Self-Assessment tax bills can be paid in monthly instalments, via an online self-serve facility, instead of calling HMRC directly.

A Time to Pay arrangement can cover all outstanding amounts due to HMRC, including tax, duty, penalties, surcharges and interest.

Every Time to Pay arrangement is based on an individual’s financial circumstances, there is no standard agreement and no upper limit on the amount of time that someone can have to pay.

What are the criteria for setting up Time to Pay?

A payment plan can be set up to spread the cost of a Self-Assessment tax bill if:

  • The amount owed is £30,000 or less;
  • There are no other payment plans or debts with HMRC;
  • Tax returns are up to date; and
  • It is less than 60 days after the payment deadline.

What do HMRC use to determine a payment plan?

HMRC take into consideration what an individual can afford to pay when calculating how much time they need to pay by using an ‘income and expenditure’ assessment.

  • HMRC looks at income, disposable assets and expenditure to calculate the disposable income; and
  • Disposable income is the monthly surplus income after deducting monthly expenditure.

Here is an example of the form HMRC use to gather income and expenditure information.

HMRC require details of:

  • Current financial position, including income and expenditure, savings, investments and other assets;
  • Details of the tax that cannot be paid, covering all debts outstanding to HMRC;
  • Why the tax cannot be paid and what has been done to pay the tax bill on time and in full;
  • The action that is being taken to ensure the payment of tax gets back on track; and
  • How finances are expected to change in the future.

How much is typically paid into the arrangement?

  • It is typically expected that an individual will pay no more than 50% of their disposable income into their Time to Pay arrangement; however
  • This may be more if the disposable income is very high;
  • More than 50% can be paid into the arrangement, at the individual’s discretion, in order to reduce the amount of interest paid;
  • Interest will be charged on the plan, this will be from the due date to the end of the Time to Pay arrangement. Further details on interest payable can be found here.
  • If the income and expenditure information show that there is not enough disposable income, HMRC will pause collection activity until the circumstances change.

How are assets treated when making a Time to Pay arrangement?

HMRC will discuss payment of liabilities through the realisation of assets, for example savings, shares or a second home.

  • If there are assets that can be realised then HMRC will expect this to be done in order to reduce the debt, prior to making any Time to Pay arrangement;
  • It is not expected that a family home should be sold in order to reduce the debt; however
  • A charge may be taken on a family home to secure the debt if it is not possible to agree a Time to Pay arrangement and there is no other means of payment available;
  • It is not expected that pension funds should be accessed early in order to reduce the debt; and
  • A pension is taken into account when calculating an income and expenditure position.

How are Time to Pay arrangements made?

M+A Partners are unfortunately unable to set up an online Time to Pay arrangement for our clients. This is because the arrangement must be set up directly by the taxpayer.

Self-Assessment Time to Pay arrangements can be set up online.

To set up your Time to Pay arrangement, you will need your Government Gateway ID and can access the log in screen by clicking on “set up a Time to Pay Arrangement online” here .

If you do not have a Government Gateway account, then this can be set up by clicking on “Create sign in details” accessible via the same link.

The Self-Assessment helpline is available for those not eligible for a payment plan, or unable to use the online service:

Self-Assessment Payment Helpline
Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm
Find out about call charges