Guidance

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

Get help to make a Time to Pay arrangement if you are an individual or business who owes a debt to HMRC.

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’re finding it difficult to make a tax payment you should ask us about affordable monthly payment options, called a Time to Pay arrangement. We’ll 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 ‘standard’ 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.

How we work out debt repayments

Individuals

We’ll decide your ability to pay using an ‘income and expenditure assessment’ form. This looks at your income, disposable assets and expenditure to help us work out your disposable income. You can find more information about this in the ‘how we work out what you can afford to pay’ section.

HMRC typically expects you to pay no more than 50% of your disposable income. This may be higher if you have a very high disposable income. There’s no upper limit on the amount of time that someone can have to pay.

Businesses

Business finances are often complex, so we’ll ask you to tell us what you think the business can afford to pay.

After we have looked at your proposal, we’ll ask you questions about it to make sure it’s affordable and pays off the debt as quickly as possible.

The length of the arrangement will depend on:

  • how much your business owes
  • the business’ financial circumstances

The arrangement will be reviewed regularly and can be adjusted over time.

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.

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

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

  • you owe £30,000 or less
  • you 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

What to expect during a call

When you phone us we’ll 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’re not able to pay, and what your current financial circumstances are — outlined in the ‘how we work out what you can afford to pay’ 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
  • for information about the business’ financial position — including how you expect the business’ finances to change in the future
  • what efforts have been made to raise the funds against the business’ 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’ 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’ll use an ‘income and expenditure assessment’ form to record details of how much money you receive and spend, we’ll 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’re VAT-registered and your employer’s PAYE reference number if you’re an employee)
  • if you own or rent your home and the cost of your mortgage or rent
  • for details of your household’s 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’s 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’ll 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’ll work out your monthly disposable income. This is your monthly surplus income after deducting your monthly spending.

Usually, we’d 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’ll 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’ll pause our collection activity until your circumstances change.

The length of the arrangement will depend upon how much you owe. There’s 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’ll make sure that your monthly payment reflects what you can afford to pay so that it’s 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’ll 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’ll review the information you have given us in your phone call.

We may ask questions about your proposal, to make sure it:

  • is affordable
  • pays off the debt as quickly as possible

The length of the arrangement will depend upon how much your business owes and its financial circumstances. It will be reviewed regularly and can be adjusted over time.

The arrangement can either be:

  • shortened if the business’ financial position improves
  • lengthened if the business’ 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’ll 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’ll 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’s not possible to agree a Time to Pay arrangement with you
  • you’re not able to pay by any other means

We’ll 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’ll contact you. We’ll 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’re 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’re 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’ll need to talk to you about your:

  • income
  • expenditure
  • asset position
Published 20 January 2020
Last updated 4 November 2021 + show all updates
  1. Welsh translation added.

  2. The guidance has been updated to cover businesses as well as individuals.

  3. How to contact HMRC to discuss a time to pay arrangement has been updated to add when you can set up a payment plan online.

  4. First published.