How to Spread Your Tax Payments When You Can’t Pay Your Tax Bill

Struggling to Pay Your Tax Bill? Here Are Your Options

If you find yourself unable to pay your tax bill by the usual deadline, HMRC offers several ways to spread the payment. The available options depend on the type of tax you owe, how much is outstanding, and whether you are employed, self-employed or running a company.
It’s important to note that interest will apply on late payments, but penalties are usually avoided if you take action promptly.

Time to Pay (TTP) Arrangement

According to HMRC’s 2024/25 Annual Report, more than 913,000 taxpayers were paying off their tax bills through a Time to Pay arrangement—totalling around £6.16 billion in instalment payments.

A TTP is a formal agreement with HMRC that lets you pay overdue tax in monthly instalments, typically over 12 months. Longer plans are possible but only in exceptional circumstances and require higher-level approval from HMRC.

Who can apply online?

Self-employed taxpayers can apply online if:

• Their latest return has been submitted

• They owe less than £30,000

• They apply within 60 days of the payment deadline (usually by 31 March)

• They have no other HMRC debts or existing payment plans

Applications that do not meet these criteria must be made by phone, and HMRC may ask for detailed financial information before approving the arrangement.

Why a TTP might be rejected

HMRC may reject (or cancel) your TTP if:

• You frequently submit returns late

• You have ignored HMRC letters or reminders

• You fail to update HMRC about changes in your financial situation

If rejected, the taxpayer may face extra penalties, interest, or even debt recovery action.

Taxes covered under TTP

TTP arrangements can also apply to:

• VAT

• PAYE

• Class 4 NIC

• Corporation Tax

However, conditions for these taxes are more stringent. HMRC may ask for proof of business viability, bank statements, and cashflow forecasts.

PAYE Coding Adjustments (For Employees)

If you are employed or receiving a taxable pension and owe £3,000 or less, HMRC can automatically adjust your tax code for the next year to collect the underpayment.
This spreads the bill over 12 months and does not attract interest—unless you opt out on your tax return.

Short-Term Deferral

In exceptional situations, HMRC may allow a short delay in payment without setting up a full TTP arrangement.
This could apply if you experience a sudden emergency, such as an accident.
You must contact HMRC immediately to request this.

Budget Payment Plan (BPP)

The Budget Payment Plan is a voluntary option for Self Assessment taxpayers who want to save for future tax bills through regular weekly or monthly Direct Debit payments.

Key points:

• You choose the amount and frequency of payments

• You must be fully up to date with your tax at the time of setting it up

• No interest is earned on the money paid in, so a savings account may be more beneficial financially

Practical Tip: Avoiding Late Payment Penalties

Self Assessment taxpayers face a 5% late payment penalty if tax remains unpaid on three trigger dates:

• 30 days after the deadline

• 6 months after the deadline

• 12 months after the deadline

For example, for tax due on 31 January 2026, you can avoid the 5% penalty by setting up a Time to Pay arrangement before 2 March 2026 and following the agreed terms.
However, interest will still apply.

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