Cannot Pay Your Self Assessment Tax Bill? How HMRC Time to Pay Works

What should you do if you cannot pay your Self Assessment tax bill?

Act before the debt grows. Follow these steps in order:

1. File your tax return on time, even if you cannot pay. Filing and paying are separate deadlines, and the online payment plan requires your returns to be up to date.
2. Pay whatever you can now. Interest and penalties only apply to the amount that remains unpaid.
3. Set up a Time to Pay arrangement online, or call HMRC if you do not qualify for the online service.
4. Get professional help if the debt is large, HMRC refuses your offer, or you owe other taxes too.

What is an HMRC Time to Pay arrangement?

A Time to Pay arrangement is a formal agreement with HMRC to pay an overdue tax bill in instalments. HMRC calls this a ‘Time to Pay’ arrangement, and it will not set one up if it doubts you will keep up with the repayments.

Time to Pay is for tax that is already overdue. If your bill is not yet overdue and you want to pay towards your next Self Assessment bill weekly or monthly, you may be able to use a Budget Payment Plan instead.

Can you set up a Self Assessment payment plan online?

Yes, if you meet HMRC’s conditions. To set up a plan online, you must be up to date with your tax returns, owe £30,000 or less, have no other tax debts, and have no other HMRC payment plans in place.

For the online service, you must be named on the UK bank account you use and be able to authorise a Direct Debit without a signature from any other account holder.

If you cannot use the online service, call HMRC on 0300 123 1813, Monday to Friday, 8am to 6pm. From outside the UK, the number is +44 2890 538 192. If a health condition or personal circumstances make contacting HMRC difficult, HMRC offers extra support.

Check the Self Assessment deadlines that apply to you.

How much will HMRC ask you to pay each month?

HMRC bases your monthly payment on what you can afford. HMRC looks at what remains after rent, food, utility bills and fixed outgoings, and usually asks for around half of that leftover amount each month. For example, if £600 remains each month, expect HMRC to ask for about £300.

When you apply by phone, HMRC will ask whether you can pay in full, how much you can repay each month, whether you owe other taxes, what you earn and spend, and what savings or investments you hold.

Three points shape the outcome:

• Savings count against you. HMRC expects you to use savings or assets to reduce the debt as much as possible.
• Pensions are treated differently. HMRC counts pension income as income, but does not treat the value of your pension pot as savings.
• Debt advice helps. If an independent debt adviser, such as Citizens Advice, has prepared a Standard Financial Statement for you, HMRC will accept it as evidence of your income and spending.

Many websites say a payment plan cannot last longer than 12 months. GOV.UK says otherwise. There is no fixed time limit on a payment plan; its length depends on how much you owe and what you can afford each month.

Do you pay interest on an HMRC payment plan?

Yes. Payment plan instalments include interest at the Bank of England base rate plus 4% a year. The current late payment interest rate is 7.75%, in force from 9 January 2026.

The rate moves when the Bank of England changes its base rate. HMRC charges late payment interest from the first day a payment is late until you pay in full.

Example: £6,000 left unpaid for 30 days at 7.75% costs about £38 in interest, or around £1.27 a day.

Interest falls as your balance falls. Paying more than the agreed amount each month clears the debt sooner and reduces the total interest you pay.

Does a payment plan stop late payment penalties?

Yes, if you agree the plan early and keep to it. Which rules apply depends on the tax year you owe tax for.

Tax due on 31 January 2027 (the 2025 to 2026 tax year)

The current Self Assessment penalty rules apply to this bill for everyone. GOV.UK confirms that even taxpayers who joined Making Tax Digital for Income Tax on 6 April 2026 fall under the current penalties for their 2025 to 2026 return, due 31 January 2027.

Under the current rules, HMRC charges a penalty of 5% of the tax still unpaid at 30 days, 6 months and 12 months after the deadline, plus interest. On a £6,000 bill left unpaid at 30 days, the first penalty would be £300.

A Time to Pay arrangement suspends these penalties. Under the Finance Act 2009, if you ask HMRC to defer payment and HMRC agrees, you are not liable to late payment penalties that would otherwise arise between your request and the end of the agreed period. The practical lesson is simple: agree your plan before the 30-day point.

Making Tax Digital for Income Tax users

New late payment penalties apply from the tax year you join Making Tax Digital for Income Tax. From April 2027, the new penalties will apply to everyone who submits a personal Self Assessment return.

Under the new rules, if HMRC agrees a payment plan and you make the payments, penalties are paused from the date you contacted HMRC. In your first year, you have 30 days from the due date to pay in full or contact HMRC to set up a plan; after that, the window shortens to 15 days.

Find out how Making Tax Digital for Income Tax changes your deadlines

What will HMRC not agree to?

HMRC will refuse a payment plan it considers unrealistic. If HMRC cannot agree a plan with you, it will ask you to pay the full amount you owe.

A plan is likely to fail when:

• Your tax returns are not filed. The online service will not accept you, and HMRC needs a confirmed figure.
• Your offer is too low. HMRC tests the offer against your income and spending, not against what you would prefer to pay.
• You hold savings you have not used. HMRC expects savings to reduce the debt first.
• HMRC doubts you will keep to the plan. A history of missed payments weakens your case.

What happens if you miss a payment plan instalment?

Missing an instalment puts the whole arrangement at risk. HMRC warns that if you do not keep up with your payments, it could ask you to pay in full.

In practice, HMRC usually talks to you first. If you miss a payment, HMRC will contact you to find out why and, where possible, try to rearrange or renegotiate the plan.

A broken plan can also bring back suspended penalties. Under the current rules, if you break the agreement and HMRC serves a notice, you become liable to the penalties the plan had suspended.

If your circumstances change, call HMRC before the next payment date. You can ask to make a payment plan longer or shorter.

What happens if you ignore an HMRC tax debt?

Ignoring the debt gives HMRC grounds to recover it by force. HMRC will try to contact you by letter, text or visits to your home or workplace. If you still do not respond or cannot agree a plan, HMRC may:

• pass the debt to a debt collection agency
• collect the debt from your wages or pension payments
• take and sell your belongings, in England, Wales or Northern Ireland
• take money from your bank or building society account, in England, Wales or Northern Ireland
• take you to court or make you bankrupt

Costs such as auction fees are normally added to your debt. HMRC will warn you before taking any of these steps and explain your rights and options.

Unpaid tax can also affect your benefits. If your tax bill includes Class 2 National Insurance contributions, late payment may affect your entitlement to contributory benefits.

Should you still file your tax return if you cannot pay?

Yes. Late filing brings its own penalties, whether or not you can pay. A late Self Assessment return triggers an initial £100 penalty, followed by further penalties at 3, 6 and 12 months.

Filing on time also keeps the online payment plan open to you, because the service requires your returns to be up to date.

Can you reduce your payments on account instead?

Yes, if you expect this year’s tax bill to be lower. You can apply to reduce payments on account if your business profits or other income fall, your tax relief rises, or more tax is deducted at source than last year.

Each payment on account is half of the tax you owed last year, due by midnight on 31 January and 31 July. A 31 January bill often combines last year’s balancing payment with the first payment on account for the current year. Reducing that payment on account can shrink the bill you need to spread.

You can claim online or by posting form SA303 to HMRC, and you must claim by 31 January after the end of the tax year. Only reduce by a realistic amount. If your final bill turns out higher, HMRC charges interest on the shortfall.

When should you get professional help with an HMRC debt?

Get professional help when the online service cannot solve the problem. Speak to an accountant if:

• you owe more than £30,000
• the online service rejects your application
• you also owe VAT, PAYE or other tax debts
• HMRC has refused your offer or your plan has broken down
• you have received debt collection or enforcement letters
• your returns are late and your tax figure is uncertain

An accountant can prepare an accurate income and spending statement, check whether your tax bill is correct, and negotiate with HMRC on your behalf.

If you also owe money to lenders or landlords, free independent debt advice can help alongside your accountant. GOV.UK lists options for dealing with debts, and HMRC accepts a Standard Financial Statement from advisers such as Citizens Advice.