Business and self-employed taxpayers with outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
This is a freeview 'At a glance' guide to Time to Pay arrangements.
At a glance
Under a Time to Pay arrangement, taxpayers can set up a payment plan to spread the cost of their outstanding tax bill.
- The amount paid is based on a taxpayer's income and expenditure and so there is no 'standard' Time to Pay arrangement.
- Each is specific to the taxpayer's financial circumstances based on what they can afford to pay and how much time they need to pay it.
- A Time to Pay arrangement can cover all outstanding amounts overdue, including penalties and interest.
- Time to Pay arrangements are designed to be flexible and are not a fixed, formal contract. They can be amended over time to reflect changes in circumstances.
You are able to ask for Time to Pay online, without calling HMRC, if:
- You owe £30,000 or less.
- Do not have any other payment plans or debts with HMRC.
- Your tax returns are up to date.
- It's less than 60 days after the payment deadline.
- You plan to pay off your debt within 12 months.
You choose how much to pay straight away and how much you want to pay each month. You’ll have to pay interest.
HMRC's link: set up a payment plan online
In other cases, it is necessary to call HMRC. HMRC have a dedicated helpline on 0800 200 3822.
From 30 May 2023, you are able to ask for Time to Pay online, without calling HMRC, if you:
- Have VAT debt which is less than 28 days old from the payment due date.
- Have VAT debt which is less than £20,000 in value.
- Do not have any other debts or TTP payment plans.
- Are up to date with all tax returns.
- Are authorised to set up a direct debit mandate.
- Plan to pay your debt off within the next 6 months.
You cannot set up a VAT payment plan online if you’re in the Cash Accounting Scheme, Annual Accounting Scheme, or you make payments on account.
HMRC's link: set up a payment plan online
What information do you need to agree a Time to Pay?
HMRC will discuss your specific circumstances to explore:
- Agreeing an instalment arrangement.
- Suspending debt collection proceedings.
- Cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.
The rate of interest on underpaid tax has seen a number of changes in recent months. Currently HMRC's late payment interest rate is 7.5%, see Tax Data Card 2023-24
Existing Time to Pay scheme
The key points to note with the existing Time to Pay scheme are:
- If you know you will have difficulties making your tax payments, you should contact HMRC or make an online application as soon as possible and before the payment due date. HMRC’s systems do not allow payment arrangements to be set up too far in advance meaning that you may need to contact them 1-2 weeks before the due date for the payment.
- You should make sure as far as possible that all returns are filed up to date. HMRC are more likely to agree to payment arrangements if there are no outstanding returns.
- HMRC may require cashflow forecasts, budgets and details of assets and liabilities to support the request for time to pay so be prepared to provide these.
- HMRC will expect you to tell them how much you can afford. They will not tell you. You should expect to pay a fixed amount each month.
- Do not be overambitious, it is better to take longer to pay than to commit to something unrealistic and then not be able to meet the agreed amounts and payment schedule.
- Once you have an agreement in place you must pay future tax liabilities on time or renegotiate your arrangements to include them.
- As this is a formal agreement with HMRC you should receive it in writing.
- As long as you have an agreement in place before the deadline for late payment penalties to be charged you will not have to pay penalties. Under current arrangements interest remains due. If you default on your time to pay agreement penalties may then become due.
- If your business has multiple tax debts you may need to prioritise which you pay and which you seek time to pay for. It can be harder to negotiate arrangements for VAT, PAYE and NICs than for Income Tax and Corporation Tax so consider whether you should pay these first.
- If you do not agree Time to Pay arrangements with HMRC and fail to pay your tax interest and penalties will be charged.
Useful guides on this topic
PAYE: Paying HMRC
This is a freeview 'At a glance' guide to paying HMRC.
COVID-19: Government support tracker
This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.
HMRC guidance: If you cannot pay your tax bill on time
HMRC guidance: How to pay a debt to HMRC with a Time to Pay Arrangement