Here’s a clear, practical walkthrough of how to set up a Time to Pay (TTP) arrangement with HMRC and what it means for your Self Assessment liability
Time to Pay (TTP) — What It Is
A Time to Pay arrangement lets you spread your Self Assessment tax bill over affordable monthly instalments if you can’t pay it in full by the deadline.
It’s not automatic — you must apply, but HMRC routinely agrees if:
- You have a good compliance history,
- The tax debt is temporary (e.g., cash flow issues), and
- You show that you can keep up with the new payment plan.
Example: Your Case
You owe £1,500 (balancing payment) for 2024/25, due 31 January 2026.
You can’t pay the full amount but could manage £250/month.
You can ask HMRC for a 6-month Time to Pay plan from February to July 2026.
How to Apply
Online (fastest)
If your circumstances are straightforward, you can do it online:
- Log into your HMRC online account
- Select “Set up a payment plan”
- You can usually do this within 60 days of the payment deadline
- Must owe < £30,000, have no other payment plans, and your tax returns must be up to date
HMRC will:
- Approve automatically (no phone call needed)
- Confirm the monthly amount and end date
- Begin collecting payments by Direct Debit
By phone (complex cases)
Call the Self Assessment Payment Helpline:
0300 200 3822
(Open Monday–Friday, 8am–6pm)
Have ready:
- Your UTR (Unique Taxpayer Reference)
- The amount you owe and what you can pay upfront
- A monthly payment proposal
- Basic info about your income, outgoings, and savings
HMRC will assess affordability and agree a reasonable plan.
How It Affects Interest & Penalties
| Type | What happens under TTP |
| Interest | Continues to accrue until the debt is cleared, at the usual HMRC rate (e.g., 7.75%) |
| Late payment penalties | Paused once the arrangement is agreed and you stick to it |
| New penalties | None added as long as you keep up payments |
| Defaulting | If you miss a payment, HMRC can cancel the plan and restart penalties |
Example Outcome
You agree to pay £1,500 in 6 instalments of £250 starting 28 Feb 2026.
Interest over 6 months at 7.75% ≈ £44.
Total payable = £1,544 spread over 6 months.
As long as you:
- Make each payment on time, and
- File future returns and payments promptly,
No late payment penalties are applied.
Tips for a Successful Plan
- Offer to pay something upfront (even 10–20%) — HMRC views this positively.
- Be realistic — it’s better to propose a smaller, sustainable amount than to miss a payment.
- If your income changes, you can amend the plan by contacting HMRC early.
- Keep a record of every conversation or confirmation email.
How HMRC calculates the interest during a Time to Pay plan (with the month-by-month breakdown)
Let’s walk through a month-by-month example showing how HMRC calculates interest under a Time to Pay (TTP) arrangement for your Self Assessment balance
Example: Interest During a Time to Pay Arrangement
Scenario
| Item | Details |
| Tax owed | £1,500 (2024/25 balancing payment) |
| Due date | 31 January 2026 |
| TTP agreed | 6 monthly instalments of £250 starting 28 February 2026 |
| HMRC interest rate | 7.75% per year (Bank of England base + 2.5%) |
⚙️ How HMRC Works It Out
- Interest is charged daily on the remaining unpaid balance.
- Each time you make a payment, the outstanding balance drops, and daily interest thereafter is calculated on the reduced amount.
- The formula HMRC uses is:
[
\text{Interest} = \text{Balance} × \text{Rate} × \frac{\text{Days outstanding}}{365}
]
Payment Plan & Interest Breakdown
| Month | Payment date | Balance before payment | Days interest charged | Interest this period | New balance |
| Feb 2026 | 28 Feb | £1,500 | 28 days | £1,500 × 7.75% × 28/365 = £8.91 | £1,250 |
| Mar 2026 | 31 Mar | £1,250 | 31 days | £1,250 × 7.75% × 31/365 = £8.23 | £1,000 |
| Apr 2026 | 30 Apr | £1,000 | 30 days | £1,000 × 7.75% × 30/365 = £6.37 | £750 |
| May 2026 | 31 May | £750 | 31 days | £750 × 7.75% × 31/365 = £4.93 | £500 |
| Jun 2026 | 30 Jun | £500 | 30 days | £500 × 7.75% × 30/365 = £3.18 | £250 |
| Jul 2026 | 31 Jul | £250 | 31 days | £250 × 7.75% × 31/365 = £1.64 | £0 |
🧾 Total Interest Charged
Add the six interest amounts:
[
£8.91 + £8.23 + £6.37 + £4.93 + £3.18 + £1.64 = £33.26
]
Total interest = £33.26
So your total cost over 6 months is:
[
£1,500 + £33.26 = £1,533.26
]
Key Points
- HMRC calculates interest up to the date each instalment is paid.
- If you pay earlier, interest stops on that amount — so you save money.
- If you miss or delay a payment, HMRC recalculates interest on the full balance again and may cancel the TTP.
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