How do I set up a Time to Pay arrangement with HMRC?

For Self Assessment debts under £30,000 with all returns up to date, set it up online at gov.uk/difficulties-paying-hmrc. For larger debts or more complex situations, call HMRC's payment-support line on 0300 200 3835. Set it up BEFORE the tax due date to avoid the 5% late-payment surcharge.

Does interest still apply if I have a Time to Pay agreement?

Yes — interest accrues on the unpaid balance at HMRC's prevailing rate (currently around 7% annualised). Late-payment penalty surcharges (5% at 30 days, 5% at 6 months, 5% at 12 months) are usually waived if the TTP is in place. So a TTP saves significant penalty cost but doesn't eliminate interest.

What happens if I miss a Time to Pay payment?

Missing a single direct debit cancels the entire TTP arrangement. HMRC then pursues the full outstanding balance plus all accrued interest and late-payment penalties from the original due date. If you know you'll miss a payment, call HMRC BEFORE the payment date to renegotiate — they will usually adjust the schedule.

What to do if you can't pay your UK tax bill

Last reviewed by the UK Tax Drag editorial team · 12 May 2026 · How we review · Next review due 12 May 2027 · See what changed · Report an error

7-minute read

If you can't pay your tax bill: (1) Don't ignore it — interest and penalties grow fast. (2) Set up Time to Pay (TTP) before the due date — online for SA debt under £30k via gov.uk, or by phone for everything else. (3) Eligibility: returns up to date, debt under £30k for online, debt under 12 months overdue. (4) Interest still accrues (current rate ~7%) but late-payment penalties are usually waived. (5) Stick to the schedule — missed payments break the arrangement and HMRC pursues full balance immediately.

Why acting before the due date matters

UK tax late-payment penalties for Self Assessment in 2026/27:

Time after due date	Late-payment penalty	Interest
Day 1	£0	~7% annualised, daily
Day 30	5% surcharge	continues
Day 180 (6 months)	Additional 5%	continues
Day 365 (12 months)	Additional 5%	continues

Time to Pay set up BEFORE the due date avoids all late-payment penalties.Interest still accrues at the same rate, but the surcharges are waived. Setting up AFTER the due date avoids only future surcharges — the 30-day 5% can still apply.

Example: £10,000 SA bill due 31 Jan 2027

If you can't pay and ignore for 12 months:

5% surcharge at 30 days: £500
5% surcharge at 6 months: £500
5% surcharge at 12 months: £500
Interest (avg balance ~£10k, 12 months at 7%): ~£700
Total cost: £12,200 + ongoing enforcement risk

With Time to Pay set up before 31 Jan 2027:

£0 surcharges
Interest over 12 months at 7% on declining balance: ~£350
Total cost: £10,350
Plus your relationship with HMRC stays good

Time to Pay eligibility

You can set up a Self Assessment TTP online via gov.uk if all of the following apply:

Owed amount is under £30,000
You're up to date with all tax returns (you've filed every return that's due)
The debt is less than 60 days past its due date
You can pay the agreed amount within 12 months
You don't already have a TTP arrangement for any tax

If you don't meet online criteria(e.g. owe more than £30k, or are more than 60 days overdue, or have an existing TTP), call HMRC on 0300 200 3835. They can set up bespoke arrangements over the phone — typically with a longer payment plan and after a financial assessment.

Step-by-step: set up TTP online

Step 1: Have your information readyUTR, NI number, amount owed, why you can't pay in full, your monthly income and outgoings (HMRC may ask), bank details for direct debit.

Step 2: Sign in to gov.ukGo to gov.uk/difficulties-paying-hmrc → "Set up a payment plan online". Sign in with Government Gateway. Select Self Assessment and the relevant tax year.

Step 3: Choose your plan lengthHMRC offers monthly direct debits typically over 12 months. You can choose a shorter period if you can afford bigger monthly payments. The system shows you the monthly amount including interest.

Step 4: Confirm and set up direct debitYou'll provide bank details and HMRC sets up the direct debit. The first payment usually comes out 14-28 days after you set up the plan.

Step 5: Keep the agreementMissing a single direct debit payment cancels the entire TTP arrangement. HMRC then pursues the full balance plus accrued penalties. If you're going to miss, contact HMRC before the payment date to renegotiate.

Phone route: complex or larger debts

Call HMRC on 0300 200 3835 (Business Payment Support Service for non-SA, or general SA payment support).

What to expect on the call30-60 minute call. Agent asks about your financial position: income, expenses, assets. They calculate what you can reasonably afford. Typical arrangements: 12-36 months for amounts under £100k; longer for very large amounts in genuine hardship.

Documentation HMRC may requestBank statements (last 3 months). Payslips. Self Assessment / business accounts. Evidence of essential outgoings (mortgage/rent, food, utilities). For very large or extended arrangements, HMRC may want a comprehensive Statement of Income and Expenses.

What if you genuinely can't afford ANY payment?

HMRC may agree a "stand still" or zero-payment short-term TTPIf you can demonstrate genuine hardship (e.g. job loss, serious illness), HMRC sometimes agrees a short period (3-6 months) with no payments, then ramping up. This requires a formal financial assessment and written justification.

If you're insolventHMRC may treat the debt as part of an Individual Voluntary Arrangement (IVA), Debt Relief Order, or bankruptcy. Specialist debt advice is essential — contact StepChange or Citizens Advice. These insolvency procedures have lasting financial consequences.

What happens if you ignore the bill

HMRC's enforcement powers escalate quickly:

Stage 1 (30 days): Penalty surcharge + interest.5% added. Interest accrues daily.

Stage 2 (60-90 days): Demand letters.HMRC sends increasingly formal demand letters. Tax code adjustment may be applied to recover via PAYE for ongoing employed taxpayers.

Stage 3 (90-180 days): Distraint / enforcement notice.HMRC can instruct enforcement agents (formerly bailiffs) to recover assets. They visit your address and can seize goods of value. Adds substantial costs.

Stage 4 (6-12 months+): County Court action.HMRC may apply for a County Court Judgment (CCJ) which permanently damages your credit record. Can lead to bank account attachments.

Stage 5: Bankruptcy / IVA petition.For very large debts, HMRC may petition for your bankruptcy. Self-employed people may lose business assets. Director disqualification proceedings can follow if HMRC tax is unpaid by a limited company.

Negotiating with HMRC — practical tips

Tip 1: Don't promise more than you can payHMRC prefers a sustainable smaller plan over an unsustainable bigger one. Be conservative about monthly affordability.

Tip 2: Always file the return even if you can't payFailing to file is a separate £100 penalty plus more if late. Filing on time + setting up TTP is the cleanest position.

Tip 3: Use the right phone line0300 200 3835 is the dedicated payment-support line, less wait time than the general SA line.

Tip 4: Have a storyHMRC agents respond better to clear narrative: "I lost my main client in November and my income has dropped from £4,000/month to £1,200/month. I have £8,000 in savings but rent is £1,400/month. I can pay £150/month sustainable, more from June when I expect a new contract." Specific is better than vague.

Tip 5: Get written confirmationOnce a TTP is agreed, ask for written confirmation by email or letter. Don't rely on the phone agent's note alone.

Common mistakes

Mistake 1: Ignoring HMRC letters.The single worst thing. Penalties compound, interest accrues, enforcement escalates. Always reply within 14 days even to say "I'm working on it".

Mistake 2: Setting up TTP then missing payments.Cancels the arrangement immediately. The whole debt becomes due, plus interest from the original date. Contact HMRC BEFORE missing a payment.

Mistake 3: Paying HMRC ahead of mortgage / utilities.HMRC is a creditor like any other. Don't go without food or heat to pay HMRC. The TTP process exists for exactly this reason.

Mistake 4: Using a "debt help" company.Many advertise "wipe your tax debt" services. They charge hundreds and rarely achieve more than you can get yourself. Free help is available from StepChange, Citizens Advice, or HMRC's own payment-support team.

Mistake 5: Not appealing penalties.If late filing or late payment is due to genuine reasonable excuse (serious illness, bereavement, fire), appeal the penalty even if you've set up TTP. The penalty appeal is separate from the payment plan.

Calculate your full SA tax bill first

Before setting up TTP, make sure you know the full bill. The tax calculator gives an end-to-end view of income tax, NI and any HICBC, including Payments on Account.

Open the tax calculator →

Sources and references

Time to Pay rules from gov.uk/difficulties-paying-hmrc. Online TTP service at gov.uk SA payments in instalments. Penalty surcharge regime from gov.uk SA penalties. Debt help from StepChange or Citizens Advice.

UK Tax Drag is not authorised by the Financial Conduct Authority and does not provide regulated financial or tax advice — see the content disclaimer for the full position. The methodology page documents how every guide is built and reviewed.

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What to do if you can't pay your tax bill — Time to Pay and beyond