HMRC Time to Pay — How to Set Up a Payment Plan for Tax You Owe
How to arrange an HMRC Time to Pay arrangement if you can't pay your tax bill. Self Assessment, PAYE, VAT, and Corporation Tax payment plan options explained.
·5 min read
If you owe tax to HMRC and cannot pay the full amount by the deadline, a Time to Pay (TTP) arrangement lets you spread the bill over monthly instalments. Here is how it works for every type of tax.
What Is a Time to Pay Arrangement?
Detail
Information
What it is
An agreement with HMRC to pay your tax bill in monthly instalments
Typical duration
Up to 12 months (sometimes longer in exceptional cases)
Interest?
Yes — charged from the original due date
Penalties?
May still apply, but HMRC won’t take enforcement action while TTP is in place
Who can use it
Anyone who owes tax and can’t pay in full by the due date
Cost to apply
Free
Self Assessment — Payment Plan
Online Self-Service (Quick Route)
You can set up a payment plan online without calling HMRC if:
Condition
Requirement
Tax type
Self Assessment only
Amount owed
Up to £30,000
Time overdue
Less than 60 days past the payment deadline
Tax returns
All returns filed and up to date
No existing TTP
You don’t already have an ongoing payment plan
Step
Action
1
Go to gov.uk/difficulties-paying-hmrc
2
Select Self Assessment
3
Sign in with Government Gateway
4
Choose your instalment plan (monthly amounts and duration)
5
Set up a direct debit
6
Plan takes effect immediately
By Phone (For Larger Debts)
Condition
Detail
Amount owed
Over £30,000 or more than 60 days overdue
Phone number
0300 200 3835 (Payment Support Service)
Opening hours
Monday to Friday 8am–6pm
What to have ready
Your tax reference, details of what you owe, your income and expenses, and a proposal for monthly payments
How Much Will You Pay?
Interest
Detail
Rate
Late payment interest rate
Bank of England base rate + 2.5%
Current rate (March 2026)
Approximately 7.0%
Charged from
The original due date (not the date you set up the plan)
On what
The outstanding balance — reduces as you make payments
Worked Example — £5,000 Self Assessment Debt
Detail
Amount
Tax owed
£5,000
Payment plan
12 monthly instalments
Monthly payment
~£417 + interest
Interest over 12 months
~£200 (approximate)
Total paid
~£5,200
Penalties
Penalty
When it applies
Late payment penalty (30 days)
5% of tax unpaid 30 days after deadline
Late payment penalty (6 months)
Additional 5% if still unpaid at 6 months
Late payment penalty (12 months)
Additional 5% if still unpaid at 12 months
Total potential penalties
Up to 15% of the tax owed
Setting up a Time to Pay arrangement before the deadline may help you avoid some penalties. If you know you can’t pay, act early.
Other Tax Types
PAYE (Employer)
Detail
Information
Who
Employers who can’t pay PAYE/NI on time
Route
Call 0300 200 3835
Duration
Typically up to 12 months
Consequences of not paying
HMRC can issue penalties, charge interest, and ultimately wind up the company
VAT
Detail
Information
Who
VAT-registered businesses that can’t pay their VAT bill
Route
Call 0300 200 3835
Duration
Negotiated — depends on amount and circumstances
Important
Continue filing VAT returns on time even if you can’t pay
Corporation Tax
Detail
Information
Who
Limited companies that can’t pay their Corporation Tax
When you call to arrange a Time to Pay plan, HMRC will want to understand your financial situation:
They will ask about
Why
Your total income (all sources)
To assess what you can afford
Your essential expenses (rent/mortgage, food, utilities, travel)
To calculate disposable income
Your assets (savings, property, investments)
To check whether you could pay from other sources
Your other debts
To understand your overall financial position
Why you can’t pay
To assess genuine hardship vs. unwillingness
Your proposed monthly payment
HMRC wants to know you’ve thought about it
Tip: Prepare a simple income and expenditure statement before calling. Know your numbers. The more prepared you are, the smoother the call.
What Happens If You Don’t Pay (And Don’t Arrange TTP)
Stage
Action HMRC takes
Missed deadline
Interest starts accruing immediately
30 days late
First late payment penalty (5%)
Letters and reminders
HMRC sends increasingly firm correspondence
6 months late
Second penalty (additional 5%)
Debt collection
HMRC uses private debt collectors or its own teams
County Court Judgment
HMRC can apply for a CCJ — damages your credit file
Direct Recovery of Debts
HMRC can take money directly from your bank account (for debts over £1,000 if you have £5,000+ in your account)
Distraint
HMRC can seize and sell your possessions
Bankruptcy/winding up
For serious debts, HMRC can petition to make you bankrupt or wind up your company
The message is clear: Always contact HMRC before the deadline if you can’t pay. They are far more willing to work with people who engage early.
Tips for a Successful Arrangement
Tip
Detail
Contact HMRC early
Before the payment deadline if possible
File your tax return on time
Even if you can’t pay — this avoids late filing penalties
Propose realistic payments
Don’t promise more than you can afford — broken plans lead to enforcement
Set up a direct debit
HMRC prefers this — and it prevents missed instalments
Keep making payments
If your circumstances change, call HMRC to renegotiate — don’t just stop paying
Consider borrowing?
A 0% credit card or personal loan may be cheaper than HMRC interest + penalties
Get help
If your debt is serious, contact TaxAid (free tax advice for low-income people) or your accountant
Self Assessment Key Dates 2026/27
Date
Deadline
5 October 2026
Register for Self Assessment if newly self-employed
31 October 2026
Paper tax return deadline
31 January 2027
Online tax return deadline AND first payment on account
31 January 2027
Balance of 2025/26 tax due
31 July 2027
Second payment on account
If you know you’ll owe tax: Consider saving monthly into a separate account so the bill is not a shock. Put aside 25%–30% of your self-employed income for tax.