What is an HMRC Time to Pay arrangement and how do you set one up?

Full answer

If you cannot pay a tax bill in full by the due date, HMRC's Time to Pay service allows you to spread the debt over a series of affordable monthly instalments instead of paying it all at once, provided you engage with HMRC before or shortly after the deadline rather than simply not paying. **Setting up online for Self Assessment** For Self Assessment tax bills of £30,000 or less, most taxpayers can set up a Time to Pay arrangement entirely online, without needing to call HMRC, as long as: your latest tax return has been filed, you are within 60 days of the payment deadline, and you have no other outstanding debts or existing payment plans with HMRC. The online system calculates a proposed monthly instalment plan based on the amount owed and lets you choose a repayment period (commonly up to 12 months). **Larger debts or other taxes** If you owe more than £30,000, have other outstanding HMRC debts, or the tax is for VAT, PAYE, or Corporation Tax rather than Self Assessment, you generally need to contact HMRC directly (by phone) to negotiate a bespoke arrangement, which usually involves explaining your financial circumstances and proposing an affordable monthly amount. **Interest still applies** A Time to Pay arrangement does NOT stop interest accruing on the unpaid tax -- HMRC's late payment interest rate is reviewed regularly and was running at 7.75% a year as of early 2026. This means the total amount you pay over the life of the arrangement will be higher than the original bill. **But it stops late payment penalties** The key benefit of agreeing a Time to Pay arrangement (rather than simply missing the deadline) is that it prevents HMRC's late payment penalties from being charged, provided you keep up with the agreed instalments. Late payment penalties can otherwise be substantial -- for Self Assessment, penalties apply at 30 days, 6 months, and 12 months after the due date, in addition to interest. **Worked example** David owes £6,000 in Self Assessment tax, due 31 January, but can only afford £500/month. He sets up an online Time to Pay arrangement for 12 months before the payment penalty deadline. He avoids the late payment penalty entirely, but pays interest on the reducing balance throughout the 12 months, meaning his total repayment is slightly more than £6,000. **What happens if you miss an instalment** If you miss a scheduled Time to Pay payment, HMRC can cancel the arrangement and demand the full remaining balance immediately, potentially reinstating late payment penalties and pursuing debt collection action. It is important to contact HMRC proactively if your circumstances change and you are at risk of missing a payment, rather than simply letting it lapse. **Acting early matters** HMRC strongly encourages taxpayers to set up a Time to Pay arrangement before the payment deadline passes, or as soon as possible afterwards -- waiting until debt collection action has already started makes negotiating a manageable arrangement considerably harder.

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