How the interest would change if you extended your Time To Pay plan to 12 months instead of 6 (so you can compare total cost vs affordability)

Here’s the 12-month version of your Self Assessment Time to Pay plan so you can see how the interest cost changes compared with the 6-month plan

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 Example: 12-Month Time to Pay Interest Calculation

Scenario

Item	Details
Tax owed	£1,500 (balancing payment 2024/25)
Due date	31 January 2026
TTP agreed	12 monthly instalments of £125 starting 28 Feb 2026
HMRC interest rate	7.75 % per year (as of early 2026)

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 HMRC’s Method

Interest is simple daily interest on the outstanding balance until each payment date:

[
\text{Interest} = \text{Balance} × 7.75% × \frac{\text{Days}}{365}
]

Each payment reduces the balance, so later months accrue less interest.

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Month-by-Month Breakdown

Month	Payment date	Balance before payment	Days charged	Interest (£)	New balance
Feb 2026	28 Feb	£1,500	28	£8.91	£1,375
Mar	31 Mar	£1,375	31	£9.08	£1,250
Apr	30 Apr	£1,250	30	£7.97	£1,125
May	31 May	£1,125	31	£7.38	£1,000
Jun	30 Jun	£1,000	30	£6.37	£875
Jul	31 Jul	£875	31	£5.76	£750
Aug	31 Aug	£750	31	£4.93	£625
Sep	30 Sep	£625	30	£3.98	£500
Oct	31 Oct	£500	31	£3.29	£375
Nov	30 Nov	£375	30	£2.39	£250
Dec	31 Dec	£250	31	£1.64	£125
Jan 2027	31 Jan	£125	31	£0.82	£0

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Total Interest

[
£8.91 + £9.08 + £7.97 + £7.38 + £6.37 + £5.76 + £4.93 + £3.98 + £3.29 + £2.39 + £1.64 + £0.82 = \mathbf{£62.52}
]

Total interest = £62.52

So the overall cost is:

[
£1,500 + £62.52 = £1,562.52
]

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Comparison: 6 Months vs 12 Months

Plan length	Monthly payment	Total interest	Total cost	Difference
6 months	£250	£33	£1,533	–
12 months	£125	£63	£1,563	+ £30 interest for 6 extra months

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 Takeaway

• Extending from 6 to 12 months roughly doubles the interest because the balance is outstanding for longer.
• However, it halves your monthly cash outflow, which may make payments manageable.
• HMRC accepts longer plans if you can demonstrate affordability — they prefer steady, on-time payments to none at all.