A Time to Pay arrangement is an agreement with HMRC to pay a tax bill in instalments instead of in one lump sum. For Self Assessment, if you owe 30,000 pounds or less you can usually set one up online without speaking to HMRC, provided you do so within 60 days of the payment deadline and spread the payments over no more than 12 months. Interest is charged on the outstanding balance, but the arrangement prevents late-payment penalties and enforcement while you keep to it.
Time to Pay exists so that a taxpayer who cannot settle in full by the deadline has a managed route rather than falling straight into arrears. It is HMRC’s standard mechanism for spreading a tax debt, and keeping to the plan is what keeps it in force.
How does a Time to Pay arrangement work?
You agree with HMRC a schedule of monthly instalments that clears the debt over an affordable period. For Self Assessment debts of 30,000 pounds or less, the plan can normally be set up online, without a phone call, as long as you have no other tax debts, no outstanding returns and no other payment plan already running, and you set it up within 60 days of the due date. Larger debts, or other taxes, are arranged by contacting HMRC directly.
Who can use the online Self Assessment plan?
To set up a Self Assessment Time to Pay online you must owe 30,000 pounds or less, have filed all your tax returns, have no other tax debts or existing HMRC payment plans, and be within 60 days of the payment deadline. If you fall outside those conditions, you can still ask for Time to Pay, but you arrange it by speaking to HMRC rather than online.
Is interest charged on Time to Pay?
Yes. Interest continues to accrue on the outstanding tax for the length of the arrangement, so paying over time costs more than paying on the due date. What Time to Pay avoids, as long as you keep to it, are the late-payment penalties and collection action that would otherwise follow an unpaid bill.
What happens if I miss a payment?
An arrangement depends on keeping to the agreed instalments and on filing and paying future taxes on time. If you miss a payment or default, HMRC can cancel the arrangement and demand the whole balance, and pursue collection. If your circumstances change, it is better to contact HMRC and revise the plan than to simply miss a payment.
Where tax investigation cover fits
Time to Pay handles a bill you cannot pay at once; it is separate from the cost of dealing with an HMRC enquiry into whether the bill is right. Tax investigation insurance covers the professional fees of that work. See our guide to tax investigation insurance, or if you are an accountant, our accountants’ scheme.