A Time to Pay arrangement with HMRC lets you clear an overdue tax bill in monthly Direct Debit instalments instead of paying the whole amount at once. HMRC agrees these plans case by case when you can show you genuinely cannot pay in full and can realistically clear the balance within a reasonable period, usually 12 months. Interest keeps building on what you owe throughout the plan, so acting early costs less.
Which Tax Debts You Can Include
Most HMRC debts are eligible: Self Assessment income tax, VAT, Employer PAYE, Corporation Tax, and National Insurance contributions. The debt has to be due or overdue — you cannot set up a plan for a bill that has not yet fallen due.
The route in differs by tax type. Self Assessment has the most accessible online self-service option. VAT has its own online tool with tighter limits. PAYE and Corporation Tax generally need a phone call.
Whether You Qualify
Time to Pay is discretionary. HMRC decides whether to grant an arrangement based on your circumstances, not on any automatic right.{1}GOV.UK. Admin Law Manual – ADML3200 The core test: you must be genuinely unable to pay by the deadline, and you must be able to clear the debt within a reasonable period, typically 12 months, though longer terms are sometimes agreed in harder cases.
For Self Assessment, you can use the online self-service tool if all of these apply:
- The debt, including penalties and interest, is £30,000 or less.
- You are within 60 days of the payment deadline.
- You have no other debts or payment plans with HMRC.
- All your Self Assessment returns are filed.
VAT-registered businesses have a separate online option: debt of £20,000 or less, within 28 days of the payment deadline, and the plan must clear the balance within six months. Businesses using VAT cash accounting, annual accounting, or payments on account are excluded from the online route and must call.
Above these thresholds, or for tax types without an online option, you can still request an arrangement by phone. There is no fixed upper limit on what HMRC will agree to over the phone; larger and more complex debts just get closer scrutiny.
What to Have Ready Before You Apply
Whether you go online or call, gather these before you start:
- Your tax reference — the 10-digit Unique Taxpayer Reference for Self Assessment, or your VAT registration number for VAT. Both appear on HMRC letters.
- The exact debt figure, including any interest and penalties already applied.
- Monthly income and expenses. For individuals, household income against living costs. For businesses, turnover against operational expenses.
- Bank account details — sort code and account number — for the Direct Debit.
The number HMRC really cares about is your disposable income: what is left after essential costs. As a rule of thumb, HMRC expects roughly half of that surplus to go toward the tax debt each month. You can offer more if you want to clear the balance faster, but do not overcommit. A failed payment can collapse the whole arrangement.
Setting Up the Plan
Online
If you meet the eligibility conditions, the online route is the fastest option. Sign in to your HMRC online account, confirm the amount owed, choose a monthly payment that clears the debt within the allowed timeframe, and set up the Direct Debit.{2}GOV.UK. If You Cannot Pay Your Tax Bill on Time – Setting Up a Payment Plan You get immediate confirmation on submission. The process usually takes around 20 minutes if your details are in order.
By Phone
For debts above the online thresholds, for PAYE or Corporation Tax, or where you do not meet all the online criteria, call HMRC’s Self Assessment payment helpline on 0300 200 3820 (Monday to Friday, 8am to 6pm, closed bank holidays).{3}GOV.UK. Payment Problems – Enquiries An HMRC officer will go through your income and expenditure, discuss what you can realistically afford, and agree specific terms. A verbal agreement reached on the phone is binding and carries the same weight as an online one.
After either route, HMRC issues written confirmation. For arrangements lasting 14 days or longer, this is generated automatically.{4}GOV.UK. Debt Management and Banking Manual – Time to Pay: Issuing Confirmation Letters If nothing arrives within a couple of weeks, chase it. You want documentation in case any dispute later arises about what was agreed.
Interest and Penalties While the Plan Runs
A Time to Pay arrangement stops HMRC from taking enforcement action, but it does not stop interest. Late payment interest keeps accruing on the unpaid balance for the whole duration of the plan.{5}GOV.UK. Penalties for Late Payment and Interest Harmonisation From 6 April 2025, HMRC’s late payment interest rate rose to the Bank of England base rate plus 4 percentage points, a 1.5 percentage point increase on the previous formula. At a base rate of 4.5%, that works out at 8.5% a year, compounded daily. On larger debts it adds up quickly.
Entering an arrangement does generally shield you from the automatic late payment surcharges. Without a plan, Self Assessment debts trigger a 5% surcharge on the unpaid tax at 30 days overdue, another 5% at six months, and a further 5% at twelve months, a potential 15% penalty on top of the original bill.{6}GOV.UK. Self Assessment Tax Returns – Penalties PAYE debts have a similar penalty structure for certain liabilities such as Class 1A and Class 1B National Insurance contributions.{7}HM Revenue & Customs. Late Payment Penalties for PAYE and National Insurance Getting an arrangement in place before the 30-day mark is where the real saving is: avoiding even the first 5% surcharge easily outweighs the interest cost of spreading payments over several months.
Keeping the Arrangement on Track
Once the plan is running, every Direct Debit has to clear on time. The obligation goes further than that, though. You also need to stay current with all new tax responsibilities: file every future return by its deadline and pay new bills as they fall due. A missed return or an unpaid new liability counts as a breach of the arrangement even if your instalments are landing perfectly.
If your finances change, either direction, contact HMRC rather than waiting for a payment to bounce. You can ask to extend the plan over a longer period, or shorten it if your income improves.{8}GOV.UK. If You Cannot Pay Your Tax Bill on Time – How Much You’ll Pay If a new tax bill lands that you cannot cover, it may be possible to fold it into your existing arrangement. Proactive communication is the single biggest factor in keeping HMRC cooperative. Taxpayers who go silent are dealt with far more harshly than those who pick up the phone.
If you do miss a payment, HMRC will contact you to find out why and will try to rearrange the plan where possible.{8}GOV.UK. If You Cannot Pay Your Tax Bill on Time – How Much You’ll Pay A single hiccup with an honest explanation usually will not end the arrangement. Repeated failures or radio silence are what trigger cancellation.
If the Arrangement Is Cancelled
When HMRC cancels a Time to Pay arrangement, the full remaining balance becomes due immediately and the penalty clock starts running again. The surcharges that were suspended can apply, and HMRC gains access to its full range of enforcement powers.
Escalation typically follows a sequence. HMRC may first pass the debt to a private debt collection agency. If that does not resolve matters, HMRC takes the case back and can use its own tools:{9}GOV.UK. What Will Happen If You Do Not Pay Your Tax Bill
- Taking control of goods. In England and Wales, HMRC issues a formal enforcement notice (which itself costs you £75) and can then send enforcement agents to seize and sell your possessions. Northern Ireland has a similar process called distraint.
- County court proceedings, including charging orders against your property, attachment of earnings orders that redirect part of your wages, and third party debt orders that freeze money held in your bank accounts.
- In Scotland, a summary warrant obtained through the sheriff court, with enforcement carried out by sheriff officers, potentially leading to insolvency proceedings.
If the plan is cancelled and you genuinely cannot pay, contact HMRC straight away. Renegotiation is sometimes still possible. The worst outcome comes from doing nothing.
If HMRC Refuses Your Request
HMRC can decline, particularly if you have a history of broken arrangements, if the debt looks unrecoverable, or if your financial disclosure suggests you could actually afford to pay in full. A refusal means HMRC will ask you to pay the full amount owed.{10}GOV.UK. If You Cannot Pay Your Tax Bill on Time – Overview
Your options narrow but do not disappear. You can offer revised terms — a larger monthly payment, a shorter repayment period, or a partial lump sum followed by instalments — that might change HMRC’s assessment. Free tax debt charities such as TaxAid and Business Debtline can help you put together a stronger case. If you believe HMRC has acted unreasonably, you can complain through HMRC’s complaints process or escalate to the Adjudicator’s Office, though neither route suspends the debt while the complaint is open.
Getting Ahead of Next Year’s Bill
If you have been through a Time to Pay arrangement once, there is a simple way to avoid the same position next year. HMRC’s Budget Payment Plan lets you make regular weekly or monthly Direct Debit payments toward your next Self Assessment bill throughout the year.{11}GOV.UK. Pay Your Self Assessment Tax Bill – Pay Weekly or Monthly The money builds up and is applied against your liability when it falls due, reducing or removing the lump sum you would otherwise have to find at the deadline.
To set one up, you need to be fully up to date on your last Self Assessment bill. It is essentially the reverse of a Time to Pay arrangement: instead of catching up on old debt, you are building credit against a future one. For anyone whose income fluctuates through the year, spreading the tax cost into smaller regular amounts is a much cheaper alternative to scrambling for a payment plan after the deadline has passed.