How to Set Up a Time to Pay Arrangement with HMRC (2026/27)

This guide is general information, not advice.

This is for anyone who has, or is about to have, an HMRC bill they cannot pay in full: a Self Assessment balancing payment on 31 January, a payment on account on 31 July, or an employer PAYE or VAT bill. HMRC’s term for the payment plan is a Time to Pay arrangement; GOV.UK’s guide now just calls it a payment plan.

By the end you will know whether you can set the plan up yourself online, what HMRC asks if you have to ring, how interest and penalties behave while the plan runs, and what puts the plan at risk.

Before you start

GOV.UK’s Setting up a payment plan page lists three things you need:

• the reference number for the tax you cannot pay, such as your Unique Taxpayer Reference (UTR), which you can usually take from any HMRC letter;
• your UK bank account details, and you must be authorised to set up a Direct Debit on it;
• details of your income and spending, or your company’s if the debt is a company tax.

For the online route you also need your Government Gateway or GOV.UK One Login sign-in. If you have had independent debt advice and hold a Standard Financial Statement, keep it to hand; GOV.UK says HMRC accepts it as evidence of what you earn and spend.

Check first that the bill is actually overdue. Paying weekly or monthly towards your next Self Assessment bill is a Budget Payment Plan, not Time to Pay.

Step-by-step

1. File the return. HMRC’s 9 December 2025 release is explicit: “A Time to Pay arrangement cannot be set up until a Self Assessment return has been filed.” HMRC needs a figure before it can spread it.

2. Try the online service. From the Setting up a payment plan page, select Start now. GOV.UK describes it as the service to “check if you’re eligible for and to set up a payment plan online”, so the eligibility test is built in. The same December 2025 release gives the two published conditions for Self Assessment: a bill of up to £30,000, and a return already filed. Above £30,000, “or a longer repayment period is needed”, you can still apply but must contact HMRC. Two further conditions appeared in HMRC’s 1 October 2020 release when the £30,000 limit was introduced: no outstanding returns, other tax debts or other HMRC payment plans, and set-up no later than 60 days after the due date of the debt. GOV.UK’s current guide no longer lists these, so treat the service’s own check as the deciding answer.

3. If the service turns you away, ring the line for that tax. HMRC’s payment problems contacts page (updated 19 December 2025) gives 0300 200 3820 for Self Assessment, 0300 200 3819 for employer PAYE and 0300 200 3831 for VAT, all Monday to Friday, 8am to 6pm. Its digital assistant covers Self Assessment, VAT, employer PAYE, Simple Assessment and Corporation Tax.

4. Be ready for HMRC’s questions. GOV.UK says that if you cannot set up the plan online, you will need to tell HMRC: whether you can pay in full; how much you can repay each month; whether there are other taxes you need to pay; how much you earn; how much you usually spend each month; and what savings or investments you have. It adds: “If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.”

5. Agree the monthly amount. GOV.UK’s How much you’ll pay page says the figure is based on what is left after rent, food, utility bills and fixed outgoings like subscriptions, and that you will “usually be asked to pay around half of what you have left over each month”. You can agree to pay more. A pension is counted as income; the money inside a pension pot is not counted as savings.

6. Set up the Direct Debit and keep the confirmation.

If the debt is a company’s, GOV.UK adds that HMRC expects the debt reduced first by releasing assets such as stock, vehicles and shares, and may ask directors to put personal funds in, accept lending or extend credit.

Deadlines and what happens next

Interest. GOV.UK’s How much you’ll pay page says paying the debt quicker “means you’ll pay less in total because you’ll pay less interest”: interest runs for the whole plan. HMRC’s interest rates page sets late payment interest at the Bank of England base rate plus 4 percentage points from 6 April 2025 (it was plus 2.5 on or before 5 April 2025), giving 7.75% from 9 January 2026. It moves when the base rate moves.

Late payment penalties. HMRC’s Self Assessment Manual at SAM61390 sets three trigger dates for the 5% late payment penalties: 30 days after the due date, then 30 days plus 5 months, then 30 days plus 11 months. It then says: “Customers who make an acceptable time to pay (TTP) arrangement on, or before, a late payment trigger date, will avoid paying late payment penalties that would normally arise between the TTP start and end dates. This is as long as the arrangement is completed successfully, and on time.” For a balancing payment due 31 January, that first trigger is 30 days after 31 January. Late filing penalties are a separate regime and are not affected.

If you are in Making Tax Digital for Income Tax, the MTD penalties page gives a different rule: in your first year you have 30 days from the due date to pay or contact HMRC about a plan (15 days after that), and if a plan is agreed and you make the payments, “penalties will be paused from the date you contacted us”.

How long the plan lasts. GOV.UK: “There’s no time limit on how long a payment plan can last.” You can make it longer or shorter, and should contact HMRC if anything changes.

If you miss a payment. GOV.UK: HMRC “will contact you to find out why” and, where possible, will “try to rearrange or renegotiate the payment plan with you”. The manual’s penalty protection depends on the plan being completed “successfully, and on time”, and the MTD page says you may be charged a penalty if “you do not follow the agreed plan”. A new bill you cannot pay can sometimes be added to the existing plan.

If HMRC refuses a plan, or you do not engage. You cannot appeal HMRC’s decision on a payment plan, only complain about how you were treated. GOV.UK’s If you do not contact HMRC or refuse to pay page lists what can follow: a debt collection agency, collection from wages or pension, taking goods or money from bank accounts (England, Wales and Northern Ireland), court, bankruptcy, or closing a company.

Common mistakes

• Trying the online service before filing. It cannot see a debt until the return is in.
• Leaving it past the first trigger date. The penalty protection in SAM61390 only covers arrangements made on or before a trigger date; for a 31 January bill that is 30 days away, not 60.
• Offering a monthly figure you cannot hold. HMRC works from what is left after essentials and expects about half of it; a plan you then miss loses its penalty protection.
• Not mentioning other tax debts. HMRC asks about them directly, and an undisclosed debt is one the plan cannot include.

Worked example

A sole trader files the 2025/26 return in January 2027 showing a balancing payment of £4,000 due on 31 January 2027, and cannot pay it. The bill is under £30,000 and the return is filed, so the online service is open. She sets up a plan within 30 days of 31 January, before the first late payment trigger date in SAM61390.

• The first 5% late payment penalty, £200 on £4,000 per the GOV.UK penalties page, does not arise while the plan is kept.
• Interest still runs. At the published 7.75% rate, £4,000 outstanding for a full year costs about £310; clearing it in six months costs roughly half that.

Had she waited until April 2027, past the trigger date, the £200 penalty would already have been charged before the plan started.

Related reading

• How to pay your Self Assessment tax bill - the payment methods and how long each takes to reach HMRC.
• HMRC penalties guide - the full penalty regimes for Self Assessment, VAT, PAYE and Corporation Tax.
• Self Assessment 2026/27 - deadlines, payments on account and who has to file.