What should I do if I can't pay my tax bill?
Contact HMRC as early as possible — ideally before the payment deadline — and ask for a Time to Pay arrangement. HMRC is generally willing to agree instalments with people who engage with it, but it treats silence seriously. Keep filing your returns on time even if you can't pay, because late filing penalties are charged separately from late payment.
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File any outstanding returns
HMRC usually won't agree a plan until your returns are up to date, and filing late adds penalties.
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Check exactly what you owe
Use your HMRC online account or the letters you've received. Note which taxes are involved (Self Assessment, VAT, PAYE, Corporation Tax).
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Work out what you can afford
List your income, essential spending and other debts. A free adviser can help you build a budget. Our debt calculator can help you see the bigger picture.
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Set up a plan online or call HMRC
Use the online service if you're eligible (see below). Otherwise call the HMRC Payment Support Service on 0300 200 3835.
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Keep paying current tax
A plan covers what you already owe. You'll be expected to pay new bills on time — missing them can cancel the arrangement.
How does an HMRC Time to Pay arrangement work?
Time to Pay is HMRC's name for a payment plan: you pay what you owe in monthly instalments instead of one lump sum. Interest is still charged on the unpaid balance while the plan runs, but you avoid further late payment penalties and enforcement as long as you keep to it.
Setting up a Self Assessment plan online
According to GOV.UK, you can usually set up a Self Assessment payment plan online if:
- you owe £30,000 or less
- you've filed your latest tax return
- you don't have any other payment plans or debts with HMRC
- it's within 60 days of the payment deadline
The online service shows the monthly amounts and plan lengths available to you, and payments are taken by Direct Debit. There are separate online services for some VAT and employer PAYE debts, with their own limits — check GOV.UK: if you cannot pay your tax bill on time.
What HMRC will ask you about
- Your tax reference (UTR, VAT or PAYE reference) and what you owe
- Why you can't pay in full
- Your monthly income and essential spending
- Savings, investments and other assets
- Other debts and what you pay towards them
- How you'll pay future tax on time
HMRC wants the debt cleared in the shortest time you can realistically manage. Be honest and specific — offering more than you can afford often leads to a broken plan.
Owe HMRC over £30,000? Your options for payment
If you owe HMRC more than £30,000 you can't use the online payment plan service, but you can still ask for a Time to Pay arrangement. Call the HMRC Payment Support Service on 0300 200 3835 with your income, spending and asset details to hand. HMRC will agree instalments it thinks you can afford and may expect savings or other assets to be used first.
1. Negotiate Time to Pay by phone
There's no fixed maximum length, but larger debts get closer scrutiny. Expect detailed questions about your finances. HMRC may ask whether you can pay part upfront, borrow, or use savings. If you run a business, show how the business will meet future tax bills.
2. Pay a lump sum, then a plan for the rest
Paying down part of the debt from savings reduces interest and makes HMRC more likely to accept your proposal for the balance. Think carefully before borrowing to pay tax — turning tax into a secured loan can put your home at risk. See our guide to debt consolidation loans for the risks.
3. Consider a formal debt solution
If you can't pay within a reasonable time, a formal solution may be more realistic:
- Individual Voluntary Arrangement (IVA) — a legally binding agreement to pay what you can afford, usually over 5–6 years, with the rest written off at the end. HMRC votes on IVA proposals like other creditors.
- Bankruptcy — usually writes off personal tax debts after 12 months, but your assets may be sold.
- Debt Relief Order (DRO) — only if your total debts are £50,000 or less, you have very little spare income and few assets.
4. Get free specialist advice first
Business Debtline (0800 197 6026) helps self-employed people and small business owners with tax debts for free, including preparing figures for HMRC. For personal tax debts, National Debtline (0808 808 4000) and StepChange (0800 138 1111) are also free.
What can HMRC do if you don't pay?
HMRC has stronger collection powers than most creditors, and some don't need a court order. It usually escalates step by step, so contacting HMRC at any stage can stop things going further.
| Action | What it means |
|---|---|
| Letters, calls and debt collection agencies | Reminders and demands. HMRC sometimes uses private debt collection agencies — you can still deal with HMRC directly. |
| Collecting through your tax code | If you're employed or get a pension, HMRC can collect some debt through PAYE ("coding out") — up to £17,000 a year depending on your income. |
| Direct Recovery of Debts | HMRC can take money from bank or building society accounts for debts of £1,000 or more. It must leave at least £5,000 across your accounts, and you have the right to object. |
| Taking control of goods | In England and Wales, HMRC can send its own officers or enforcement agents to take goods without first going to court. See your rights when bailiffs visit. |
| County court claim | HMRC can sue for the debt, which can lead to a County Court Judgment. |
| Bankruptcy or winding up | HMRC can petition for your bankruptcy if you owe £5,000 or more, or to wind up a company. |
If you've had a letter about enforcement, contact HMRC immediately and get free advice. A Time to Pay arrangement agreed in time usually stops enforcement going ahead.
How much interest and penalties does HMRC charge?
HMRC charges late payment interest at the Bank of England base rate plus 4 percentage points (since April 2025), from the day after the deadline until you pay — including while you're on a payment plan. The rate changes when the base rate changes; check the current figure on GOV.UK: HMRC interest rates.
Penalties are charged on top of interest and differ by tax:
- Self Assessment (if you're not yet in Making Tax Digital): £100 if your return is late, more if it's later still; late payment penalties of 5% of the unpaid tax at 30 days, 6 months and 12 months.
- VAT and Making Tax Digital for Income Tax: a newer points-based system for late returns and percentage penalties for late payment.
Setting up a Time to Pay arrangement before a penalty date can stop some late payment penalties being charged. If you had a reasonable excuse — such as serious illness or bereavement — you can appeal a penalty. Not having the money is not normally accepted on its own.
What if the tax debt belongs to my limited company?
A limited company's tax debts are normally the company's, not yours personally — but there are exceptions. Directors can become personally liable in some circumstances, for example if National Insurance wasn't paid because of fraud or neglect, or where a company is deliberately run into insolvency to avoid tax. HMRC can also ask for security deposits or petition to wind up the company.
If your company can't pay its tax, talk to HMRC early about Time to Pay and get advice from Business Debtline or a licensed insolvency practitioner before the company's position gets worse. Don't pay yourself or favoured creditors ahead of HMRC if the company is insolvent.
Can tax debts be included in an IVA, DRO or bankruptcy?
Yes — personal tax debts owed to HMRC can usually be included in an IVA, a DRO or bankruptcy. Some debts that HMRC collects, such as tax credit overpayments, are treated in particular ways, so check with an adviser.
| Solution | How it deals with HMRC debt | Key points |
|---|---|---|
| IVA | Included; HMRC votes on the proposal | Needs creditors owed 75% of the voting debt to agree. You'll need to keep up with new tax during the IVA. |
| DRO | Included and written off after 12 months | Total debts £50,000 or less, spare income £75/month or less, assets £2,000 or less. |
| Bankruptcy | Usually written off on discharge (normally 12 months) | £680 fee; assets may be sold; you may have to make payments for up to 3 years. |
Not sure which fits? Compare IVA vs bankruptcy, or read about Breathing Space, which can pause most creditor action for up to 60 days while you get advice.
In Scotland, the options are different (for example the Debt Arrangement Scheme, Protected Trust Deeds and sequestration). Get advice from a Scottish debt adviser.
Where can I get free help with HMRC debts?
HMRC Payment Support Service
0300 200 3835 — to set up or change a Time to Pay arrangement if you can't do it online.
Business Debtline
0800 197 6026 — free advice for self-employed people and small businesses, including tax debts.
National Debtline & StepChange
National Debtline 0808 808 4000 or StepChange 0800 138 1111 — free help with personal debts, including tax.
TaxAid
A charity giving free tax advice to people on low incomes who can't afford an adviser. Contact details are on taxaid.org.uk.
If you have a health condition or circumstances that make dealing with HMRC hard, ask HMRC for extra support. For more free services, see our free debt help page.
Frequently Asked Questions
Can I set up an HMRC payment plan online?
Yes, for Self Assessment if you owe £30,000 or less, you've filed your latest return, you have no other payment plans or debts with HMRC, and it's within 60 days of the payment deadline. Some VAT and employer PAYE debts can also be set up online. Otherwise, call HMRC on 0300 200 3835.
What are my options if I owe HMRC more than £30,000?
You can still get a Time to Pay arrangement, but you have to call the HMRC Payment Support Service on 0300 200 3835 instead of using the online service. HMRC will look closely at your income, spending and assets. If you can't repay in a reasonable time, an IVA or bankruptcy may be options. Business Debtline can help you prepare, for free.
How long can an HMRC Time to Pay arrangement last?
There's no fixed maximum. Plans often last up to 12 months, but HMRC can agree longer if you show you can't afford to pay sooner. HMRC wants the debt cleared as quickly as you can realistically manage, and you must keep up with new tax bills during the plan.
Can HMRC take money from my bank account?
Yes. Under Direct Recovery of Debts, HMRC can take money from bank and building society accounts if you owe £1,000 or more and haven't paid or agreed a plan. It must leave at least £5,000 across your accounts, and you can object. Contacting HMRC to agree a plan usually prevents this.
Does HMRC charge interest on a payment plan?
Yes. Late payment interest is charged on the unpaid balance until it's cleared, including during a Time to Pay arrangement. The rate is the Bank of England base rate plus 4 percentage points. Paying more upfront reduces the total interest.
Can HMRC make me bankrupt?
Yes. Like any creditor, HMRC can petition for your bankruptcy if you owe at least £5,000. It normally sends demands and warnings first. If you're contacted about bankruptcy proceedings, get free advice immediately — agreeing a payment plan can often stop it.
Talk to someone for free
Free debt advisers can help you work out an affordable offer to HMRC and check whether a formal solution would be better.