UK · Journal
HMRC Time to Pay: Self Assessment Payment Plans Explained
Cannot pay your Self Assessment bill? How an HMRC Time to Pay arrangement works, who can set one up online, and which penalties it prevents. UK figures verified 3 October 2026.
Cannot pay your Self Assessment bill? How an HMRC Time to Pay arrangement works, who can set one up online, and which penalties it prevents. UK figures verified 3 October 2026.
If you cannot pay a Self Assessment bill, HMRC's Time to Pay arrangement lets you clear it by monthly Direct Debit instead of in one payment. Many Self Assessment taxpayers can set one up online without speaking to anyone, provided their returns are up to date, they owe £30,000 or less, they have no other tax debts and no other HMRC payment plan running. Interest continues to accrue on the unpaid tax, but a plan agreed and kept to prevents the late payment penalties that would otherwise follow at 30 days, six months and twelve months.
Rates, thresholds and penalty amounts in this article are as at 3 October 2026 and are taken from gov.uk. The Budget is scheduled for 28 October 2026, so check the current figures before relying on them.
A Time to Pay arrangement is an agreement with HMRC to pay an overdue tax bill in instalments by Direct Debit rather than in a single sum. It is not a concession, a hardship scheme or a write-off: the tax remains due in full and only the timetable changes. HMRC tests whether the instalments are affordable, and its published position is that if a plan cannot be agreed it will ask you to pay in full. A plan buys time and the removal of penalties, not a discount.
HMRC operates Time to Pay across most taxes. This article deals with Self Assessment, where the deadlines are 31 January for the previous year's balancing payment plus the first payment on account, and 31 July for the second.
HMRC's own service page sets out four conditions. To set up a Self Assessment payment plan online you must:
You must also be named on the UK account and able to authorise a Direct Debit without a second signature, and you will need your 11-character payment reference: your 10-digit Unique Taxpayer Reference followed by the letter K.
The first condition catches people out: the liability does not exist in HMRC's systems until the return is filed, so there is nothing to spread until you have filed. Do not confuse this with a Budget Payment Plan, which covers a bill not yet due — Direct Debits towards your next bill, available only if you are up to date on your last one.
If any of the four conditions fails — the debt is over £30,000, another tax debt sits on the record, a plan already exists, or a return is outstanding — the online route closes and you need to call HMRC on 0300 123 1813, or +44 2890 538 192 from outside the UK. Lines are open Monday to Friday, 8am to 6pm, and closed at weekends and on bank holidays.
A phone-agreed plan is not a worse outcome, merely a negotiated one. The published guidance is explicit that there is no time limit on how long a payment plan can last — the length depends on what you owe and what you can afford each month. A plan running beyond a year is normal for a large debt.
For a negotiated plan, expect to be asked whether you can pay in full, how much you can repay each month, whether other taxes are also owed, how much you earn, how much you usually spend each month, and what savings or investments you hold.
HMRC's stated method is to look at what is left after rent or mortgage, food, utilities and fixed outgoings such as subscriptions, then to ask for around half of that surplus each month. You can offer more, and paying faster costs less overall.
Two details help in advance. If you draw a pension, HMRC counts the income but does not treat the remaining pot as savings. And if you hold a Standard Financial Statement from independent debt advice, HMRC accepts it as evidence of income and expenditure.
Late payment interest is statutory, automatic and unaffected by a payment plan. HMRC sets it at the Bank of England base rate plus 4 percentage points, a margin that rose from plus 2.5 points on 6 April 2025. The current late payment rate is 7.75%, in force from 9 January 2026; repayment interest is 2.75%.
Interest is charged daily from the original due date, so the real cost of a plan is interest on a declining balance — far cheaper than the penalty regime it replaces, but not free.
Under the Self Assessment penalty regime that still applies to most taxpayers, late payment penalties are charged at 5% of the tax unpaid at 30 days, six months and twelve months after the due date. Interest is charged on top of all three. Each charge is calculated on the tax still outstanding at that point, so partial payments reduce the later penalties even if they cannot prevent them.
This is the most valuable feature of Time to Pay, and it rests on statute rather than HMRC discretion. Under Schedule 56 to the Finance Act 2009, where a taxpayer asks HMRC to defer payment and HMRC agrees, any late payment penalty that would otherwise arise between the date of the request and the end of the deferral period is not charged. If the arrangement is later varied by a further agreement, the protection carries across.
The protection is conditional. If you fail to pay when the deferral period ends, or break a condition of the agreement — including missing an instalment — HMRC can serve notice and the suspended penalty becomes payable from the date of that notice.
So the request must come before a penalty date to protect that penalty: a plan agreed in February protects all three 5% charges, while one agreed in September protects only the twelve-month charge.
A payment plan has no effect whatsoever on late filing penalties. These bite on the return, not the money, and they apply even if there is no tax to pay:
All partners are charged if a partnership return is late, and a separate "failure to notify" penalty applies if you register for Self Assessment after 5 October and have not paid all your tax by 31 January.
Run both ladders together and a return filed and paid a year late can carry £100, up to £900 in daily penalties, two filing penalties of at least £300, three 5% late payment penalties and interest throughout. Filing on time while arranging to pay late removes most of that — see our guide to who must file a Self Assessment return.
The ladder above is being replaced as taxpayers move into Making Tax Digital for Income Tax, and the timing is easy to get wrong. The new penalties apply from the tax year you join MTD. HMRC's guidance gives the example directly: if you use MTD from 6 April 2026, the current penalties still apply to your 2025 to 2026 return due on 31 January 2027. Sole traders and landlords with qualifying income over £50,000 were brought in from 6 April 2026, and from April 2027 the new penalties apply to everyone submitting a personal Self Assessment return. Non-resident company, trust, estate and partnership returns stay on the current penalties.
For 2026 to 2027 the new late payment penalties run: nothing up to 15 days late; 3% of the tax owed at day 15 if you pay 16 to 30 days late, or nothing in your first year under the new rules; and from 31 days, 3% of the tax owed at day 15 plus 3% at day 30, plus an annual rate of 10% charged daily from day 31 until the tax is paid, for up to two years. Both fixed percentages rise to 4% for 2027 to 2028. In your first year you have 30 days to pay or contact HMRC; after that it tightens to 15.
Two things carry over: late payment interest is unchanged, and contacting HMRC still protects you — the guidance states that where a payment plan is agreed and the payments are made, penalties are paused from the date you contacted HMRC. One thing improves: the new late payment penalties do not apply to payments on account.
Assume a £10,000 balancing payment for 2025 to 2026 due on 31 January 2027, and that the rate stays at 7.75%.
Nothing paid, no contact. Interest accrues at roughly £2.12 a day. At 30 days a 5% penalty of £500 arises; at six months another £500, with interest of about £384 by then; at twelve months a third £500, with interest for the full year about £775. Total extra cost after a year: £1,500 in penalties plus roughly £775 in interest — around £2,275, with the £10,000 still owed.
A plan agreed in early February 2027, cleared over twelve monthly instalments. All three 5% penalties are suspended, because the request preceded each penalty date. Interest runs on a falling balance, so it totals roughly £400 rather than £775. Total additional cost: about £400.
The gap — roughly £1,875 on a £10,000 bill — is bought by one online form. That is the entire argument for acting early.
Payments on account are advance instalments towards next year's bill, due on 31 January and 31 July, each normally half of the tax you owed last year. You do not have to make them if the tax you owed last year was under £1,000, or if you paid more than 80% of last year's tax at source — through PAYE, for example, or tax already deducted from bank interest.
If your income has fallen, your tax relief has gone up, or more tax has been deducted at source than last year, you can apply to reduce them. Do it in your HMRC online account by selecting "Reduce payments on account", or post form SA303. The claim must be made by 31 January following the end of the tax year.
Here is the trap. If you reduce your payments on account and the eventual bill is higher than estimated, HMRC charges interest on the difference, backdated to the original due dates. At 7.75% an over-aggressive reduction turns a cash-flow fix into a larger bill. Base the estimate on draft accounts or half-year management figures, not optimism; our UK tax calculators are a useful sense-check first.
| Situation | Route | Act by | What it prevents |
|---|---|---|---|
| Return filed, owe £30,000 or less, no other tax debts or plans | Online Self Assessment payment plan | Before the 30-day penalty date (early March for a 31 January bill) | All three 5% penalties, while the plan is kept |
| Owe over £30,000, need longer, or another debt is on the record | Phone HMRC on 0300 123 1813 to negotiate | Same — before the 30-day penalty date | Same penalties; no maximum plan length |
| Return not yet filed and you cannot pay | File the return, then set up a plan | 31 January | The £100 filing penalty; unlocks the plan |
| Income has fallen, payments on account too high | Reduce online, or form SA303 | 31 January after the tax year ends | Overpaying now (interest applies if you cut too far) |
| Bill not yet due, want to pay gradually | Budget Payment Plan by Direct Debit | Any time, if up to date on the last bill | A large single payment at the deadline |
| Cannot pay anything at all | Contact HMRC; get free debt advice | As soon as possible | Debt collection, direct recovery, court action |
Contact HMRC anyway. The penalty suspension runs from the date of your request, and the affordability assessment produces a figure based on your actual surplus, which can be modest. A small sustainable instalment is a plan; nothing is not.
If you do not make contact, or no plan can be agreed, HMRC's published enforcement options include debt collection agencies, collection directly from wages or pension, taking and selling goods you own and taking money from your bank account (both England, Wales and Northern Ireland), court action, bankruptcy, and winding up a company where the debt is a business tax. Costs such as auction fees are added to the debt.
Free debt advice is available: MoneyHelper in England and Wales, Scotland Debt Solutions in Scotland, Advice NI in Northern Ireland. You cannot appeal HMRC's decision on a payment plan, but you can complain about how you were treated.
If you are a US citizen or green card holder living in the UK, you have a UK Self Assessment liability and a US federal liability, and they can land in the same window.
A UK Time to Pay arrangement is a UK arrangement only. It has no effect on your US filing or payment position, it does not extend any US deadline, and the IRS has no visibility of it. The two authorities run separate instalment regimes with separate eligibility rules, interest and penalties — qualifying for one tells you nothing about the other. Our guide to paying the IRS from abroad covers the US side, and the IRS sets out its own instalment options on irs.gov.
The practical risk is sequencing: which liability to clear first, and what a foreign tax credit position looks like once payment timing changes, is a cross-border judgement rather than a UK one. If both bills are live, take advice before committing cash to either.
1. File any outstanding return. Nothing else works until the liability exists on your record.
2. Confirm the amount, separating the balancing payment from the payments on account.
3. Test the payments on account. If income has fallen, reduce them online or by SA303 before building a plan around an inflated figure.
4. Check the four online conditions: returns up to date, £30,000 or less, no other tax debts, no other HMRC plans.
5. Set the plan up online, or phone 0300 123 1813 if any condition fails, with your income and expenditure figures ready.
6. Diarise the instalments alongside the next statutory deadline — our UK and US tax deadline calendar is a useful cross-check. If you also have a US filing, map both cash requirements together before committing.
Most Self Assessment payment plans need no professional input: file, check the four conditions, set the plan up online, keep to it. Help earns its cost on the judgement calls — whether to reduce payments on account and by how much, how to structure a negotiated plan around a business still trading, and how a UK payment timetable interacts with a US one. At Next Tax Source, UK work is reviewed and signed off by an ACCA-qualified accountant and US work by a licensed CPA or Enrolled Agent. If both sides are live, our accountants for US and UK tax can look at the two ledgers together, and you can book a consultation to talk it through.