Pillar Guide · Updated June 2026
UK Time to Pay Arrangement 2026/27: How to Set Up an HMRC Instalment Plan
If you cannot pay a tax bill in full, an HMRC Time to Pay arrangement lets you clear it in monthly instalments based on what you can afford. For Self Assessment, many people can set one up online once the return is filed, provided the debt is within the self-serve limit. Interest still runs on the balance, but a plan set up promptly can stop late payment penalties building up. This guide explains eligibility, how to set one up online or by phone, how interest applies, what happens if you miss a payment, and how it fits alongside a penalty appeal.
Key Time to Pay facts -- 2026/27
- What it is: monthly instalment plan for tax you cannot pay in full
- Self Assessment self-serve: set up online once the return is filed
- Typical self-serve length: up to 12 monthly instalments
- Interest: accrues daily on the outstanding balance
- Penalties: a prompt plan can prevent late payment penalties
- Larger or complex debts: arranged by phoning HMRC
- Missed payment: the plan can be cancelled and the balance falls due
What Time to Pay Is
A Time to Pay arrangement is an agreement with HMRC to settle a tax debt in monthly instalments rather than one lump sum. It is most often used for Self Assessment but can cover other taxes such as VAT or PAYE in some cases.
The plan is built around what you can realistically afford after essential living costs. Interest is added to the outstanding balance for the period it remains unpaid, but the arrangement spreads the capital and, when set up early, helps avoid late payment penalties.
The principle is simple: pay as much as you can, as quickly as you can. HMRC is generally willing to agree a plan with people who engage early and are realistic about their finances.
Who Qualifies
For Self Assessment self-serve online, you typically need to meet conditions such as:
- Your latest return has been filed.
- The debt is within HMRC's published self-serve limit.
- You are within a set period of the payment deadline.
- You have no other HMRC payment plans or outstanding debts.
- You can clear the balance within the maximum instalment period.
If your debt is above the self-serve limit or your situation is more complex, you arrange the plan by calling HMRC, which assesses affordability in more detail.
Setting Up Online
The online route is the quickest for eligible Self Assessment debts. Log in to your Government Gateway account, choose the Time to Pay option, confirm the amount owed, and set up a monthly Direct Debit. You select a monthly instalment that clears the balance within the allowed period.
You mainly need your filed return, the amount due and bank or debit card details. The plan is confirmed straight away, with the first instalment collected by Direct Debit on the agreed date.
Arranging by Phone
For larger or more complex debts, you call HMRC's payment support line. HMRC may ask about your income, regular outgoings, savings, assets and other debts to work out what you can afford.
Be honest and realistic - agreeing instalments you cannot sustain risks the plan breaking down later. Having a simple monthly budget ready makes the call faster and your proposal more credible.
How Interest Applies
Late payment interest accrues on the outstanding tax for the whole period it is unpaid, including while you pay it off under Time to Pay. Interest is calculated daily on the reducing balance.
Because interest follows the balance, larger instalments or clearing the debt early cut the total interest. The arrangement does not freeze interest - its value is in spreading the capital and helping you sidestep penalties.
Effect on Penalties
Self Assessment late payment penalties are charged at 30 days, 6 months and 12 months after the due date, each broadly 5% of the unpaid tax. If you agree a Time to Pay plan before the relevant trigger and keep to it, HMRC will not normally charge the penalty the arrangement covers.
The key is timing. Acting before, or soon after, the deadline protects you from upcoming penalties. Leaving it until a penalty has already triggered means that penalty may stand, even though future ones are avoided.
Missed Payments
A Time to Pay plan is conditional on keeping up the instalments and staying current with future tax. Missing a payment, or failing to file or pay later tax, can cause HMRC to cancel the arrangement - making the full balance due immediately and potentially reinstating penalties.
If your circumstances change, contact HMRC before the instalment is due. It may revise the plan rather than cancel it. Engaging early is far better than letting a payment simply fail.
Worked Examples
Example 1 - online self-serve. Sofia filed her 2024/25 return showing GBP 3,600 due on 31 January but could not pay in full. She set up a self-serve Time to Pay plan over 6 months.
- Tax due: GBP 3,600
- Plan: 6 monthly instalments of GBP 600 by Direct Debit
- Interest: accrues daily on the reducing balance until cleared
- Set up before the 30-day penalty trigger
- Outcome: the 5% (GBP 180) 30-day late payment penalty is avoided
By acting promptly, Sofia paid only the interest on top of the GBP 3,600, with no late payment penalty.
Example 2 - larger debt by phone. Marcus owed GBP 12,000 and called HMRC. After reviewing his budget, HMRC agreed a 10-month plan.
- Tax due: GBP 12,000
- Plan: 10 monthly instalments of GBP 1,200
- Interest: daily on the falling balance over the 10 months
- Condition: keep up instalments and file/pay future tax on time
- Outcome: penalties protected while the plan is maintained
Marcus keeps a small buffer in his budget so a single tight month does not cause a missed instalment and put the arrangement at risk.