If you can't cover your Self Assessment bill, a Time to Pay HMRC arrangement spreads it into monthly instalments. Here's who qualifies and how to set one up.
The Self Assessment deadline is a familiar sting for anyone self-employed, but the payment on account is the one that catches people out. You file your return in January, brace yourself for one tax bill, and then find HMRC is asking for that bill plus half of it again as an advance on next year. For a lot of freelancers, that second slice is the difference between paying on time and not being able to pay at all.
If that’s where you are, you’re not stuck and you’re not in trouble yet. A Time to Pay HMRC arrangement lets you spread what you owe into monthly instalments instead of paying it all in one hit. Here’s exactly how it works, who can set one up, and what it costs.
Time to Pay is an agreement with HMRC to clear a tax bill you can’t pay in full by paying it off in fixed monthly amounts over an agreed period, usually up to 12 months, while interest continues to run on the balance.
It isn’t a special favour or a hardship scheme. HMRC set nearly 18,000 of these plans up in the first eight months of the 2025/26 tax year alone. It’s a standard route, and using it early is far better than missing the deadline and hoping.
Most people who reach for Time to Pay have been floored by their first payment on account, so it’s worth understanding the mechanism.
Once your Self Assessment bill goes over £1,000, and less than 80% of your tax is already collected at source, HMRC asks you to pay towards next year in advance. You make two payments on account, each one worth half of your previous year’s tax bill. The first is due on 31 January alongside the balancing payment for the year just gone. The second is due on 31 July.
Worked example. Say your 2025/26 tax bill comes to £4,000. On 31 January 2027 you owe that £4,000 in full, plus a first payment on account of £2,000 towards 2026/27. That’s £6,000 leaving your account in one go. Then on 31 July 2027, another £2,000 is due. In your first year of profit like this, the January bill can be 150% of what you were mentally braced for.
That is why the payment on account, not the original tax, is what pushes people towards a payment plan. Knowing the number is coming doesn’t always mean the cash is there.
HMRC lets you arrange a plan yourself, with no phone call, if all of the following are true:
If you tick all four, you can set the whole thing up inside your HMRC online account. You choose how much to pay upfront, pick a monthly amount you can actually manage, and confirm the plan. HMRC’s guidance on how this works is at gov.uk/pay-self-assessment-tax-bill/pay-in-instalments.
If you owe more than £30,000, or you need longer than 12 months, you can still get a plan, but you have to ring the Self Assessment payment helpline on 0300 200 3822 to arrange it. Expect a few questions about your income, your outgoings, and what you can realistically afford each month.
The self-serve route takes about ten minutes if your return is filed and your figures are settled.
First, log into your HMRC online account with your Government Gateway details and go to the Self Assessment section. Your outstanding balance shows there. Choose the option to set up a payment plan, then enter the size of any upfront payment you want to make. A larger deposit means smaller monthly instalments and less interest overall, so pay what you can spare now without leaving yourself short.
Next, pick your monthly figure. HMRC will show you a schedule based on clearing the balance within the allowed window. Check the monthly amount against your real budget, not your optimistic one. The point of this exercise is to choose a number you’ll still be able to pay in month eight when work is quiet.
Finally, confirm the direct debit. Payments come out automatically on the same date each month. Once it’s set up, keep the confirmation and diarise the dates so a payment never bounces by surprise.
This is the part worth being clear-eyed about. A Time to Pay arrangement does not make your bill free to defer.
Interest keeps accruing on whatever you still owe, right up until the final instalment clears. HMRC’s late payment interest rate is set at the Bank of England base rate plus 4 percentage points, so on a balance of a few thousand pounds spread over a year, you’re looking at tens of pounds, not hundreds.
What the plan does save you is the penalties, and those are the expensive part. Miss the 31 January payment deadline without an arrangement in place and HMRC adds a 5% surcharge on tax still unpaid after 30 days, another 5% after six months, and a further 5% after twelve. On a £4,000 bill, that first 5% alone is £200. A Time to Pay plan set up in time stops those surcharges cold, as long as you keep the instalments going.
So the honest trade-off is: you pay a modest amount of interest to avoid a much larger amount of penalty. For most people who genuinely can’t pay in full, that’s an easy call.
It’s the right move when the money simply isn’t there by the deadline and you know it in advance. Setting up a plan on 20 January for a bill due 31 January is exactly what the system is for. Do it before the deadline, not after.
It’s the wrong move if the real problem is that your payment on account is too high because your income has dropped. In that case, don’t arrange to pay an inflated figure in instalments. Instead, apply to reduce your payments on account. You can do this through your HMRC account or directly on your tax return, and it lowers both the January and July advance payments to match what you actually expect to owe. Just be honest with the estimate, because if you reduce it too far, HMRC charges interest on the shortfall later.
It’s also worth a pause if you’re reaching for Time to Pay every single year. That’s usually a sign the payments on account are catching you off guard, and the fix is to set money aside as you earn rather than scrambling each January. A simple rule of putting 25% to 30% of every invoice into a separate tax pot removes the problem at source.
The core Time to Pay rules are stable. The £30,000 self-serve ceiling, the 60-day window, and the requirement to have filed your return all carry through the 2026/27 tax year unchanged.
What has shifted in recent years is the interest rate. The late payment interest charge rose to base rate plus 4 percentage points from April 2025, up from base rate plus 2.5 points before that, which makes deferring more expensive than it used to be. It’s still far cheaper than the penalties, but it’s another reason to set aside tax as you go rather than lean on instalments by habit.
The self-serve online service has also become the default path. HMRC now steers most Self Assessment taxpayers with bills under £30,000 to arrange plans themselves online rather than phoning in, which is faster for you and means you can sort it at 11pm on a Sunday if that’s when you finally open the letter.
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Yes, if you owe £30,000 or less, you've filed your Self Assessment return, and you're within 60 days of the payment deadline. You set it up yourself through your HMRC online account with no phone call needed. If you owe more than £30,000 or need longer than 12 months, you have to ring HMRC to arrange it.
Yes. Interest keeps building on whatever you still owe until the balance is cleared, currently at the Bank of England base rate plus 4 percentage points. What the plan does stop is the late payment penalties, which are far more expensive than the interest. An active plan protects you from those surcharges as long as you keep up the instalments.
One missed payment doesn't automatically cancel the plan, but you should contact HMRC straight away if you know you'll miss one. If payments stop without explanation, HMRC can cancel the arrangement and demand the full remaining balance at once, plus reinstate the late payment penalties. If your circumstances change, ask to renegotiate rather than going quiet.
Sometimes, yes. If your income has genuinely dropped and you expect a smaller tax bill this year, you can apply to reduce your payments on account through your HMRC account or on the tax return itself. Only do this if you're confident the lower figure is right, because underpaying leaves you with interest to settle later.
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A note on financial advice: NetPay UK calculates take-home pay based on official HMRC tax rules. This article reflects rules in force at the time of publication (8 July 2026). Tax rules change. For complex situations, consult a qualified UK accountant or visit gov.uk/income-tax.
