Can't Pay Your Tax Bill? HMRC Time to Pay Explained

If you can't pay your Self Assessment bill in full, you can usually spread it over monthly instalments using an HMRC Time to Pay arrangement. Debts of £30,000 or less can normally be set up yourself online in a few minutes, provided your tax return is already filed and you apply within 60 days of the payment deadline. Interest still runs on what you owe, but agreeing a plan before the penalty date protects you from the 5% late payment penalty.

• Online self-serve covers Self Assessment debts of £30,000 or less, paid off within 12 months.
• You must have filed the return first — HMRC can't set up a plan for a bill it hasn't calculated.
• Interest keeps accruing at the HMRC late payment rate (Bank of England base rate plus 4 percentage points) on the falling balance.
• Set the plan up before the 30-day penalty date and the first 5% late payment penalty is not charged, as long as you keep to it.
• Owe more than £30,000, or need longer than a year? You can still agree a plan, but you have to phone HMRC and discuss your income and outgoings.

What HMRC Time to Pay actually is

Time to Pay is not a loan and it is not a penalty waiver. It is a formal agreement that HMRC will not chase or enforce the debt while you pay it off in agreed instalments, normally by monthly direct debit. The tax remains due; you are simply paying it later, with interest.

It exists because HMRC would rather collect in instalments than pass a debt to enforcement. There is no means test for a small online plan and no credit check. What HMRC wants is realism: instalments you can actually afford, starting now.

Time to Pay is available for most taxes — Self Assessment, VAT, PAYE, Corporation Tax — but the online routes and limits differ. This guide focuses on Self Assessment, which is where the January crunch bites.

Setting one up online

For Self Assessment, HMRC's online payment plan service is the fastest route. You can use it if all of the following apply:

• You have filed the tax return the debt relates to.
• You owe £30,000 or less in total.
• You are within 60 days of the payment deadline.
• You have no other tax debts and no other HMRC payment plans running.

You will need your Government Gateway user ID and password, your UK bank details for a direct debit, and a rough idea of what you can pay each month. Start at GOV.UK: pay your Self Assessment in instalments.

The steps

1. File the return. If it's still outstanding, file it first — even a late return stops further filing penalties stacking up. See our guide to Self Assessment late filing penalties.
2. Check the amount due in your HMRC account, including any payment on account.
3. Sign in and choose to pay in instalments. The service offers a plan length and monthly figure; you can adjust it within the limits it allows.
4. Pay an upfront amount if you can. A first payment reduces the balance interest is charged on.
5. Set up the direct debit and keep the confirmation. The plan is live from that point.

If the service won't let you proceed — because of the amount, the timing or an existing debt — phone the Self Assessment payment helpline on 0300 200 3822 instead. Don't simply do nothing; silence is what triggers enforcement.

The £30,000 limit — and what happens above it

£30,000 is the ceiling for the self-serve online route, not the ceiling for Time to Pay itself. HMRC agrees larger arrangements every day, but above the limit the conversation becomes a negotiation rather than a form.

On the phone, expect questions about your income, essential outgoings, savings, and any assets you could realise. HMRC's starting position is that the debt should be cleared as quickly as you can reasonably manage — often within 12 months, sometimes longer where the case justifies it. Larger or longer plans are more likely to be reviewed periodically.

Some practical points worth knowing:

• A plan can cover the balancing payment and payments on account, but HMRC will expect future liabilities to be paid on time.
• If your profits have fallen, you may be able to reduce your payments on account — that shrinks the debt rather than spreading it. Reducing them too far means interest on the shortfall.
• Business debts (VAT, employers' PAYE) have their own online routes and thresholds, and their own helpline: the Business Payment Support Service on 0300 200 3835.

Interest: what a payment plan really costs

Interest is the price of paying late, and a Time to Pay arrangement does not switch it off. HMRC charges late payment interest from the day after the due date until the debt is cleared, calculated on the outstanding balance, so it falls as you pay. The rate is the Bank of England base rate plus 4 percentage points.

Worked example

Rosa owes £6,000 for 2025/26, due on 31 January 2027. She has £1,000 available now and agrees a plan: £1,000 upfront, then £500 a month for 10 months.

The arithmetic is the whole argument for acting early: the penalties, not the interest, are what make an unpaid bill expensive. Put your own figures through the late payment interest calculator and the Self Assessment penalty calculator to see the gap for your bill.

Interest rates and penalties are set UK-wide, so a Scottish taxpayer faces exactly the same Time to Pay rules. Only the underlying tax differs, because Scottish rates and bands apply to non-savings income.

Missing a payment

A Time to Pay arrangement is conditional. Miss an instalment, or let the direct debit bounce, and HMRC can cancel the plan and demand the whole remaining balance immediately — along with any penalties that were held off because you had a plan in place.

If you know a payment will fail, contact HMRC before the date. Plans can sometimes be re-profiled if your circumstances have genuinely changed. What damages your position is a missed payment with no explanation, because HMRC then treats you as a taxpayer who does not engage. From there the route runs to debt collection agencies, direct recovery from your bank account, deduction from wages or pension through your tax code, and ultimately enforcement action.

Filing obligations are separate. A payment plan does nothing about late filing penalties, and a new return still has to be filed on time. If you also missed the filing deadline, read how the late filing penalties build up — the £100 fixed penalty is only the start.

Ask before the deadline

Timing changes the outcome more than anything else you can control. Three dates matter for a 2025/26 Self Assessment bill:

You can ask about Time to Pay before the deadline, as soon as the return is filed and the amount is known. Filing your return in, say, November tells you the January number months in advance and leaves room either to save for it or to line up a plan.

One more option for the organised: HMRC's Budget Payment Plan lets people who are up to date pay weekly or monthly by direct debit towards a future bill. It isn't Time to Pay — there is no debt and no interest — but it removes the January shock entirely.

If you are newly within Making Tax Digital for Income Tax from April 2026 (gross self-employment or property income over £50,000), check which late payment penalty regime applies to you, because the reformed rules charge penalties on a different, faster timetable.

What to do next

Work out the real cost of your options before you decide. Use the late payment interest calculator to see what interest will accrue on your balance, then the Self Assessment penalty calculator to see the penalties you avoid by agreeing a plan in time. If a return is still outstanding, file it first — the guide to Self Assessment late filing penalties explains why every week of delay costs money.