, bankruptcy petitions are also on the table. None of that is inevitable if you keep paying, but it is what default triggers.

If Your Circumstances Change

If your income drops or costs rise and the monthly payment becomes unaffordable, ring HMRC before you miss a payment. The agency can renegotiate the amount or extend the period. A proactive call keeps goodwill; a silent missed payment starts the default process.

It works the other way too. If money comes in and you can pay more, increasing the monthly amount or clearing a lump sum reduces the interest you will pay overall. HMRC does not charge early repayment fees.

If HMRC Says No

If HMRC decides your proposal is unrealistic, or believes you can pay in full, they will ask for the full amount immediately. There is no formal appeal against a refused Time to Pay request. You can call back with a revised proposal, particularly one with a larger upfront payment or a shorter period. Independent debt advice from Citizens Advice or StepChange can help you work out what to offer, or point you toward alternatives if the debt is genuinely unmanageable.

Breathing Space as a Separate Route

The Debt Respite Scheme, known as Breathing Space, is a distinct statutory protection that applies to HMRC debts. A standard breathing space freezes enforcement, creditor contact, and the accrual of interest, fees, and penalties on qualifying debts for up to 60 days.⁹ During that window HMRC cannot seize goods, start legal proceedings, apply for a liability order, or petition for bankruptcy.

Tax debts qualify, but you have to apply through a debt advice provider rather than directly, and you are still expected to keep paying ongoing tax liabilities during the moratorium if you can.⁹ Some debts, including court-imposed fines and student loans, are excluded. Breathing Space does not replace a Time to Pay arrangement, but it can buy time to put one together or to get proper advice before enforcement forces a rushed decision.

1
GOV.UK. HMRC Offers Time to Help Pay Your Tax Bill
2
GOV.UK. If You Cannot Pay Your Tax Bill on Time – Setting Up a Payment Plan
3
GOV.UK. If You Cannot Pay Your Tax Bill on Time – How Much You’ll Pay
4
GOV.UK. Self Assessment Manual – Time to Pay (TTP) and Late Payment Penalties
5
GOV.UK. Rates and Allowances – HMRC Interest Rates for Late and Early Payments
6
GOV.UK. Self Assessment Tax Returns – Penalties
7
GOV.UK. Payment Problems – Enquiries
8
GOV.UK. Introduction to Distraint – General
9
GOV.UK. Debt Respite Scheme (Breathing Space) Guidance for Creditors