If You Cannot Pay Your Tax Bill on Time

Introduction

If you're struggling to pay your tax bill, it's important to act quickly. HMRC offers payment plans that let you pay in instalments, but you must contact them before taking enforcement action. This article explains your options, how to set up a Time to Pay arrangement, and what happens if you don't pay.

What is a Time to Pay arrangement?

A Time to Pay arrangement is a payment plan that allows you to pay your overdue tax bill in monthly instalments. HMRC will check whether the plan is affordable based on your income and spending. If you cannot agree a payment plan, HMRC will ask you to pay the full amount you owe.

This is different from a Budget Payment Plan, which you can use if your bill is not yet overdue and you want to make weekly or monthly payments towards your next Self Assessment tax bill.

Setting up a payment plan

To set up a Time to Pay arrangement, you'll need:

• The relevant reference number for the tax you cannot pay (such as your unique tax reference number, usually found on letters from HMRC)
• Your UK bank account details (you must be authorised to set up a Direct Debit)
• Details of your income and spending, or your company's income and spending if you owe company tax

You can set up a payment plan online through HMRC's digital service. This will check if you're eligible and guide you through the process.

If you cannot set up a payment plan online

If the online service doesn't work for you, contact HMRC's Payment Support Service directly. You'll need to tell them:

• If you can pay in full
• How much you can repay each month
• If there are other taxes you need to pay
• How much money you earn
• How much you usually spend each month
• What savings or investments you have

If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible. If you've received independent debt advice from organisations like Citizens Advice, you may have a Standard Financial Statement, which HMRC will accept as evidence of your income and spending.

Special considerations for companies

If your company owes tax, HMRC will ask how you'll pay the bill as quickly as possible. You must reduce your debt as much as possible before setting up a payment plan by releasing assets like stock, vehicles and shares.

HMRC may ask company directors to:

• Put personal funds into the business
• Accept lending
• Extend credit

How much you'll pay each month

The amount you pay each month is based on what you have left after paying essential costs like rent, food, utility bills and fixed outgoings such as subscriptions. HMRC will usually ask you to pay around half of what you have left over each month towards your tax debt.

You can agree to pay more if you want to clear the debt faster. Paying quicker means you'll pay less in total because you'll pay less interest.

If you receive a pension, HMRC will count that as income, but will not count the amount in your pension pot as savings.

How long payment plans last

There's no time limit on how long a payment plan can last. The duration depends on how much you owe and what you can afford to pay each month.

You should contact HMRC if your circumstances change and this could affect your payment plan. You can make the plan longer or shorter. If HMRC discovers that your circumstances have changed, they may contact you to discuss changing your repayments.

If you miss a payment

HMRC will contact you to find out why you missed a payment. Where possible, they'll try to rearrange or renegotiate the payment plan with you.

If you cannot pay another tax bill that becomes due while you're on a payment plan, contact HMRC. You may be able to include the new tax bill in your existing payment plan.

What happens if you don't contact HMRC

HMRC will always try to contact you if you miss a tax payment. This can include sending letters, texts and visiting you at home or at work.

If you do not get in contact with HMRC or cannot agree an instalment plan, HMRC may:

• Ask a debt collection agency to collect the money
• Collect what you owe directly from your wages or any monthly pension payments
• Take things you own and sell them (in England, Wales or Northern Ireland)
• Take money directly from your bank account or building society savings (in England, Wales or Northern Ireland)
• Take you to court
• Make you bankrupt
• Close down your company if the tax is a business tax

Any costs, such as auction fees, are normally added to your debt. HMRC will tell you before taking any of these actions and will explain your rights, costs and options.

HMRC visits and debt collection agencies

If you don't respond to HMRC's attempts to contact you, they may visit you at your home or business address to understand your circumstances. During these visits, HMRC collectors will:

• Ask about your financial situation and ability to pay
• Try to agree how best to settle the debt
• Take payment directly from you during the visit if possible

All HMRC collectors carry card payment machines to take payment safely and securely. You can pay by personal debit card or corporate debit or credit card (though there's a non-refundable fee for corporate cards). You cannot pay by personal credit card.

HMRC may also use debt collection agencies to settle your debt. These agencies will only contact you by letter, SMS text message or phone—they will never visit you at home or work. You can pay them what you owe or talk to them about setting up a Time to Pay arrangement. When your payment clears, the agency will send it to HMRC to credit to your account.

Getting help and advice

If you need free debt advice:

• England or Wales: Money Helper provides information about debt management and free debt advice
• Scotland: Scotland Debt Solutions offers free debt advice
• Northern Ireland: Advice NI provides free debt advice

Making a complaint

You cannot appeal against HMRC's decision about whether to offer you a payment plan, but you can make a complaint if you're unhappy about how you were treated.

If you need to complain about a debt collection agency, you can do this through the agency itself or through HMRC if you're dissatisfied with how the agency handled your original complaint.

Sources

• If you cannot pay your tax bill on time
• Find out what to do if you owe money to HMRC
• What will happen if you do not pay your tax bill

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.