How to pay a debt to HMRC with a Time to Pay arrangement

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Debt can be owed to HMRC for a variety of reasons, the best payment solution is different for each individual and business.

HMRC takes its responsibility seriously to make sure that individuals and businesses who can pay, do so on time. We provide extra, bespoke support to those facing financial hardship or who have personal difficulties.

If you鈥檙e finding it difficult to make a tax payment you should ask us about affordable monthly payment options, called a Time to Pay arrangement. We鈥檒l always try to work with you to negotiate time to pay what you owe based on your income and expenditure.

Time to Pay arrangements are based on the specific financial circumstances of whoever owes a debt, so there is no 鈥榮tandard鈥� Time to Pay arrangement. We look at what you can afford to pay and then use that to work out how much time you need to pay.

A Time to Pay arrangement can cover all outstanding amounts overdue, including penalties and interest.

Check HMRC interest rates for late and early payments.

The arrangement is designed to be flexible and is not a fixed, formal contract.

It can be amended over time, so it can be shortened if your earnings rise or if you receive a cash windfall (for example, an inheritance).

It can also be lengthened if your essential expenses increase, or your income reduces.

Over 90% of our Time to Pay arrangements are completed successfully.

Setting up a payment plan without contacting HMRC

For Self Assessment, PAYE and VAT bills, you may be able to set up a payment plan online. This will let you pay your tax bill in instalments without contacting HMRC.

If you owe tax from Self Assessment

You can set up a payment plan to spread the cost of your latest Self Assessment bill online without calling us if:

you owe 拢30,000 or less
you do not have any other payment plans or debts with HMRC
your tax returns are up to date
it鈥檚 less than 60 days after the payment deadline

If you owe tax from PAYE

You can set up a payment plan to spread the cost of your latest PAYE bill online without calling us if you:聽

have missed the deadline to pay an employer PAYE 产颈濒濒听
owe 拢100,000 or less聽
plan to pay your debt off within the next 12 months聽
have debts that are 5 years old or less聽
do not have any other payment plans or debts with HMRC聽
have sent any employers鈥� PAYE submissions and Construction Industry Scheme (CIS) returns that are due聽

If you owe tax from VAT

You can set up a payment plan to spread the cost of your latest VAT bill online without calling us if you:聽

have missed the deadline to pay a VAT 产颈濒濒听
owe 拢100,000 or less聽
plan to pay your debt off within the next 12 months聽
have a debt for an accounting period that started in 2023 or later聽
do not have any other payment plans or debts with HMRC聽
have filed all your tax returns

Read more information about what you鈥檒l need to set up a payment plan online.

How to contact HMRC to discuss a Time to Pay arrangement

If you cannot pay your tax bill and need help you should contact HMRC as soon as possible.

What to expect during a call

When you phone us we鈥檒l ask you some questions, so make sure you have the following information when you call.

Individuals

We may ask you:

the reference number relating to the bill that you want to discuss
details of the amount of tax that you cannot pay, covering all debts outstanding to HMRC
why you鈥檙e not able to pay, and what your current financial circumstances are 鈥� outlined in the 鈥榟ow we work out what you can afford to pay鈥� section
what you have done to try to pay your bill on time and in full
about your current financial position (including income and expenditure, savings, investments and other assets)
how you expect your finances to change in future
questions to check if a Time to Pay arrangement would be the best payment solution
for your bank account details, so you can set up a Direct Debit for your arrangement

Businesses

We may ask you:

for the reference number relating to the bill that you want to discuss
about any other debts the business owes HMRC
about any tax repayments owed to the business
about the business鈥� current financial position (including income, expenditure and savings, information) and how you expect the business finances to change in the future
for information about the business鈥� financial position 鈥� including how you expect the business鈥� finances to change in the future
what efforts have been made to raise the funds against the business鈥� debt
what has been done to try to pay the tax bill
what the business has done or is doing to get its tax affairs back on track and to afford repayments
for the business鈥� bank account details, so that a Direct Debit can be set up (the caller will need the authority to set up a Direct Debit on that account)

How we work out what you can afford to pay

Individuals

We鈥檒l use an 鈥榠ncome and expenditure assessment鈥� form to record details of how much money you receive and spend, we鈥檒l ask you:

for your personal details (including your marital status and if you have any dependants)
for your employment details (including your VAT registration number if you鈥檙e VAT-registered and your employer鈥檚 PAYE reference number if you鈥檙e an employee)
if you own or rent your home and the cost of your mortgage or rent
for details of your average monthly income (including any rental income and any benefits you receive)
for details of any assets you hold (such as the value of all of your property, if you own any motor vehicles and how much you paid for them and when)
for information about any savings and investments you have (including saving certificates, Premium Bonds, Individual Savings Accounts and stocks and shares)
how much you spend each month on household bills (including gas, electricity, water and Council Tax payments) and commuting, petrol, food, clothing and any television packages you might have
for details of any other debt you have (including loans, hire purchase and credit cards)
for information about any creditors you may owe money to (including debt that鈥檚 outstanding to them and the payments you make)
how you plan to pay off your tax debt

If you have discussed what you can afford with an independent debt adviser (such as Citizens Advice) we鈥檒l accept their income and expenditure figures if they are shown on their Standard Financial Statement.

You should send the completed statement to the HMRC address shown on the latest letter we have sent you about your debt.

Make sure the statement includes your:

National Insurance number
Self Assessment Unique Taxpayer Reference (if you have one)

Based on the information you give, we鈥檒l work out your monthly disposable income. This is your monthly surplus income after deducting your monthly spending.

Usually, we鈥檇 expect 50% of your disposable income to be paid into your Time to Pay arrangement.

We expect you to pay 50% rather than 100% because we want:

your arrangement to be sustainable
for you to be able to manage any unexpected changes in expenditure

You may wish to pay more than 50% to reduce the amount of interest you pay.

If you have a high disposable income but still need more time to pay, we鈥檒l work with you to agree a level of payment that balances clearing the debt quickly with your reasonable monthly expenses. This may mean that you pay more than 50% of your disposable income.

If your income and expenditure information shows that you do not have enough disposable income, we鈥檒l pause our collection activity until your circumstances change.

The length of the arrangement will depend on how much you owe. There鈥檚 no upper limit on the length of an arrangement.

Your time to pay will be based on the information you have shared with us.

We鈥檒l make sure that your monthly payment reflects what you can afford to pay so that it鈥檚 sustainable over the length of the agreement.

To help us support you in doing this:

be open and honest during the payment plan discussion
be ready to explain unusual or large items of expenditure
provide all the information we ask for

We鈥檒l usually accept what you tell us without asking for more details, but we may need more detail or evidence if your debt is large or complex.

Businesses

We鈥檒l use an 鈥榠ncome and expenditure assessment鈥� form to record details of how much the company or partnership receives and spends.

We鈥檒l ask you:聽

about any other HMRC debts聽
how much cash is held in business bank accounts聽
how much the company or partnership receives from sales revenue and any other regular income it receives聽
how much is spent by the company on wages and salaries聽
how much it spends on mortgage and rental payments聽
how much it spends on materials and stock聽
details of any other regular spending such as business rates, utility bills, employee benefits, business travel, insurance payments and so on聽
for information about any creditors you may owe money to (including debt that鈥檚 outstanding to them and the payments you make)聽
how you plan to pay off your tax debt聽

Based on the information you give, we鈥檒l work out the company or partnership鈥檚 monthly disposable income. This is the company or partnership monthly surplus after deducting the monthly spending.聽

Usually, we鈥檇 expect 75% of the company or partnership鈥檚 disposable income to be paid into the Time to Pay arrangement. 聽

We expect it to pay around 75% rather than 100% because we want:聽

the arrangement to be sustainable聽
for you to be able to manage any unexpected changes in expenditure聽

You may wish to pay more than 75% to reduce the amount of interest you pay.聽

The arrangement can either be:聽

shortened if the business鈥� financial position improves聽
lengthened if the business鈥� financial position worsens but remains in a position to recover

How assets are treated when we agree a Time to Pay arrangement

Individuals

If you have the means to pay your HMRC liabilities by realising assets (for example, savings, shares, or a second home) then we鈥檒l discuss this with you.

If you have assets that both you and HMRC agree can be realised (including equity in a property), then we expect you to do so to reduce the debt as much as possible before we agree an arrangement.

We鈥檒l not ask you to sell your family home.

We may consider taking a charge on your home to secure the debt payable to HMRC if:

it鈥檚 not possible to agree a Time to Pay arrangement with you
you鈥檙e not able to pay by any other means

We鈥檒l not expect you to access pension funds early to pay your debt. If you receive a pension this will be taken into account as part of your income and expenditure position.

Businesses

If your business can pay its HMRC liabilities by releasing assets, then we will discuss this with you.

Assets can include:

stock
vehicles or shares
directors putting personal funds into the business
business lending
extending credit lines

If we agree with you that there are assets your business can release (including equity in a business property) then we would expect them to be used to reduce the debt as much as possible before we agree a Time to Pay arrangement.

Debts that can be included in a Time to Pay arrangement

Any tax, duty, penalties or surcharges that you cannot afford to pay can be included.

Interest charged on Time to Pay arrangements

Interest accrues from the due date to the end of the Time to Pay arrangement.

The interest payable will be included in overall debt covered by the arrangement.

You can find out information about interest payable on tax debts and charges in HMRC interest rates for late and early payments.

After a Time to Pay arrangement has been agreed

If payment instalments are made on time

No further action will be needed and future time to pay requests will be considered.

If you have a change in circumstances

You should contact us if your situation:

improves and you can pay the bill quicker, to increase your monthly payment
worsens, to check how we can reduce your monthly payments

If you cancel your Direct Debit or if a payment fails

If you cancel your monthly payments or payments fail, we鈥檒l contact you.

We鈥檒l ask why the monthly payment was not paid.

We may be able to restore the payment arrangement or renegotiate it if appropriate.

If we cannot contact you, or we鈥檙e not able to renegotiate how much you should pay, we may decide to use our tax debt enforcement powers to collect what you owe. We only use these powers as a last resort.

If you have another new debt to HMRC

We expect new debt to be paid in full and on time.

You should contact us as soon as possible if you cannot pay your tax bill in full.

If you鈥檙e already making monthly payments into a Time to Pay arrangement, then this can be amended to include this new debt.

Before we can do this, we鈥檒l need to talk to you about your:

income
expenditure
asset position

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