What is a Time to Pay Arrangement?

It’s always best to pay HMRC on time if you can. If, for whatever reason you find yourself unable to pay and you find yourself in debt to HMRC, don’t panic – there’s help available.

What is Time to Pay?

HMRC are not interested in driving people in financial difficulties to bankruptcy, so if you're struggling they'll be open to discussing the time frame in which you pay what you owe. This bespoke deal, based on your income and expenditure is called a Time to Pay Arrangement and can cover any outstanding amount you're due to pay, whether that be tax debt or penalties and interest.

It's important to note that Time to Pay Arrangements aren't fixed contracts. They're ongoing arrangements that can be amended to reflect your ability to pay. For example, if your income increases, your Time to Pay can be shortened and vice versa. Over 90% of Time to Pay Arrangements are completed successfully, so they're a great option to consider if you're struggling.

How are repayments scheduled?

You can apply for a Time to Pay Arrangement as an individual or as a business, and the process is a little different for both.

As an individual, you will need to fill out the 'income and expenditure assessment' form, which measures your income, disposable assets and expenditure so that HMRC can calculate your disposable income, which HMRC will ask you to pay a percentage of. Usually, this won't be any higher than 50%, though it might be more if your disposable income is very high. The typical term for repaying the debt will be under 12 months unless there are exceptional circumstances (like the Covid-19 Pandemic).

Applying for your business is a little more complicated – you'll need to put together a proposal explaining how much you think your business will be able to repay. Once HMRC has examined your proposal, they'll ask you questions to confirm that the figure you suggest is both affordable and pays off the debt in the quickest timeframe possible. How long you're given to pay the debt off will depend on how much your business owes, and what its current financial circumstances are.

Both individual and business arrangements will be reviewed regularly and can be adjusted over time. Bear in mind that interest accrues from the date the bill is due until the end of the arrangement and is included in the total amount you'll pay back.

As soon as you need help

The best time to contact HMRC for help is as soon as you discover you cannot pay your bill. If you have Self Assessment debt, this can be done online provided that you owe less than £30,000, you do not have any other debts with HMRC and your tax returns are up to date. Otherwise, you will need to call HMRC, who will ask you about your current financial situation to see how a Time to Pay Arrangement can help you.

Realising Assets

If you would be able to pay the bill by realising your assets then HMRC will discuss this with you. What your assets are will vary depending on whether you are applying as an individual or a business (a second home versus stock, for example), but if you agree with HMRC that the asset can be realised then you must do so to reduce the debt before HMRC will agree to a Time to Pay Arrangement. You won't be asked to access pension funds early or sell your family home, or any assets vital to the running of your business.

What comes next

Once you've reached an agreement with HMRC on the terms of your Time to Pay Agreement, you can begin paying the debt off as per the monthly payments. If your circumstances change you should contact HMRC to adjust your payments. If you miss a payment, either because you cancel your direct debit or a payment fails, HMRC will contact you and ask why the payment wasn't made if it was a mistake or a technical failure, they will help you restore your method of payment. If you are unable to pay, however, they will look to renegotiate the payments where appropriate. If HMRC cannot renegotiate or are unable to contact you, they may decide to use their tax debt enforcement powers to collect what you owe – but these are the last resort. HMRC want to work with you to make payment possible.

If you accrue a new debt whilst in your current Time to Pay Arrangement, this can be added to the arrangement. You will need to contact HMRC as soon as you can and explain your situation including your current Time to Pay Arrangement.

Accessibility links