HMRC Time to Pay Arrangement: How to Set Up a Self Assessment Payment Plan in 2026

If you have filed your 2025-26 Self Assessment — the return due by 31 January 2027 — and are staring at a tax bill you cannot pay in full, you are not stuck. HMRC’s Time to Pay (TTP) arrangement lets you spread the debt over monthly instalments — and for many self-employed people and side-hustlers, you can set it up online in about 15 minutes without speaking to anyone.

This guide covers the eligibility rules, the exact online journey, when you must contact HMRC instead, how interest and penalties interact with a TTP, and a decision framework for comparing a TTP against a 0% credit card or personal loan.

What Time to Pay Actually Is

A Time to Pay arrangement is an informal instalment plan between you and HMRC for an unpaid Self Assessment debt. It is not a write-off, it is not a payment holiday, and it does not pause interest. What it does is move you from “late payer at risk of enforcement and surcharges” into “compliant taxpayer on an agreed plan”.

Once a TTP is in place:

HMRC stops chasing the debt (no demand letters, no debt collection referral)
Late-payment penalties are not charged automatically where the TTP was agreed before the relevant penalty date (30 days, 6 months, 12 months); if the plan later fails, a penalty is raised on the amount that was outstanding at that date
Interest continues to accrue daily on the outstanding balance
You make monthly Direct Debit payments to HMRC for the agreed term

HMRC sets no time limit on how long a payment plan can last: the term depends on how much you owe and what you can afford each month. Longer plans need detailed income and expenditure evidence.

Online Self-Service Eligibility

Since 2020, HMRC has offered an online self-service TTP for Self Assessment debt. You can set one up yourself, without phoning HMRC, if all of these are true:

The debt is £30,000 or less (this is the SA-debt-only ceiling — not your total HMRC liability)
You have filed the relevant tax return (HMRC must know the exact figure owed)
The payment plan is set up no later than 60 days after the due date of the debt
You have no other payment plan in place with HMRC
You have no other tax debts that are also unpaid

If you tick all five, you can self-serve. If any are missing — particularly debt over £30,000 or a return not yet filed — you must contact HMRC instead (see below).

The Online Journey: Step by Step

The official entry point is gov.uk/pay-self-assessment-tax-bill/pay-in-instalments. Have your Government Gateway login and your bank details ready before you start.

Sign in to your HMRC online account with your Government Gateway user ID or GOV.UK One Login, whichever you already use for Self Assessment. If you have lost your User ID, recover it via the “forgot user ID” link — but allow extra time because the recovery letter can take 7 days.
HMRC checks eligibility automatically. Once you sign in, the system pulls your Self Assessment record and confirms whether you qualify for online self-service. If you do not qualify, you will need to contact HMRC instead.
Confirm the debt. HMRC shows you the exact amount owed, broken down by tax year. Check it matches your own calculation. If something looks wrong (e.g., a payment on account you already made is not showing), do not proceed — sort the underlying record first.
Choose a monthly amount and duration. You can pick a monthly figure that fits your cash flow, within what HMRC accepts as affordable. HMRC will calculate the implied number of instalments. The first instalment is usually due within 30 days.
Provide bank details for Direct Debit. HMRC takes payment by Direct Debit only — you cannot pay manually each month. Make sure the bank account is in your name (joint accounts are accepted if you are a named holder).
Confirm and submit. You will receive a confirmation reference. Keep this somewhere safe. HMRC also sends a confirmation letter to your registered correspondence address.

The whole journey takes about 10-15 minutes. Once submitted, the TTP is live immediately — penalty enforcement stops, but interest keeps running on the declining balance.

When You Must Contact HMRC Instead

If your SA debt is over £30,000, or you have any other complicating factor, you cannot self-serve. You must contact HMRC to set up a payment plan; the contact route is on GOV.UK’s “If you cannot pay your tax bill on time” guide.

This is also the line for:

TTPs that cover multiple HMRC debts (e.g., Self Assessment plus VAT or PAYE)
Situations where you cannot afford the standard pro-rata monthly amount
Cases where you have already missed a previous TTP

Before you call, gather:

Income evidence: recent payslips or business invoices, expected income for the next 12 months
Expenditure summary: rent or mortgage, utilities, food, transport, childcare, other unavoidable monthly costs
Current account balances: all current and savings accounts (HMRC will ask)
Other debts: credit cards, personal loans, mortgages, business debts
A monthly figure you can afford: be realistic — HMRC has discretion to refuse plans that look likely to fail

The call typically lasts 30-45 minutes. The HMRC officer will run an “income and expenditure” assessment and propose a monthly amount. You can negotiate within reason; if you cannot afford what they propose, ask them to extend the term rather than agreeing to a payment you will miss.

Interest Is Still Charged

The single most common misconception about Time to Pay is that it pauses interest. It does not.

HMRC charges late-payment interest on overdue Self Assessment from the due date until payment. The rate is set by reference to the Bank of England base rate plus 4 percentage points. As of mid-2026, with the BoE base rate held at 3.75% (confirmed 17 September 2026), the HMRC late-payment interest rate is 7.75% APR (effective from 9 January 2026). Always confirm the current figure on the HMRC “Interest rates for late and early payments” page before quoting it to a client.

On a 12-month £8,000 TTP, the interest cost over the life of the plan is meaningful — roughly £300-£350 depending on the rate cycle. That is the price you pay to spread the debt versus paying in full on day one.

For a detailed breakdown of how the interest rate is calculated and how it has moved over the 2025-26 tax year, see our HMRC late payment interest 2025-26 explainer.

5% Surcharge Timing: The Hidden Cliff

The deadline that catches most people out is not the 31 January payment date itself — it is the 5% late payment penalty that lands once the 30 days after it have passed. It is charged on the unpaid balancing payment, not on payments on account.

If your 2025-26 Self Assessment balancing payment is unpaid by 31 January 2027 and you have not agreed a TTP with HMRC by 2 March 2027, HMRC adds a 5% penalty to the unpaid balancing payment from 3 March 2027. On an £8,000 balancing payment that is £400 — a flat penalty on top of accruing interest.

The same 5% penalty applies again to any amount still unpaid at:

6 months late (early August 2027 for 2025-26 debt)
12 months late (early February 2028 for 2025-26 debt)

If you cannot pay in full by 31 January, get the TTP agreed before 2 March. HMRC’s system does not automatically charge a late payment penalty where the arrangement was agreed before the penalty date — so the plan needs to be in place by the relevant deadline. A TTP agreed on 5 March 2027 will not prevent the 5% penalty that triggered on 3 March.

This is why “set up the TTP as soon as you know you cannot pay” is better advice than “set it up when HMRC chases you”. By the time HMRC writes, the first penalty may already have been charged.

Worked Example: £8,000 Bill, 6-Month TTP

Anika is a freelance graphic designer. Her 2025-26 Self Assessment balancing payment is £8,000 (her payments on account for 2026-27 are separate and not part of this plan).

She filed her return on 25 January 2027 but only has £2,500 saved for the tax bill. She pays £2,500 on 31 January 2027, leaving £5,500 outstanding.

On 25 February 2027 she sets up an online TTP:

Outstanding debt: £5,500
Term chosen: 6 months
Monthly Direct Debit: roughly £935 (principal + accruing interest)
First payment: 28 March 2027
Final payment: 28 August 2027

Because the TTP was agreed before 2 March 2027, ahead of the 30-day penalty date, the 5% penalty (£275) is not charged automatically. She still pays interest at the prevailing HMRC rate (7.75%) on the declining balance — roughly £115-£130 in total over the 6 months — but she avoids the surcharge entirely and HMRC stops chasing.

If Anika had waited until 10 March 2027, the 5% penalty would already have been triggered. She could still get a TTP, but the £275 penalty would be on her debt.

What Breaks a TTP

A Time to Pay arrangement is contingent on you holding up your side. The arrangement can be cancelled if you:

Miss a monthly Direct Debit (HMRC typically allows one missed payment if you contact them quickly, but a second missed payment usually voids the TTP)
Fail to file your next year’s Self Assessment return on time — being current on filing is a condition of the plan
Add new tax debt that you cannot pay (e.g., you incur a 2026-27 balancing payment of £3,000 while still on the TTP for the 2025-26 debt and do not address it)
Change bank accounts without updating HMRC — the Direct Debit fails and the plan defaults

If the TTP is cancelled, HMRC demands the full outstanding balance immediately and a penalty is raised on the amount that was outstanding at the penalty date.

TTP vs Credit Card vs Personal Loan: Decision Framework

A TTP is not always the cheapest way to handle an unpaid tax bill. Three rough rules of thumb:

Use a TTP if:

You cannot get a 0% balance transfer or money transfer card large enough for the debt
A personal loan rate would exceed the HMRC late-payment interest rate (currently ~7.75%)
You want to keep your credit cards free for emergencies
You value the certainty of a fixed plan with no upfront fee

Use a 0% credit card if:

You can get a money transfer card with a 0% period long enough to clear the debt
The money transfer fee (typically 3-4%) is lower than 12 months of HMRC interest (~7.75% APR)
You have the discipline to clear the balance before the 0% period ends

Use a personal loan if:

You can secure a fixed-rate personal loan below the HMRC interest rate
You want a longer repayment term than HMRC will agree
You prefer keeping HMRC at arms length

For a £6,000 debt over 12 months: a TTP costs roughly £230-£260 in interest. A 0% money transfer card with a 3.5% fee costs £210 upfront but requires the discipline to clear before the 0% ends. A 9% personal loan over 24 months costs roughly £580. The TTP is rarely the absolute cheapest — but it is often the simplest and most certain.

Need to Work Out the Numbers First?

Before setting up a TTP, run your 2026-27 payment on account through the Payment on Account Calculator — you may have a reduction claim available that lowers the debt before you start. And if you are already past 31 January, the Self Assessment Penalty Calculator will model the exact surcharges and interest you face if you do not act.

For broader context on how payments on account fit into the Self Assessment cycle, read Payments on account explained. And if your debt is already running late, see Self Assessment late filing penalty relief for the appeal grounds HMRC will accept.

FAQs

Will a Time to Pay arrangement affect my credit rating?

HMRC does not report TTPs to credit reference agencies, so a TTP itself does not appear on your credit file. However, if HMRC issues a winding-up petition, county court judgment, or transfers the debt to a debt collection agency because you missed payments and let the TTP collapse, those steps can affect your credit rating. Stay on the plan and your credit file is unaffected.

Can I set up a Time to Pay for the next payment on account (due 31 January or 31 July), before it is due?

Generally no — the online self-service tool requires the debt to be overdue (the deadline has passed) and the return for the relevant year to be filed. The exception is the “Budget Payment Plan”, a separate scheme where you make voluntary advance payments toward a future SA bill. If cash flow is the issue, look at SA303 to reduce your POA first via the Payment on Account Calculator, rather than waiting to default and then arranging a TTP.

What if I cannot afford even the minimum monthly payment HMRC proposes?

Contact HMRC and ask for an extended-term plan based on your income and expenditure. If your circumstances are genuinely severe — long-term illness, redundancy with no immediate income, business failure — HMRC has discretion to agree very long terms or, in rare cases, to write off part of the debt. Be honest about your full financial picture; agreeing to a plan you cannot afford and then defaulting is worse than negotiating a realistic one upfront.