You can’t afford to pay your tax bill in one lump sum. That’s okay — HMRC has a formal system for this. It’s called a Time to Pay arrangement, and it lets you spread your Self Assessment tax bill over monthly instalments.
According to HMRC’s Time to Pay guidance, over 800,000 taxpayers used payment plans in the 2023-24 tax year. It’s a standard, well-established process — not a last resort. The key is to set it up before you miss a payment, not after.
What Is a Time to Pay Arrangement?
A Time to Pay arrangement is a formal agreement between you and HMRC to pay your tax debt in instalments over an agreed period. It’s not a loan — HMRC doesn’t charge setup fees or arrangement fees. You simply agree to pay a fixed monthly amount until the debt (plus interest) is cleared.
The arrangement covers:
- Your balancing payment — the tax you owe for the year
- Interest — which accrues on the reducing balance
- Your first payment on account — if applicable (50% of your current year’s tax, due 31 January)
It does not cover:
- Late filing penalties (these are separate — see our late filing guide)
- Existing debts from previous years (each year’s debt needs its own arrangement)
Who Qualifies for a Time to Pay Arrangement?
Online plan eligibility
You can set up a payment plan online if all of the following apply:
- You owe less than £30,000
- You’ve already filed your Self Assessment return
- You have no other outstanding tax debts or Time to Pay arrangements
- You can pay the debt within 12 months (or less)
- You have a Government Gateway account
If you meet all these criteria, the online system is automatic — no phone call, no negotiation, no paperwork.
Phone-based arrangement
If you don’t meet the online criteria — because you owe £30,000+, you need longer than 12 months, or you have other tax debts — you’ll need to call HMRC’s Payment Support Service.
Phone number: 0300 200 3835 Hours: Monday to Friday, 8am to 6pm
HMRC will assess your situation on the phone and propose a plan. They’re generally flexible as long as you’re honest about what you can afford.
How to Set Up an Online Payment Plan: Step by Step
Step 1: File your return
You can’t set up a payment plan without filing first. HMRC needs to know exactly how much you owe. If you haven’t filed yet, see our missed deadline guide and file immediately.
Step 2: Log into your HMRC account
Go to HMRC Online and sign in with your Government Gateway credentials.
Step 3: Navigate to the payment section
Once logged in, go to your Self Assessment account and look for the payment section. You’ll see your outstanding balance and a prompt to pay.
Step 4: Select “Set up a payment plan”
Instead of selecting “Pay in full,” choose the option to set up a payment plan. The system will ask you:
- How much you can pay per month — propose an amount you can realistically afford
- What day of the month you want to pay — choose a date shortly after you get paid
- How many months you need — up to 12 months maximum for online plans
Step 5: Review the plan
HMRC will show you:
- Your monthly payment amount
- The number of payments
- Total interest you’ll pay
- The total amount you’ll pay (debt + interest)
Review this carefully. Make sure the monthly amount is something you can consistently afford — missing a payment has serious consequences.
Step 6: Confirm and set up a Direct Debit
Once you’re happy with the plan, confirm it. You’ll need to set up a Direct Debit for the monthly payments. HMRC will collect the payment automatically on the date you chose.
You’ll receive a confirmation email with the plan details. Keep this for your records.
How to Set Up a Phone-Based Arrangement: Step by Step
Step 1: Gather your information
Before you call, have ready:
- Your UTR (Unique Taxpayer Reference) — 10-digit number
- Your National Insurance number
- Your tax bill amount — from your filed return
- Income details — monthly take-home pay, or business income if self-employed
- Expense details — rent/mortgage, utilities, food, transport, other debts
- Proposed monthly payment — how much you can realistically afford
- Proposed timeline — how many months you need
Step 2: Call the Payment Support Service
Call 0300 200 3835 (Monday to Friday, 8am to 6pm). Be prepared for a wait — lines are busiest in late January and early February.
Step 3: Explain your situation
Be honest and specific. Tell the advisor:
- How much you owe
- Why you can’t pay in full
- Your income and essential expenses
- How much you can afford per month
- When you can start paying
Step 4: Agree on a plan
The advisor will calculate a plan based on your circumstances. They may suggest a different monthly amount or timeline than you proposed — be open to negotiation, but don’t agree to payments you can’t sustain.
Step 5: Set up the Direct Debit
Once you agree on the plan, the advisor will set up a Direct Debit over the phone. You’ll receive written confirmation by post or email.
Real-World Example: A £6,000 Tax Bill on a 12-Month Plan
Let’s say you owe £6,000 and set up a 12-month online payment plan:
| Month | Starting balance | Monthly payment | Interest (7.25%) | Principal paid | Ending balance |
|---|---|---|---|---|---|
| 1 | £6,000.00 | £521.50 | £36.25 | £485.25 | £5,514.75 |
| 2 | £5,514.75 | £521.50 | £33.32 | £488.18 | £5,026.57 |
| 3 | £5,026.57 | £521.50 | £30.37 | £491.13 | £4,535.44 |
| 4 | £4,535.44 | £521.50 | £27.38 | £494.12 | £4,041.32 |
| 5 | £4,041.32 | £521.50 | £24.41 | £497.09 | £3,544.23 |
| 6 | £3,544.23 | £521.50 | £21.41 | £500.09 | £3,044.14 |
| 7 | £3,044.14 | £521.50 | £18.38 | £503.12 | £2,541.02 |
| 8 | £2,541.02 | £521.50 | £15.34 | £506.16 | £2,034.86 |
| 9 | £2,034.86 | £521.50 | £12.29 | £509.21 | £1,525.65 |
| 10 | £1,525.65 | £521.50 | £9.22 | £512.28 | £1,013.37 |
| 11 | £1,013.37 | £521.50 | £6.12 | £515.38 | £497.99 |
| 12 | £497.99 | £500.98 | £3.01 | £497.97 | £0.00 |
Total paid: £6,265.48 Total interest: £265.48
Compare this to the cost of not setting up a plan:
- 30-day surcharge: £300 (5% of £6,000)
- 6-month surcharge: £300
- 12-month surcharge: £300
- Interest for 12 months: ~£435
- Total penalties + interest: £1,335
The payment plan saves you £1,069.52 — the surcharges are suspended, and you pay less interest because the balance reduces each month.
What Happens to Interest and Surcharges?
| Charge | On a payment plan | Without a payment plan |
|---|---|---|
| Interest (7.25%) | ✅ Accrues on reducing balance | ✅ Accrues on full balance |
| 30-day surcharge (5%) | ❌ Suspended | ✅ Charged |
| 6-month surcharge (5%) | ❌ Suspended | ✅ Charged |
| 12-month surcharge (5%) | ❌ Suspended | ✅ Charged |
The surcharge suspension is the biggest financial benefit. On a £6,000 bill, the three surcharges would total £900 — all avoided by being on a plan.
What If You Can’t Keep Up With the Plan?
Life happens. If your income drops or you face an unexpected expense, call HMRC before you miss a payment. Do not wait until after the payment has bounced.
HMRC can:
- Reduce your monthly payments — if your income has dropped
- Extend the payment period — give you more months
- Pause payments temporarily — for a defined period (e.g., 3 months)
- Convert to a different arrangement — if your circumstances have fundamentally changed
The key phrase HMRC advisors look for is “I’m struggling to keep up with my plan and I want to discuss my options.” They’re trained to help — not to punish you for being proactive.
If you miss a payment without contacting HMRC:
- You’ll get an automated reminder
- If you miss a second payment, HMRC may cancel the arrangement
- The full remaining balance becomes due immediately
- Late payment surcharges may be reinstated
- Enforcement action can begin
What If You Come into Money During the Plan?
If your financial situation improves — you get a new client, a pay rise, or an unexpected windfall — you can:
- Increase your monthly payments — to clear the debt faster and pay less interest
- Pay off the balance early — there are no early repayment penalties
Log into your HMRC account and adjust your plan, or call the Payment Support Service. Paying off early saves you the remaining interest.
Time to Pay and Making Tax Digital
From April 2026, Making Tax Digital for Income Tax changes how you report income — but not how you pay. Your tax is still due by 31 January, and Time to Pay arrangements work the same way. See our MTD for income tax guide for what’s changing.
However, MTD’s quarterly updates mean you’ll have a better picture of your income throughout the year — making it easier to budget for your tax bill and avoid needing a payment plan in the first place. See our MTD quarterly updates guide for how to use quarterly updates to stay on top of your tax.
Common Questions About Time to Pay
Can I have more than one Time to Pay arrangement?
Yes, but each tax year’s debt needs its own arrangement. If you owe tax for 2023-24 and 2024-25, you’ll need two separate plans. Having multiple plans may affect HMRC’s willingness to agree to new ones — they’ll want to see you’re managing your tax affairs better.
Does a Time to Pay arrangement affect my credit score?
No. HMRC does not report Time to Pay arrangements to credit reference agencies. However, if HMRC takes enforcement action (CCJ, bankruptcy) because you defaulted on the plan, that will affect your credit score.
Can I set up a plan before the deadline?
Yes. If you file early (you can file from 6 April) and know you can’t afford the bill by 31 January, you can set up a payment plan in advance. This is the best approach — it shows HMRC you’re being proactive and avoids any late payment surcharges entirely.
What if I disagree with HMRC’s proposed plan?
If the advisor proposes payments you genuinely can’t afford, explain why. Provide specific numbers — “My essential monthly expenses are £2,400 and my income is £2,800, so I can only afford £400/month, not £600.” HMRC advisors are required to set realistic plans based on your actual financial situation.
The Bottom Line
A Time to Pay arrangement is the single best option if you can’t afford your tax bill in one go. Here’s the quick action plan:
- File your return — you can’t set up a plan without it
- Check if you qualify for the online plan — debts under £30,000, no other tax debts
- If yes: Set it up online in 10 minutes through your HMRC account
- If no: Call 0300 200 3835 with your financial details ready
- Propose a realistic monthly payment — one you can actually sustain
- Stick to the plan — and call HMRC immediately if your circumstances change
The financial benefit is clear: you avoid the 5% surcharges (potentially £900+ on a £6,000 bill) and pay less interest overall. The emotional benefit is even bigger — you go from “I can’t afford this” to “I have a plan.”
If you need the broader overview of what to do when you can’t afford your tax bill, see our can’t afford tax bill guide. For the full breakdown of penalties and interest charges, see what happens when you file late. If you’ve also missed the filing deadline, see what to do when you miss the deadline.