HMRC Time to Pay 2026/27: How to Set Up a Payment Plan for Tax Debt

If you owe a tax bill you can't afford to pay in full, HMRC offers a "Time to Pay" (TTP) arrangement that allows you to spread payments over a series of installments. This can be a lifeline, especially if you've had unexpected income, a business downturn, or simply miscalculated your tax liability. However, TTP comes with interest charges and strict conditions. This guide explains how to apply, what rates you'll pay, and what happens if you miss a payment.

What is Time to Pay?

Time to Pay is an HMRC arrangement that lets you pay a tax debt over several months or years, rather than in one lump sum. You request an arrangement (usually after receiving a demand), and HMRC agrees to accept installments instead of demanding full payment immediately.

HMRC will grant TTP arrangements in most cases where:

1. You're unable to pay the full amount immediately.
2. You have no other means to raise the funds (savings, loans, etc.).
3. You're cooperating with HMRC (paying on time, filing returns on time, etc.).

TTP is a discretionary arrangement -- HMRC can refuse if it believes you're deliberately evading tax or have a poor compliance history. But for most taxpayers with genuine difficulties, TTP is available.

Types of Tax Debts That Qualify for TTP

You can request TTP for most types of tax debt:

• Self-Assessment tax bills (from your annual return)
• VAT liabilities (from quarterly returns or assessments)
• Employer PAYE taxes (if you're a director with a company tax bill)
• Corporation Tax (if you run a limited company)
• National Insurance arrears (Class 2, Class 3, or Class 4 for self-employed)

You cannot use TTP for tax fines or penalties (though in some cases, HMRC may remit penalties if you show genuine hardship).

How to Request Time to Pay

HMRC offers two routes to request TTP:

1. Online Self-Service (for debts up to GBP 30,000)

If your debt is under GBP 30,000, you can set up a TTP arrangement online without contacting HMRC:

1. Go to your Personal Tax Account (gov.uk) or Business Tax Account (for business taxes).
2. Look for "Manage your payment" or "Payment arrangement" option.
3. Enter your details and the debt reference.
4. Select the payment frequency (weekly, fortnightly, monthly).
5. Review and confirm the arrangement.

The online system will calculate the minimum installment amount based on how long you want to spread the debt. For example, if you owe GBP 3,000 and want to pay over 12 months, you'd pay approximately GBP 250/month plus interest.

Advantage: Quick (within minutes) and confidential. Disadvantage: Limited to debts under GBP 30,000.

2. Phone or Post (for debts over GBP 30,000)

For larger debts, or if you prefer to negotiate terms directly with HMRC, call:

• Self-Assessment debts: 0300 200 3300 (HMRC Self-Assessment helpline)
• Business taxes (VAT, CT): 0300 322 7500 (HMRC Business Tax helpline)

You'll need to provide:

• Your UTR (Unique Taxpayer Reference) or tax reference
• The debt amount and period (tax year or quarter)
• Details of your financial situation (income, outgoings, why you can't pay)
• How much you can afford to pay per month

HMRC will negotiate a payment schedule. For larger debts, you may need to provide evidence of your circumstances (payslips, business accounts, etc.) or speak with a debt advisor.

Advantage: Flexibility for negotiating longer-term arrangements or lump-sum interim payments. Disadvantage: Slower (may take days/weeks to arrange) and requires sharing financial details.

Interest and Charges on Time to Pay

While you're paying off a TTP arrangement, HMRC charges interest on the unpaid balance. This is crucial to understand -- the longer you take to pay, the more interest accrues.

Interest Rate

The interest rate is the Bank of England Base Rate plus 2.5%. As of June 2026, the Bank Rate is approximately 4.75%, so the interest rate is approximately 7.25%.

However, the Bank Rate changes regularly (set by the BoE every 6 weeks), so your interest rate may fluctuate during your TTP arrangement.

How Interest Works

Interest accrues daily on the unpaid balance. For example:

• You owe GBP 5,000 Self-Assessment tax due 31 January 2027.
• You set up a TTP arrangement on 1 February 2027 to pay GBP 500/month for 10 months.
• Interest at 7.25%/year accrues on the outstanding balance.

Month 1: GBP 5,000 outstanding. Interest: GBP 5,000 × 7.25% ÷ 12 = approximately GBP 30. You pay GBP 500, so the balance becomes GBP 4,530.

Month 2: GBP 4,530 outstanding. Interest: GBP 4,530 × 7.25% ÷ 12 = approximately GBP 27. You pay GBP 500, balance becomes GBP 4,057.

By the end of 10 months, you'll have paid GBP 5,000 plus approximately GBP 200+ in interest. The exact amount depends on the daily accrual.

Late Payment Penalty (5% + 5% + 5%)

If you miss the initial payment deadline (31 January for a Self-Assessment tax bill), HMRC charges a late payment penalty in addition to interest. The penalty structure is:

• 5% if payment is 30 days late
• Additional 5% if payment is 6 months late
• Additional 5% if payment is 12 months late (total 15%)

These penalties are charged on the unpaid tax, not on interest. However, if you have a TTP arrangement in place and stick to it, you avoid these additional penalties.

Example: GBP 5,000 tax due 31 January. If you miss the deadline but set up TTP by mid-February, you're safe -- no 5% penalty yet. If you ignore HMRC and don't arrange TTP until August, you'd face:

• 5% penalty (30 days late): GBP 250
• 5% penalty (6 months late): GBP 250
• Total penalties: GBP 500, plus your original GBP 5,000 debt, plus interest.

Setting Up a TTP Arrangement: Step-by-Step

Here's a realistic timeline:

1. Tax deadline passes (e.g., 31 January for SA): You owe GBP 4,000.
2. Day 1-10: HMRC sends first demand (usually automatically).
3. Day 11-20: You contact HMRC to request TTP.
4. Day 21-30: HMRC confirms TTP arrangement (online is instant; phone may take a few days).
5. Day 31 onwards: You make monthly installments according to the agreed schedule.

If you request TTP within 30 days of the deadline, you typically avoid the 5% late payment penalty. The interest still applies to the unpaid balance, but the penalty is waived.

What Happens If You Miss a TTP Payment

This is critical: if you miss an installment, your TTP arrangement can be cancelled, and HMRC can demand the full remaining balance immediately.

What HMRC does:

1. If you miss a payment, HMRC usually allows 7-10 days grace before taking action.
2. They'll send a notice explaining you've broken the arrangement.
3. If you don't pay within the grace period, they may:
   • Cancel the TTP arrangement
   • Issue a demand for the full outstanding balance
   • Refer you to enforcement (bailiffs, attachment of earnings, bank account freeze)

How to avoid this:

• Set up a Standing Order (SO) for your TTP payment -- this ensures payments are made automatically.
• Notify HMRC immediately if you can't make a payment -- they may grant a one-time extension.
• Contact HMRC proactively if your circumstances change (income drops, unexpected expense).

If you're consistently unable to meet your TTP payments, HMRC may suggest a longer-term arrangement or a hardship review.

Hardship Review

If you're struggling with your TTP arrangement (because your income has dropped, you've had an unexpected expense, etc.), you can request a hardship review. This allows HMRC to assess your circumstances and potentially:

• Extend the payment period
• Reduce the monthly installment amount
• Temporarily suspend payments (rare, but possible in genuine hardship)

To request a hardship review, contact HMRC and explain your situation. You may be asked to provide evidence (payslips, benefits statements, household budget, etc.).

Early Repayment

If you come into money (inheritance, bonus, etc.), you can pay off your TTP arrangement early without penalty. In fact, HMRC encourages early payment because it stops interest accruing.

The interest saved is genuine. If you owe GBP 2,000 and have an 18-month TTP arrangement, paying it off after 6 months would save you approximately GBP 75+ in interest.

TTP and Your Credit File

A Time to Pay arrangement does not directly appear on your credit file as a missed payment. However, if you default on the arrangement and HMRC takes enforcement action (county court judgment, attachment of earnings), this would affect your credit rating.

The key is to avoid defaulting. As long as you stick to your TTP arrangement, your credit file remains unaffected.

TTP and Self-Assessment Returns

While on a TTP arrangement, you must continue to file your Self-Assessment returns on time. If you fall behind on filing, HMRC may view you as uncooperative and cancel the arrangement.

For example, if you set up TTP in February 2027 for a 2025/26 tax debt, you must still file your 2026/27 return by 31 January 2028. Failure to do so puts the TTP at risk.

Alternatives to Time to Pay

Before requesting TTP, consider:

1. Using savings: If you have emergency savings, HMRC prefers this over a TTP arrangement.
2. Requesting a loan: A personal loan at 5-10% interest might be cheaper than HMRC interest (currently 7.25%).
3. Tax credit against future income: Some individuals can request HMRC to hold tax owed against future PAYE refunds or overpayments (though this is not a formal mechanism).
4. Debt advice: Citizens Advice or StepChange can help negotiate with HMRC or suggest other options.

Realistic Timeline for a TTP Arrangement

• GBP 500 debt: Minimum 2-3 months (HMRC usually requires at least GBP 100+/month if you're in work).
• GBP 3,000 debt: 6-12 months typical.
• GBP 10,000+ debt: 24-36 months possible, though longer arrangements accrue significant interest.

Key Takeaways

• TTP is available for most tax debts and is HMRC's preferred solution for taxpayers unable to pay immediately.
• Online self-service is available for debts under GBP 30,000 -- set it up in minutes via your tax account.
• Interest is Bank Rate + 2.5% (approximately 7.25%) and accrues daily on the unpaid balance.
• Late payment penalties (5% + 5% + 5%) apply if you miss the initial deadline -- but TTP stops these penalties from accruing further.
• Missing a TTP payment can lead to enforcement action -- set up a Standing Order and contact HMRC if you're struggling.
• Early repayment saves interest and is always encouraged.
• You must continue to file returns and comply with tax obligations while on TTP, or the arrangement may be cancelled.

If you're facing a tax bill you can't pay, don't panic. Request a Time to Pay arrangement early -- within 30 days of the deadline if possible -- to minimize penalties and interest charges.

For more on managing your tax position, explore our

or to understand your future liability and plan ahead.