HMRC Time to Pay Arrangement: Complete Guide to Setting Up a Payment Plan

An HMRC Time to Pay arrangement is an agreement that allows an overdue tax bill to be repaid through monthly instalments rather than in one immediate payment.

HMRC will check whether the arrangement is affordable. You may need to provide your tax reference, UK bank details and information about your income, spending, savings and assets.

Approval is not automatic, and late-payment interest normally continues until the debt is cleared.

Some taxpayers can set up an HMRC payment plan online. People who cannot use the online service may still be able to negotiate directly with HMRC.

Key Takeaways:

• An HMRC Time to Pay arrangement normally divides overdue tax into monthly payments.
• HMRC assesses each application individually.
• You must offer the best payment plan you can realistically afford.
• HMRC will consider your income, essential costs, savings, assets and future taxes.
• Late-payment interest continues during the arrangement.
• HMRC’s public guidance does not impose a fixed maximum term, but arrangements exceeding 12 months are treated as exceptional internally.
• You must normally continue filing returns and paying new tax liabilities on time.
• Contact HMRC immediately if you expect to miss a payment.

What Is an HMRC Time to Pay Arrangement?

An HMRC Time to Pay arrangement, also known as a Time to Pay agreement or HMRC payment plan, allows someone who cannot pay a tax liability by its deadline to repay it over an agreed period.

It is not a tax reduction, write-off or discount. The full liability remains payable, together with any applicable interest and penalties.

HMRC describes Time to Pay as a case-by-case arrangement for viable taxpayers who cannot pay on the normal due date but can repay the debt over an affordable period.

Most plans involve regular monthly payments, although HMRC may permit a short payment deferral in exceptional circumstances.

An HMRC Time to Pay arrangement may potentially cover liabilities such as:

• Self Assessment
• VAT
• Corporation Tax
• Employers’ PAYE
• Simple Assessment
• Other overdue HMRC debts

The available online or telephone process depends on the tax, the amount owed and the taxpayer’s circumstances.

How Widely is Time to Pay Used?

HMRC’s latest published performance data shows that 884,319 customers were in Time to Pay arrangements during the fourth quarter of the 2025–26 financial year.

This indicates that payment arrangements are a significant part of HMRC’s approach to managing tax debt rather than an unusual concession.

Approval nevertheless depends on the facts of each case.

HMRC Time to Pay Versus a Budget Payment Plan

A Time to Pay arrangement and a Budget Payment Plan are not the same.

An HMRC Time to Pay arrangement is generally used for tax that is due or overdue and cannot be paid in full.

A Budget Payment Plan allows eligible Self Assessment taxpayers who are up to date with their payments to make voluntary weekly or monthly contributions towards a future tax bill.

If the voluntary payments do not cover the final liability, the remaining amount must still be paid by the usual deadline.

Someone who already owes overdue tax should normally explore Time to Pay rather than relying on a Budget Payment Plan.

Who Can Get an HMRC Time to Pay Arrangement?

There is no automatic right to an HMRC payment plan. HMRC must be satisfied that the taxpayer:

• Cannot pay the liability in full by the due date
• Can afford the proposed instalments
• Can pay other taxes that become due during the arrangement
• Is offering the shortest realistic repayment period
• Has provided an accurate picture of their financial circumstances

HMRC may also consider previous compliance, outstanding returns, available assets and whether the individual or business has a realistic plan to avoid falling behind again.

A person who has the money but simply prefers to retain it is less likely to receive an arrangement than someone experiencing genuine financial difficulty.

Can Individuals and Sole Traders Apply?

Individuals, landlords and sole traders may be able to apply.

HMRC can ask about:

• Employment or pension income
• Self-employment income
• Household expenditure
• Business costs
• Savings and investments
• Other debts
• Expected future income
• Upcoming tax bills

The purpose is to establish what remains after reasonable essential spending.

Can Limited Companies Apply?

A limited company may also request an HMRC Time to Pay arrangement, but HMRC will usually examine whether the business remains viable.

The company may be asked to explain:

• Why the tax was not paid
• How the cash-flow problem arose
• Whether the difficulty is temporary
• What steps have been taken to raise funds
• How future PAYE, VAT or Corporation Tax will be paid
• What assets could be used to reduce the debt

HMRC’s public guidance says companies may be expected to release value from assets such as stock, vehicles or shares. Directors could also be asked whether they can invest personal funds, accept lending or extend credit to the company.

An arrangement is less likely to be accepted where the company cannot demonstrate that it can meet both the monthly instalments and its future tax obligations.

Can You Set Up an HMRC Time to Pay Arrangement Online?

HMRC provides an online service that checks eligibility and may allow the payment plan to be created without calling an adviser.

For Self Assessment, HMRC confirmed that customers with bills of up to £30,000 may be able to set up a plan online.

The relevant Self Assessment return must have been filed first. Someone owing more than £30,000 or needing a longer repayment period can still apply but must contact HMRC directly.

You may need to speak to HMRC when:

• The online service says you are not eligible
• The debt is above the online limit
• You need a longer repayment term
• Several taxes are outstanding
• You already have another payment plan
• The debt belongs to a company
• Your income or expenditure is complicated
• You cannot use HMRC’s online services

An online rejection does not necessarily mean that HMRC will refuse every arrangement. It may mean the application requires manual consideration.

What Should You Prepare Before Applying?

HMRC says applicants should prepare the relevant tax reference, authorised UK bank details and information about their income and spending.

The following checklist can help you prepare.

HMRC may expect available savings or assets to be used to reduce the debt. However, its internal guidance recognises that the existence of an asset does not always justify refusing Time to Pay;

HMRC should consider whether realising that asset is reasonable in the circumstances.

Prepare an Income-and-expenditure Statement

An accurate income-and-expenditure statement should show:

1. Dependable monthly income
2. Essential household or business expenditure
3. Existing contractual debt payments
4. Taxes that will become due
5. The amount genuinely available for HMRC

Do not exclude necessary costs merely to make the proposal appear stronger. An unaffordable offer is more likely to fail later.

HMRC will accept a Standard Financial Statement obtained through an independent debt-advice organisation as evidence of monthly income and spending.

How to Set Up an HMRC Time to Pay Arrangement?

Step 1: Confirm That the Bill is Correct

Before requesting an arrangement, check:

• The tax period
• The amount assessed
• Payments already made
• Credits or repayments
• Payments on account
• Penalties and interest
• The original payment deadline

A Time to Pay arrangement controls when a liability is paid. It does not resolve a dispute about whether the tax is legally due.

Step 2: Submit Outstanding Tax Returns

HMRC needs an accurate view of the total liability.

Its internal guidance says an overdue return may prevent an arrangement from being agreed because HMRC cannot know the taxpayer’s true position.

Future returns and payments must also normally remain up to date while the arrangement is active.

Self Assessment taxpayers must file the relevant return before using HMRC’s online Time to Pay service.

Step 3: Decide What You Can Pay Immediately

Paying part of the bill upfront can:

• Reduce the outstanding balance
• Reduce future interest
• Shorten the repayment period
• Demonstrate a willingness to resolve the debt

Do not use money required for essential living costs, employee wages or immediate business survival without considering the consequences.

Step 4: Calculate an Affordable Instalment

Start with monthly income and deduct reasonable essential expenditure. Then account for taxes that will fall due during the proposed arrangement.

HMRC’s public guidance says taxpayers will usually be asked to pay around half of the amount remaining after rent, food, utility bills and fixed outgoings. This is a general approach rather than a guaranteed formula.

For example:

• Monthly income: £3,200
• Essential expenditure: £2,400
• Amount remaining: £800
• Possible starting proposal: approximately £400 per month

HMRC could request more or less depending on savings, assets, other debts and future tax liabilities.

Step 5: Use HMRC’s Online Service

Use the official service to check whether you can create an HMRC Time to Pay arrangement online.

Review the proposed:

• Monthly payment
• First collection date
• Number of instalments
• Included liabilities
• Bank details
• Estimated completion date

Keep confirmation of the arrangement and any reference numbers provided.

Step 6: Contact HMRC When Online Setup is Unavailable

When speaking to HMRC, be prepared to explain:

• Why you cannot pay in full
• What caused the financial difficulty
• Whether the problem is temporary
• What you can pay immediately
• What you can pay each month
• How future taxes will be funded
• Whether your financial position is expected to improve

HMRC will normally ask what you earn, what you spend, whether you have savings or investments and whether other taxes need to be paid.

Step 7: Check the Final Agreement

Before relying on the plan, confirm:

• HMRC has accepted it
• The first payment date
• The instalment amount
• The expected final payment
• Which liabilities are included
• Whether interest will continue
• What happens if circumstances change
• How missed payments will be handled

Do not assume that a telephone discussion alone means the plan is active. Check that the terms and payment method have been confirmed.

How Long Can an HMRC Time to Pay Arrangement Last?

HMRC’s public guidance says there is no fixed time limit. The duration depends on the amount owed and what the taxpayer can afford each month. HMRC can make the plan longer or shorter when circumstances change.

However, HMRC’s internal guidance provides an important qualification: arrangements are usually expected to last only a few months, and arrangements exceeding 12 months are exceptional.

For business taxes, the internal expectation is generally a term shorter than 12 months unless exceptional circumstances justify more time.

These positions can be reconciled as follows:

• There is no universal statutory maximum applying to every taxpayer.
• HMRC nevertheless expects the debt to be cleared as quickly as realistically possible.
• Longer arrangements require greater scrutiny and may need managerial approval.

Someone asking for more than 12 months should prepare clear financial evidence showing why the longer period is necessary and sustainable.

Does HMRC Charge Interest on Time to Pay?

Yes. An HMRC Time to Pay arrangement does not normally freeze late-payment interest.

HMRC’s internal guidance says applicable interest is charged when tax is paid after its due date, regardless of whether Time to Pay has been agreed.

As of 18 July 2026, the published late-payment interest rate for the main taxes and duties is 7.75%, effective from 9 January 2026. The rate is linked to the Bank of England base rate and can change.

Paying more upfront or clearing the arrangement early can reduce the total interest.

Worked HMRC Time to Pay Example

Suppose a taxpayer owes £6,000 and can pay £1,000 immediately.

The remaining balance is:

£6,000 − £1,000 = £5,000

If HMRC agrees to spread the principal over ten months:

£5,000 ÷ 10 = £500 per month

Interest must then be added to the declining balance.

Using the current 7.75% annual late-payment rate as a simplified monthly calculation, and assuming the rate did not change, the approximate interest over the ten months would be £177.60.

The total paid after the initial £1,000 would therefore be approximately:

• Principal: £5,000
• Estimated interest: £177.60
• Instalments in total: approximately £5,177.60

This is an illustrative budgeting example. HMRC calculates interest using the actual outstanding balance, payment dates and rates applying at the time.

Does Time to Pay Stop Late-Payment Penalties?

It can reduce or prevent some penalties, but the result depends on:

• The tax involved
• The applicable penalty regime
• When the arrangement is proposed
• When HMRC accepts it
• Whether the taxpayer keeps to the agreement

For VAT, no late-payment penalty applies during the first 15 days after the due date. The first penalty can apply from day 16, while a higher first penalty and a second daily penalty can apply from day 31.

Requesting Time to Pay promptly may prevent or stop some VAT penalties. If the agreement is broken, HMRC may calculate the penalties as though the arrangement had never existed. Late-payment interest continues from the first overdue day.

For Self Assessment liabilities under the standard penalty system, HMRC’s internal guidance says an acceptable proposal made by the first 30-day penalty trigger may prevent late-payment penalties, provided the arrangement is agreed and maintained.

Different rules can apply under newer penalty regimes, so taxpayers should check the rules for the relevant tax year and liability.

What Happens After HMRC Accepts the Arrangement?

Once an HMRC Time to Pay arrangement begins, you should:

• Keep enough money in the nominated account
• Check that every Direct Debit is collected
• Retain payment records
• File future tax returns on time
• Pay new liabilities by their deadlines
• Contact HMRC when your circumstances change
• Pay more or clear the debt early when affordable

HMRC expects taxpayers to make the best payments they can realistically afford. If their ability to pay improves, they should increase the instalments or clear the remaining balance.

What Happens If You Miss an Instalment?

HMRC says it will normally contact you to establish why the payment was missed. Where possible, it may try to rearrange or renegotiate the plan.

Contact HMRC before the payment fails, where possible, and explain:

• Why you cannot make the payment
• Whether the difficulty is temporary
• What you can pay now
• Whether the existing payment remains affordable
• When your circumstances may improve

HMRC may cancel an arrangement if the taxpayer defaults, provides misleading information or fails to meet the conditions of the agreement.

A missed payment should never be ignored.

Can a New Tax Bill Be Added?

A future liability is not automatically included in an existing HMRC Time to Pay arrangement.

HMRC advises taxpayers who cannot pay another tax bill to contact it. The new liability may be added to the plan, but this must be discussed and agreed.

Allowing new debts to accumulate can also cause HMRC to question whether the current arrangement remains sustainable.

Can HMRC Refuse a Time to Pay Arrangement?

Yes. HMRC may refuse a proposal when:

• The taxpayer can afford to pay in full
• The proposed payment is lower than they can afford
• The arrangement would not clear the complete debt
• Returns remain outstanding
• Available savings or assets have not been considered
• New taxes are unlikely to be paid
• The business does not appear viable
• Previous payment arrangements have failed
• The information supplied is incomplete or inaccurate

HMRC’s decision-making guidance requires the taxpayer to demonstrate an inability to pay immediately, an ability to meet the proposed instalments and an ability to pay liabilities arising during the arrangement.

After a refusal, consider:

• Asking HMRC to explain its decision
• Checking whether any figures were misunderstood
• Providing a clearer income-and-expenditure statement
• Increasing the upfront payment
• Revising the proposed instalment
• Supplying a business cash-flow forecast
• Seeking help from an accountant or debt adviser

What Happens If You Ignore HMRC?

Ignoring an overdue tax bill can lead to increasingly serious recovery action.

Where no arrangement is agreed, HMRC may:

• Use a debt collection agency
• Recover money through wages or pension payments
• Take and sell assets
• Take money from bank or building society accounts in certain circumstances
• Begin court proceedings
• Pursue bankruptcy
• Seek to close a company

Additional recovery costs may be added to the debt. HMRC says it will provide notice before taking these actions and explain the taxpayer’s rights and options.

Contacting HMRC early generally provides more opportunity to agree an affordable solution.

Practical Checklist Before Applying

Before requesting an HMRC Time to Pay arrangement:

• Confirm the amount and payment deadline.
• Check that previous payments were allocated correctly.
• Submit outstanding returns.
• Gather your UTR and other tax references.
• Prepare authorised UK bank details.
• List monthly income and essential expenditure.
• Record savings, investments and assets.
• Calculate future tax liabilities.
• Decide how much you can pay immediately.
• Calculate a sustainable monthly instalment.
• Use the online eligibility checker.
• Contact HMRC directly when online setup is unavailable.
• Retain confirmation of the final agreement.

Conclusion

An HMRC Time to Pay arrangement can provide a manageable route for dealing with a tax bill that cannot be paid immediately. The strongest application is based on accurate figures, an affordable monthly offer and a credible plan for keeping future taxes up to date.

Prepare your financial information, submit outstanding returns and pay what you reasonably can upfront. Remember that interest normally continues and that repayment periods exceeding 12 months receive greater scrutiny.

Most importantly, contact HMRC early. Ignoring the liability can result in additional costs and enforcement action, while early engagement may provide more opportunity to agree a sustainable payment plan.

Important: This guide provides general UK tax information and is not personalised tax, legal, insolvency or financial advice. Check the latest official guidance or consult a suitably qualified adviser before acting.

Frequently Asked Questions

Can anyone get an HMRC Time to Pay arrangement?

No. HMRC assesses each application individually. You must usually show that you cannot pay in full but can afford instalments and meet future tax obligations.

Can I apply before the payment deadline?

You should contact HMRC as soon as you know you will have difficulty paying. The exact online or telephone process may depend on whether the liability is already due.

Can I set up a Self Assessment payment plan online?

Qualifying Self Assessment taxpayers with a filed return and a bill of up to £30,000 may be able to use the online service. Larger debts or requests for longer repayment periods require direct contact with HMRC.

How much will HMRC expect me to pay each month?

HMRC assesses what remains after reasonable essential expenses. Its public guidance says it will usually seek around half of the amount left over, although the final payment depends on the individual circumstances.

How long will HMRC give me to pay?

There is no fixed public maximum. However, HMRC’s internal guidance says arrangements over 12 months are exceptional and the repayment period should be as short as realistically possible.

Does interest stop during the arrangement?

No. Late-payment interest normally continues until the tax is paid in full.

Can my accountant negotiate with HMRC?

An authorised accountant or tax adviser can help prepare figures and communicate with HMRC. HMRC may still need to speak directly to the taxpayer about affordability, bank authority or agreement conditions.

Can I change the monthly instalment?

Potentially. HMRC says a payment plan may be made longer or shorter when circumstances change. Contact HMRC before changing or cancelling a Direct Debit.

Note

This article was prepared for a general UK audience and last reviewed on 18 July 2026. It explains HMRC Time to Pay arrangements using current official guidance available at the time of publication.

Tax rules, interest rates, online eligibility criteria and HMRC procedures can change. Readers should check the latest GOV.UK guidance or seek advice from a qualified tax, debt or insolvency professional before making financial decisions.

The article provides general information only and does not constitute personalised tax, legal, financial or insolvency advice. It was produced in line with the supplied editorial, verification and information-gain standards.

Source Links

HMRC: If you cannot pay your tax bill on time
https://www.gov.uk/difficulties-paying-hmrc

HMRC: Pay a tax bill in instalments
https://www.gov.uk/difficulties-paying-hmrc/pay-in-instalments

HMRC: How much you will pay under a payment plan
https://www.gov.uk/difficulties-paying-hmrc/how-much-you-pay

HMRC: Payment problems contact details
https://www.gov.uk/find-hmrc-contacts/payment-problems-enquiries

HMRC: Interest rates for late and early payments
https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates

HMRC: Time to Pay principles
https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm800040

HMRC: Time to Pay decision criteria
https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm803010