# Can I set up a Time to Pay arrangement with HMRC? Struggling to pay a UK tax bill? HMRC's Time to Pay arrangement allows you to spread outstanding tax into manageable monthly installments to avoid penalties. **Published:** 2026-07-03 **Updated:** 2026-07-03 **Source:** https://aztajournal.com/gb/hmrc-time-to-pay-arrangement --- > If you are struggling to clear a tax bill, His Majesty's Revenue and Customs (HMRC) provides a formal mechanism to spread your payments. Understanding the eligibility criteria, interest rates, and application channels can help you avoid costly late payment penalties. Yes, you can set up a Time to Pay arrangement with HMRC to spread your outstanding tax liabilities into manageable monthly instalments. This facility is designed for individuals and businesses experiencing temporary financial difficulties, provided they meet strict compliance and viability criteria. By negotiating a payment plan, you can avoid immediate enforcement action and secure structured terms to clear your debt. ## Key Takeaways - **Formal debt management:** A Time to Pay (TTP) arrangement is a discretionary, structured monthly instalment plan agreed with HMRC. - **Filing prerequisite:** All outstanding tax returns must be fully filed before HMRC will consider your application. - **Two main routes:** You can negotiate online via the Self-Serve portal for lower debts, or contact the Payment Support Service by phone for larger debts. - **Interest accumulation:** Interest continues to accrue on the outstanding balance throughout the arrangement at the statutory rate. - **Penalty mitigation:** Contacting HMRC early and securing a plan can prevent or significantly reduce late payment penalties. ## I cannot pay my tax bill on time — can I set up a Time to Pay arrangement with HMRC? Yes, HMRC permits taxpayers to establish a Time to Pay arrangement if they cannot clear their tax bill on time. This facility is structured to assist viability, allowing you to settle debts over a series of monthly payments. According to official HMRC guidelines, anyone who genuinely cannot pay their tax bill in full by the due date may apply. However, this is not a statutory right. HMRC assesses each proposal discretionary, evaluating your financial situation to ensure the proposed payments are realistic and sustainable. ## What is a Time to Pay arrangement? A **Time to Pay arrangement** is a formal, discretionary agreement between a taxpayer and His Majesty's Revenue and Customs to clear outstanding tax liabilities over an agreed period through structured instalments. This arrangement is specifically tailored for individuals or businesses experiencing short-term financial hardship, ensuring they can settle their debts without facing immediate legal recovery action. It is important to understand that a TTP is not a mechanism to reduce the total amount of tax you owe. Instead, it alters the timeframe in which you pay it. Every plan is bespoke and is calculated based on your disposable income and current business cash flow. ## What are the key eligibility conditions for a TTP? To qualify for a plan, you must demonstrate a genuine inability to pay the lump sum and prove that you will be able to clear the debt eventually. 1. **Up-to-date filing:** You must ensure that all of your relevant tax returns have been officially filed and submitted to HMRC. 2. **Genuine hardship:** You must show a clear, short-term inability to clear the total outstanding balance in one single payment. 3. **Credible repayment proposal:** You need to present a realistic plan showing how the debt will be fully paid over the agreed period. 4. **Proactive contact:** You must contact HMRC before or as close to the original payment deadline as possible to secure the best possible terms. 5. **Clear history:** If using the online self-serve option, you must not have any other active TTP agreements or unresolved outstanding debts with HMRC. ## How do I apply for a Time to Pay arrangement? You can apply either through HMRC's online self-serve portal or by calling their Payment Support Service, depending on your tax type and debt size. The online self-serve system is the fastest way to set up an agreement, but it is restricted to specific financial limits. For larger amounts of debt, older deadlines, or Corporation Tax liabilities, you must contact the HMRC Payment Support Service by telephone. The table below outlines the criteria for these two routes: | Application Route | Tax Types Covered | Maximum Debt Threshold | Key Time Windows & Access | | --- | --- | --- | --- | | **Online Self-Serve** | Self Assessment, VAT, and PAYE | Up to £30,000 for Self Assessment; Up to £100,000 for VAT/PAYE | Must be set up within 60 days of the payment deadline. Done via Government Gateway. | | **Phone (Payment Support)** | All tax types, including Corporation Tax | No set upper limit (assessed on case-by-case financials) | Required if outside the 60-day window, or if a repayment term longer than 12 months is needed. | If you are applying online, HMRC will expect you to commit about half of your leftover monthly disposable income to the payment plan. If applying over the telephone, you must prepare detailed documentation of your income, assets, and monthly outgoings before calling. ## What should I expect once the arrangement is active? Once your agreement is officially active, you will make regular monthly payments, but interest will continue to build up on the outstanding balance. While a TTP pauses HMRC's standard recovery actions, it does not stop the cost of the debt from growing. You should anticipate several operational conditions during the lifespan of your plan: - **Plan Duration:** Most agreed schedules run between 3 and 12 months. Repayments stretching over 12 to 24 months require exceptional circumstances and HMRC managerial approval. - **Ongoing Interest:** Interest continues to accrue on the outstanding balance at a rate of **7.75% per annum** (the prevailing rate as of January 2026). - **Penalty Protection:** Proposing an arrangement within 15 days of the due date prevents late payment penalties. Proposing within 30 days reduces them. - **Payment Method:** HMRC requires payments to be collected automatically via Direct Debit, which is set up during the application process. ## What happens if I break the arrangement? Missing a payment or failing to file future tax returns will default the agreement, allowing HMRC to pursue immediate legal enforcement actions. Breaking the terms of your TTP arrangement is a serious issue. If you miss an instalment, HMRC has the right to cancel the payment plan. When a plan is cancelled, the entire remaining balance of your debt becomes due immediately, and interest continues to climb on this total. If the arrangement fails, HMRC can initiate debt collection procedures. These procedures include referring the debt to a third-party collection agency, taking funds directly from your business or personal bank accounts, or starting court action to wind up your company or declare you bankrupt. ## Why would HMRC refuse my Time to Pay proposal? HMRC will refuse a Time to Pay proposal if they believe the plan is unrealistic, or if your filing history is non-compliant. HMRC's main goal is to collect the tax due while supporting viable businesses. They will reject a proposed arrangement under several common scenarios, such as when a business has outstanding tax returns that have not yet been submitted. They will also refuse if they believe the business cannot realistically meet the monthly payment targets. Furthermore, if HMRC suspects that you are using a TTP arrangement as a way to access cheap short-term funding rather than out of genuine financial distress, they will deny the request. Once formal court recovery actions have officially started, it becomes much more difficult to secure a standard payment structure. ## What practical steps should I take right now? If you cannot pay your tax bill, you must act quickly to secure a structured plan and minimise additional interest charges. 1. **File outstanding returns:** Ensure all your Self Assessment, VAT, or Corporation Tax returns are filed immediately so HMRC has accurate debt figures. 2. **Make a partial payment:** Pay whatever amount you can afford right now, as this reduces the total interest that will accrue and shows good faith. 3. **Gather financial evidence:** Collect your bank statements from the last three months, a breakdown of your essential monthly outgoings, and a simple cash flow forecast. 4. **Contact HMRC immediately:** Log into your online Government Gateway account to check if you can set up a plan online, or call the Payment Support Service directly. ### Does HMRC freeze interest under a Time to Pay arrangement? No. HMRC does not freeze interest during a Time to Pay arrangement. Interest will continue to accrue daily on the remaining unpaid tax balance at the statutory rate, which is 7.75% per annum as of January 2026. ### Can I set up a Time to Pay arrangement online for Corporation Tax? No. You cannot set up an online self-serve Time to Pay arrangement for Corporation Tax. All Corporation Tax payment agreements must be negotiated by calling HMRC's Payment Support Service directly. ### Will setting up a TTP prevent late payment penalties? Yes, provided you contact HMRC early. If you set up an agreement within 15 days of the payment due date, you will avoid the initial late payment penalty. Proposing a plan within 30 days will reduce the penalty amount. ### What financial details do I need to prepare before calling HMRC's Payment Support Service? You should gather your last three months of bank statements, your current management accounts, a basic cash flow forecast, a summary of your monthly income and expenses, and your unique taxpayer reference numbers.