How do I set up a time to pay arrangement with HMRC?

A time to pay arrangement lets you settle a tax bill, including one arising from an enquiry, over a series of monthly instalments instead of one lump sum.

You apply by contacting HMRC, either online for smaller Self Assessment debts or by phone through the Payment Support Service for larger or more complex bills, including those following a compliance check.

HMRC will ask about your income, outgoings and assets before agreeing a plan, because it wants a proposal it believes you can actually keep to, not one that will collapse after a few months.

Time to pay isn't set out in a single piece of tax legislation; it's an exercise of HMRC's collection and management powers, applied through internal guidance and case-by-case negotiation.

Interest continues to accrue on the unpaid balance throughout the arrangement, calculated by reference to the Bank of England base rate, because time to pay defers payment rather than waiving the underlying liability.

If you default on the agreed instalments, HMRC can cancel the arrangement and pursue the full outstanding balance immediately, including through debt recovery action.

Following an enquiry, the company may owe Corporation Tax, VAT or PAYE, while you personally may owe Self Assessment tax and any penalty attributed to you. Each debt can, in principle, need its own arrangement, though HMRC will often discuss them together.

Directors sometimes assume a time to pay arrangement protects the company from insolvency risk. It buys time, but the debt remains real, and continuing to trade while insolvent carries separate director duties regardless of any payment plan.

Being upfront with HMRC about cash flow difficulties, supported by management accounts or a cash flow forecast, significantly improves the chances of a workable arrangement being agreed.

The arrangement itself doesn't carry a separate fee, but interest keeps accruing throughout, so spreading payments over a longer period increases the total interest paid compared with settling immediately.

If you default, HMRC can also consider further recovery action, including direct recovery of debts from your bank account in the most serious cases, so it's important to only agree to instalments you can genuinely maintain.

Growth plan clients have free tax investigation insurance included, which can help with the professional support needed to negotiate a realistic arrangement — see /fees.

Don't wait until after the payment deadline has passed to make contact; applying in advance shows good faith and avoids automatic late payment penalties on top of the bill.

Don't propose instalments you can't realistically sustain just to get the immediate pressure off. A defaulted arrangement often leaves you worse off than the original position.

Don't ignore HMRC's request for financial information. Refusing to provide it makes agreement far less likely.