Can't Pay Your Tax Bill? HMRC Time to Pay Explained for UK Tradespeople (2026)

What Is Time to Pay?

Time to Pay is an arrangement with HMRC to pay a tax bill in monthly instalments instead of one lump sum. Rather than paying the full amount by the deadline, you agree an affordable schedule — typically over several months, sometimes up to 12 months — and HMRC holds off on debt collection while you keep to it.

TTP is available across the main taxes a trade business deals with: Self Assessment (Income Tax and Class 4 National Insurance for sole traders), VAT, PAYE (if you employ staff), and Corporation Tax (for limited companies). Each tax has its own route to set up an arrangement, but the underlying principle is the same: HMRC looks at what you can realistically afford, agrees instalments, and charges interest on the outstanding balance while it's owed.

Self Assessment: the Online Self-Serve Route

For most sole trader tradespeople, the bill that causes the headache is Self Assessment — due on 31 January (with the payment on account in July for many). The good news is you can often set up a payment plan online yourself, without phoning anyone, through your HMRC online account. This is the self-serve Time to Pay arrangement.

To use the online self-serve route, you generally need to meet all of the following conditions. These are current for 2025–26 and can change, so confirm on GOV.UK before applying.

If you owe more than the threshold, or you don't meet one of the conditions above, you can't use the online tool — but you're not out of options. You call the HMRC Self Assessment payment helpline and negotiate a plan over the phone. You'll need to explain your situation and your finances, and HMRC may agree a longer or larger arrangement based on what you can afford.

VAT, PAYE and Corporation Tax

Sole traders mostly deal with Self Assessment, but VAT-registered tradespeople and limited companies face other deadlines too. Time to Pay covers these as well — the difference is mainly in how you apply.

• VAT: If you can't pay a VAT bill, contact HMRC as soon as possible. In some cases an online VAT payment plan is available for eligible businesses that have filed their return and are within a set time of the deadline; otherwise you arrange it by phone.
• PAYE: Employers who can't pay PAYE and National Insurance for their staff can ask HMRC for a Time to Pay arrangement, generally by contacting the relevant HMRC helpline before the deadline passes.
• Corporation Tax: Limited company directors who can't pay Corporation Tax can also negotiate TTP, usually by phone. As with the other taxes, HMRC will look at affordability and set instalments accordingly.

The principles are consistent across all four taxes: HMRC assesses what you can afford, agrees a monthly instalment plan, and charges interest on the outstanding balance until it's cleared.

How to Set One Up

The process is straightforward if you prepare. The order matters — you usually can't arrange a plan for an amount HMRC hasn't yet calculated, so the return comes first.

• File your return first. For Self Assessment, VAT or Corporation Tax, you generally can't set up Time to Pay until the relevant return is filed and the liability is known. File even if you can't pay — filing late triggers a separate penalty regardless of payment.
• Know exactly what you owe. Check your HMRC online account or your return so you know the total figure, including any payments on account.
• Work out an affordable monthly amount. Look at your income and outgoings honestly. HMRC expects you to clear the debt as quickly as you reasonably can, but the instalments must be realistic — there's no point agreeing a figure you'll default on.
• Apply online or phone HMRC. Use the self-serve tool if you qualify; otherwise call the relevant helpline. If you negotiate by phone, be ready to explain your income, outgoings, savings and why you can't pay in full.

Interest and Penalties

A Time to Pay arrangement is not interest-free. HMRC charges late-payment interest on tax that isn't paid by the deadline, and that interest keeps accruing on the outstanding balance throughout your plan. The rate is set at the Bank of England base rate plus a margin, so it moves when the base rate moves. As a guide it has recently been somewhere around 7–8% — but you must check the current HMRC late-payment interest rate on GOV.UK rather than rely on a figure here.

Penalties are a separate matter from interest. For Self Assessment, late-payment penalties can apply at set points after the deadline (for example a percentage of the unpaid tax at 30 days, six months and twelve months). Setting up a Time to Pay arrangement before the payment deadline — or promptly afterwards — can help you avoid or reduce those late-payment penalties, because you have an agreed plan in place rather than an ignored debt.

The key thing to understand: a TTP plan stops the situation escalating into enforcement and can protect you from penalties, but it does not stop interest. Interest generally still applies for as long as any tax is outstanding. Think of TTP as buying breathing room and certainty, not as a discount.

What Happens If You Miss a Payment?

A Time to Pay arrangement is a deal, and HMRC expects you to keep to it. If you miss an instalment without warning, HMRC can cancel the whole arrangement and demand the entire remaining balance immediately. At that point the debt is back in collection, and HMRC can pursue enforcement action — using debt collection agencies, and in more serious cases other recovery powers.

The way to protect yourself is simple: keep up the payments, and if your circumstances change — a big customer goes under, a quiet quarter, an unexpected cost — contact HMRC early rather than just missing a payment. HMRC can sometimes revise an existing arrangement if you talk to them before things go wrong. Silence is what turns a manageable plan into an enforcement problem.

Practical Tips for Trades

Time to Pay is a safety net, but the goal is to need it as rarely as possible. A handful of habits keep most trade businesses out of trouble.

• Set tax money aside in a separate pot. The moment an invoice is paid, move a percentage into a dedicated tax account — many sole traders use a rough 20–30% depending on profit, and VAT-registered traders should ring-fence the VAT element separately. The tax was never your money to spend.
• File early so you know the bill in advance. You don't have to wait until January. Filing your Self Assessment return months ahead tells you exactly what you owe while you still have time to plan — and you can still pay at the deadline.
• Don't ignore HMRC letters. Brown envelopes don't improve with age. The earlier you engage, the more options you have and the less it costs.
• Get an accountant or bookkeeper. Someone keeping you on top of deadlines, profit and the tax you're accruing is usually money well spent for a trade business — they often save more than they cost.
• Consider a Budget Payment Plan. For Self Assessment, HMRC offers a Budget Payment Plan that lets you pay regular voluntary amounts towards your next bill before it's due. It's a proactive way to spread the cost on your terms — the opposite of scrambling for Time to Pay after the deadline.

Frequently Asked Questions

Can I pay my Self Assessment tax in instalments?

Yes. If you can't pay your Self Assessment bill in full, you can usually spread it over monthly instalments through a Time to Pay arrangement. If you owe below the threshold (commonly up to £30,000), have filed your latest return, are within the set time window and have no other tax debts, you can often set the plan up yourself online. Otherwise you call the HMRC Self Assessment payment helpline to agree one.

Does HMRC charge interest on a payment plan?

Yes. HMRC charges late-payment interest on tax paid after the deadline, and that interest keeps building on the outstanding balance for the life of the Time to Pay plan. The rate is the Bank of England base rate plus a margin, so it changes over time — check the current rate on GOV.UK. A payment plan can help you avoid or reduce penalties, but it does not make the tax interest-free.

What happens if I miss a Time to Pay instalment?

If you miss a payment, HMRC can cancel the arrangement and demand the full remaining balance straight away, then pursue enforcement such as debt collection. If your circumstances change, contact HMRC before you miss a payment — they can sometimes revise the plan. The worst outcome comes from going quiet, not from asking for help.