A Time to Pay arrangement is an HMRC payment plan that lets a client clear overdue tax in instalments by Direct Debit. Self Assessment debts up to £30,000, and VAT or employers’ PAYE debts up to £100,000, can often be set up online. Larger debts, Corporation Tax and anything outside the online criteria need a phone call to HMRC.
Agreeing a Time to Pay arrangement early matters as much as the amount. Interest still runs, but depending on the tax, a plan agreed in time can mean lower late payment penalties or none. This guide compares the online and phone routes by tax, lists what HMRC will ask, and explains how a plan interacts with penalties.
Key points
- HMRC calls these payment plans; Time to Pay arrangement is the formal name used in its penalty guidance.
- Online limits: Self Assessment £30,000, VAT £100,000, employers’ PAYE £100,000, Simple Assessment £50,000.
- Interest is charged at the Bank of England base rate plus 4% on plans set up through HMRC’s online services.
- There is no fixed maximum length. HMRC bases the plan on what the client can afford (GOV.UK: how much you’ll pay).
- For VAT and MTD for Income Tax, asking for a plan early can reduce or stop late payment penalties. Breaking the plan can bring them back.
What a Time to Pay arrangement is
When a taxpayer cannot pay a bill in full, HMRC may agree to monthly instalments. It checks that the plan is affordable; if no plan can be agreed, it asks for payment in full (GOV.UK: if you cannot pay your tax bill on time). A Time to Pay arrangement can cover all outstanding amounts, including penalties and interest already charged.
HMRC usually asks for around half of what the taxpayer has left each month after essential spending such as rent, food, utilities and fixed outgoings. There is no time limit on how long a plan can last; it depends on the debt and what is affordable. Paying faster reduces the total interest. If HMRC cannot agree a plan, it may move to recovery action, which can include debt collection agencies, deductions from wages or pensions, taking money from bank accounts and, for business taxes, closing the company.
A Budget Payment Plan is different. It lets a Self Assessment client make voluntary weekly or monthly payments towards a future bill that is not yet overdue, and it is not a Time to Pay arrangement.
Online self-serve limits by tax
HMRC’s online services cover four taxes. Each has its own conditions, taken from the start pages of HMRC’s payment plan services.
| Tax | Online limit | Main conditions | Source |
|---|---|---|---|
| Self Assessment | £30,000 or less | Tax returns up to date; no other tax debts; no other HMRC payment plans | HMRC SA payment plan service |
| VAT | £100,000 or less | Payment deadline missed; debt for a period starting in 2023 or later; no other plans or debts; returns filed. Not for cash accounting, annual accounting or payments on account customers | HMRC VAT payment plan service |
| Employers’ PAYE | £100,000 or less | Payment deadline missed; debts 5 years old or less; no other plans or debts; no outstanding PAYE submissions or CIS returns | HMRC PAYE payment plan service |
| Simple Assessment | £50,000 or less | No other debts or payment plans with HMRC | HMRC Simple Assessment service |
| Corporation Tax | No online service found | Call HMRC | GOV.UK: payment problems |
Every online service requires the person setting up the plan to be named on the UK bank account and able to authorise a Direct Debit without another signatory. In practice that means the client, or a director for a company, completes the set-up, often with the agent having prepared the figures beforehand. A client with a Customer Compliance Manager should speak to them before using the VAT service.
Setting up a Time to Pay arrangement by phone as an agent
Debts above the online limits, Corporation Tax, and clients who fail any online condition need a call. HMRC lists a separate number for each tax when a payment deadline has been missed, all open Monday to Friday, 8am to 6pm.
| Tax | Phone number |
|---|---|
| Self Assessment | 0300 200 3820 |
| VAT | 0300 200 3831 |
| Employers’ PAYE | 0300 200 3819 |
| Simple Assessment | 0300 322 7835 |
| Corporation Tax | 0300 200 3840 |
Source: GOV.UK: payment problems enquiries. HMRC’s payment plan service pages also give 0300 123 1813 for anyone who cannot set up a plan online.
Before you call about a Time to Pay arrangement, make sure your authorisation covers the tax concerned, have the client’s references to hand and agree with the client what monthly figure they can sustain. Clients who can be reached during the call make it easier to confirm bank details and answer affordability questions. Log the date and time of the call and the adviser’s name: for VAT and MTD for Income Tax, the date of the request affects penalties.
Information HMRC will ask for
Whether online or by phone, prepare these before starting. GOV.UK sets out the list for individuals and companies (GOV.UK: setting up a payment plan).
- The reference for the tax owed, such as the UTR, VAT registration number or PAYE accounts office reference.
- UK bank details for the Direct Debit.
- Whether the client can pay anything now, and how much each month.
- Other taxes due soon.
- Income and usual monthly spending, or the company’s income and spending.
- Savings, investments and assets. HMRC expects these to be used to reduce the debt as far as possible.
- For individuals with independent debt advice, a Standard Financial Statement, which HMRC accepts as evidence of income and spending.
Extra questions for companies
For company debts, HMRC asks how the company will pay as quickly as it can and tests whether the proposal is realistic. It expects the company to reduce the debt first, for example by releasing stock, vehicles or shares, and may ask directors to put in personal funds, accept lending or extend credit. A short cash flow forecast for the plan period makes this conversation far easier.
How a Time to Pay arrangement affects penalties and interest
Interest always runs on overdue tax until it is paid. The effect on penalties depends on the tax.
| Tax | Effect of an agreed plan | If the plan is broken |
|---|---|---|
| VAT (periods from 1 January 2023) | Asking on days 1 to 15 can avoid the first penalty; by day 30 avoids the higher one; from day 31 stops the second penalty growing | HMRC may cancel the plan and charge both penalties as if it never existed |
| MTD for Income Tax | Penalties paused from the date the client contacted HMRC, if the plan is agreed and kept | A penalty may be charged |
| Self Assessment (outside MTD) | No late payment penalty for the deferral period if HMRC agrees deferral after the request | HMRC can serve a notice making the penalty payable |
Sources: GOV.UK: VAT late payment penalties; GOV.UK: MTD for Income Tax penalties; Finance Act 2009, Schedule 56, paragraph 10. Self Assessment late payment penalties are 5% of the unpaid tax at 30 days, 6 months and 12 months, so a request made before day 30 protects the most.
A Time to Pay arrangement does not cancel penalties already charged. If the client had a reasonable excuse for paying late, appeal those separately; see our guide to HMRC penalty appeals and our reasonable excuse examples. HMRC’s decision on a plan itself cannot be appealed, although a complaint can be made about how the client was treated.
Keeping a Time to Pay arrangement on track
A Time to Pay arrangement most often fails on a new liability. The client keeps up the instalments, then a fresh VAT quarter or a July payment on account goes unpaid, and the plan is at risk. Build this checklist into your diary for each client on a plan.
- Diarise every instalment date and check the Direct Debit was collected.
- Diarise the next returns and payment dates for every tax the client pays.
- Prepare returns early so the next bill is known before it is due.
- If a new bill cannot be paid, contact HMRC before the due date. GOV.UK says a new bill may be added to the existing plan.
- Tell HMRC about any change in circumstances; plans can be made longer or shorter.
- If a payment is missed, call HMRC straight away. HMRC says it will try to rearrange the plan where possible.
For Self Assessment clients, the busiest risk point is January, when the balancing payment and first payment on account fall together. Our guide to Self Assessment season covers how practices spread that workload.
FAQs
Can I set up a time to pay arrangement for Corporation Tax online?
We could not find an HMRC online payment plan service for Corporation Tax. HMRC’s online services cover Self Assessment, VAT, employers’ PAYE and Simple Assessment. For Corporation Tax, call HMRC on 0300 200 3840 if the payment deadline has been missed, with the company’s income and spending figures ready.
What is the maximum amount for an online HMRC payment plan?
£30,000 for Self Assessment, £100,000 for VAT, £100,000 for employers’ PAYE and £50,000 for Simple Assessment, each with other conditions such as having no other debts or plans with HMRC. Above those amounts, or if any condition is not met, the client needs to call HMRC to discuss a plan.
Does a time to pay arrangement stop interest?
No. Interest is charged on the overdue amount until it is paid, at the Bank of England base rate plus 4% for plans set up through HMRC’s online services. Paying more each month shortens the plan and reduces total interest. An agreed plan can, however, reduce or avoid late payment penalties for VAT, MTD for Income Tax and Self Assessment.
Can an agent set up a time to pay arrangement for a client?
Agents commonly prepare the figures and speak to HMRC, provided they are authorised for the tax. HMRC’s online services require the person setting up the plan to be named on the bank account and able to authorise the Direct Debit, so the client or a director usually completes that step.
How long can an HMRC payment plan last?
GOV.UK says there is no time limit. The length depends on the amount owed and what the client can afford each month, typically around half of their disposable income. Clients who need a longer or larger plan than the online service allows can discuss it with HMRC by phone.
Get the paperwork right first time
Our team prepares affordability figures, diarises instalments and new liabilities, and drafts penalty appeals for your review. See our appeals and late payment support service or book a consultation.
