If your business has a tax bill due and you do not have the money to pay it, the worst thing you can do is ignore it. HMRC has a formal process for helping businesses and individuals who are genuinely struggling to meet a tax deadline, and engaging with it proactively almost always produces a better outcome than going silent.
That process is called a Time to Pay arrangement, and this article explains how it works and what you need to do.
The single most important thing to know is this: contact HMRC as early as possible. Ideally, you should act before the deadline passes, or as soon as you know you cannot pay in full. The later you leave it, the fewer options you have, and the higher the risk of penalties, interest and enforcement action.
What Is a Time to Pay Arrangement?
A Time to Pay (TTP) arrangement is an agreement between you and HMRC that allows you to pay a tax debt in instalments over an agreed period rather than in a single lump sum.
It is not a waiver of the debt and it is not a reduction in what you owe. Interest continues to accrue on the outstanding balance throughout the arrangement. The value of a TTP arrangement is that it gives you an agreed route to clear the debt and can prevent the situation escalating into enforcement action while you keep to the terms.
TTP arrangements are available for many of the main taxes, including Corporation Tax, Self Assessment Income Tax, PAYE, VAT, and National Insurance Contributions. HMRC considers each application individually based on your circumstances, your payment history, your ability to pay, and whether the proposed instalments are realistic.
The process is more straightforward than many business owners expect, but it does require you to be organised, honest, and prompt. Having clean and up-to-date financial records before you make contact makes the whole process significantly smoother.
Which Taxes Can Be Covered by a TTP?
| Tax | Online Option | When HMRC Contact Is Usually Needed |
|---|---|---|
| Self Assessment Income Tax | Yes, if you meet HMRC’s eligibility criteria, including having filed your return and owing £30,000 or less | If you owe more than £30,000, need longer than the standard online period, have not filed, or have other complications |
| Corporation Tax | HMRC’s online payment plan service can be used to check options, but company debts often require direct HMRC contact | Usually needed where the company tax position is complex or the amount is significant |
| VAT | HMRC’s online payment plan service may be available in some cases | Needed where you are not eligible online, have multiple debts, or need a more complex arrangement |
| PAYE and Employer NIC | Usually handled through HMRC’s payment support contact routes | Usually needed |
| Class 2 and Class 4 NIC | Usually dealt with through the Self Assessment process | Needed where the Self Assessment online option is not available |
For Self Assessment debts of £30,000 or less, where the return has been filed and the other eligibility conditions are met, HMRC may allow you to set up an online payment plan without speaking to an adviser.
For business taxes, you should use HMRC’s online payment plan service or payment support contact routes. If you have already missed a deadline, HMRC lists separate payment helplines for Self Assessment, VAT, PAYE and Corporation Tax. If you are seeking help before a formal demand has been issued, HMRC’s Business Payment Support Service may also be relevant.
What HMRC Will Ask You
When you contact HMRC to request a TTP arrangement, you should be prepared to explain your situation clearly and provide supporting information. HMRC will typically want to know:
- Why you cannot pay on time, for example a specific cash flow event, a bad debt from a customer, or a period of reduced trading
- What you have done to try to raise the funds
- Your current income and expenditure, both for the business and, in some cases, personally
- What you owe and when you can realistically begin paying
- How much you can afford to pay each month
- Whether there are other taxes you need to pay
- Whether you have savings, assets, stock, vehicles or other resources that could be used to reduce the debt
- Whether upcoming income, such as a large invoice being settled, will help you clear the balance
HMRC is looking for evidence that you have a credible repayment plan. If your business is profitable but has a temporary liquidity issue, TTP may be suitable. If your business cannot cover its debts at all and is not viable, TTP is unlikely to solve the underlying problem and you may need different advice.
Having a clear and current picture of your finances before you call makes a significant difference. If you use a management accounting service that produces regular reports, you can go into the conversation with precise figures rather than estimates, which gives HMRC more confidence that you understand your position and have a realistic plan.
How Long Will HMRC Give You?
There is no fixed maximum duration for a TTP arrangement. The length is agreed based on what HMRC considers affordable and reasonable given your circumstances.
In practice, arrangements of 3 to 12 months are common for smaller tax debts, but longer arrangements can be agreed in more complex cases where the repayment proposal is credible. HMRC will not usually agree to an arrangement that simply defers the problem indefinitely.
The monthly payment amount is based on what you can afford after essential business and personal outgoings. HMRC may ask for income and expenditure details to test whether the proposal is realistic.
If your circumstances change and you cannot meet the agreed payments, you must contact HMRC immediately rather than simply missing a payment. A missed payment without prior contact can result in the arrangement being cancelled.
Interest During a TTP Arrangement
HMRC charges interest on tax that is paid late, and a TTP arrangement does not stop interest running.
From 6 April 2025, HMRC’s late payment interest rate for the main taxes is set at the Bank of England base rate plus 4 percentage points. From 9 January 2026, the published late payment interest rate is 7.75%.
This is a meaningful cost over a 12-month arrangement. If you owe £50,000 in Corporation Tax and spread it over 12 months, interest will be calculated daily on the outstanding balance as it reduces. Depending on the repayment profile and the rate in force, the interest could still run into the low thousands. That is a cost worth factoring into your cash flow planning.
If you can afford to clear the debt faster, doing so reduces the total interest you pay. Equally, if the alternative is an expensive overdraft or business loan, HMRC’s interest rate may still be cheaper than some forms of commercial borrowing. The right answer depends on the numbers.
Penalties and What TTP Protects You From
It is important to understand what a TTP arrangement does and does not protect you from. A properly agreed TTP arrangement can prevent HMRC from taking enforcement action while the arrangement is in place, provided you keep to the terms.
It does not stop late payment interest. It also does not automatically remove penalties that have already been charged. However, in some tax regimes, approaching HMRC early and agreeing a TTP can help reduce or avoid certain late payment penalties.
For VAT, the current late payment penalty regime gives you a short window to act. If VAT is paid in full, or a Time to Pay arrangement is requested and agreed, within 15 days of the due date, no first late payment penalty is charged. From day 16 onwards, penalties can apply. If VAT remains unpaid at day 31, a further penalty structure applies and a daily second penalty can begin to accrue.
For Self Assessment, late payment penalties can apply at 30 days, 6 months and 12 months if the tax remains unpaid. For Corporation Tax, late payment interest runs from the due date, and late filing penalties can apply separately if the CT600 is not filed on time.
Understanding exactly which penalties apply and when is part of what an accountants stockport businesses work with can help you manage. Getting the timing of your contact with HMRC right, ideally before the formal deadline or as soon as possible afterwards, reduces the risk of additional charges.
Corporation Tax and TTP
If it is your Corporation Tax bill that you cannot meet, a few things are worth knowing.
Corporation Tax is generally due 9 months and 1 day after the end of your accounting period, though large companies may pay in quarterly instalments. Our corporation tax deadlines in the UK guide sets out the full payment timeline clearly.
You should not wait until the CT600 filing deadline before dealing with payment. The payment deadline usually comes before the CT600 filing deadline, so you need a reliable estimate of the liability in advance.
Working with a limited company tax accountant before the payment deadline means you know what is due well in advance and have time to plan, rather than finding out at the last moment that the bill is larger than expected.
Our Corporation Tax Calculator gives you a quick estimate so you are not caught off guard, and our guide to how to calculate corporation tax explains the mechanics behind the figure.
If there are legitimate ways to reduce your corporation tax liability that have not been explored, that conversation should happen before the return is filed rather than after the bill arrives.
Self Assessment and TTP
For sole traders and company directors who take salary and dividends, HMRC self assessment is the mechanism through which personal income tax is collected. The payment dates are 31 January and 31 July each year for payments on account, with any balancing payment due on 31 January.
If you cannot pay your Self Assessment bill on time, acting quickly is essential. The online TTP option is usually available only if your return has already been submitted and you meet HMRC’s eligibility criteria. If you owe more than £30,000, need longer to pay, or have other tax debts, you will usually need to contact HMRC directly.
Our Self-Employed Tax Calculator can help you model your expected liability well before the filing deadline so that surprises are minimised.
If you do not yet have a UTR number or are not yet registered for Self Assessment, our guide on UTR numbers covers what you need and how to get one. Being registered and filing on time is important, because late registration or late filing can remove options you may otherwise have had.
VAT and TTP
VAT is payable quarterly for most businesses, which means cash flow pressure from VAT tends to arrive regularly rather than as a single annual event. If your VAT bill is difficult to meet, the same principles apply: contact HMRC quickly, be ready to explain your position, and have your figures to hand.
One specific issue with VAT and cash flow is the timing mismatch between when you invoice your customers and when you collect cash from them. If your customers are slow payers and you are on standard VAT accounting, you can end up paying VAT to HMRC on income you have not yet received.
Switching to the Cash Accounting Scheme can help eligible businesses, as it means you usually account for output VAT when payment is received rather than when the invoice is issued. This is not suitable for every business, but it can be useful where late customer payments are a recurring problem.
Our guide to understanding VAT registration and the signs your business needs to register for VAT early are worth reading if your VAT position is relatively new territory. You can use our VAT Calculator to check your expected liability each quarter so you are not estimating when planning your cash flow.
PAYE, NIC, and Payroll
If it is your PAYE and employer NIC that you cannot pay on time, you should contact HMRC as soon as possible through the relevant employer payment support route.
The rules are similar to other taxes: engaging proactively is essential, and continuing to meet your ongoing obligations while a TTP arrangement covers historic debt is usually a condition of keeping the arrangement in place.
Payroll services stockport businesses use can ensure your payroll is calculated correctly and your RTI submissions are made on time, which helps you avoid a situation where you discover an unexpected PAYE liability mid-year.
The 5 payroll problems small employers can avoid guide covers the most common errors that lead to underpayments to HMRC, and avoiding those errors in the first place is always preferable to resolving them through a TTP arrangement.
Understanding employer NI rates and keeping accurate payroll records means your liability is less likely to come as a surprise. If you are a newer employer, our guide to what employers need to know before hiring their first employee covers the basics of setting up your PAYE obligations correctly from the start.
Why Cash Flow Management Matters More Than TTP
A Time to Pay arrangement is a useful tool in a difficult situation, but the better goal is never to need one. The businesses that find themselves regularly unable to meet tax deadlines are almost always the ones whose cash flow management needs attention, not just their tax planning.
How poor invoice tracking can damage your cash flow sets out one of the most common root causes. If you are regularly waiting longer than your payment terms to collect money from customers, the cash you need to pay HMRC simply may not be there when the deadline arrives.
How Xero can make it easier to stay on top of cash flow explains how the right tools can give you real-time visibility of what is coming in and going out. With Xero accountants Stockport businesses depend on managing their records, you can see your tax liabilities building in your accounts throughout the year rather than only discovering the size of the bill when it falls due.
If your bookkeeping has been getting behind, our guide on how often a small business should update its bookkeeping is a practical starting point for getting back on track, and our bookkeeping checklists for UK small businesses give a step-by-step framework to follow month by month.
The risks of messy bookkeeping creating problems at year end apply just as much to your tax payment planning as they do to your accounts preparation.
Using Management Accounts to Anticipate Problems
The businesses that handle cash flow difficulties best are the ones that see them coming. Regular management accounts give you a forward-looking view of your cash position, which means you know several months in advance that a tax bill is going to be difficult to meet.
That lead time is exactly what you need to plan ahead, whether that means building up reserves, arranging a credit facility, reducing spending, chasing overdue invoices, or approaching HMRC before any deadline passes.
Our management accounts vs year-end accounts guide explains the difference clearly. Year-end accounts tell you what happened. Management accounts tell you what is happening now and, with a cash flow forecast attached, what is likely to happen next.
The 3 accounting reports every limited company owner should review regularly includes cash flow as a fundamental piece of financial monitoring.
How management accounts help directors control business spending is particularly relevant here. A director who reviews management accounts every month knows when a cash crunch is developing and can act before it becomes a crisis. A director who reviews accounts once a year, at the point of preparing the statutory accounts, often finds out too late.
Directors and Personal Tax Liabilities
For company directors, there is sometimes a distinction worth making between the company’s tax liabilities and your own personal Self Assessment liabilities. If your company is struggling to meet its Corporation Tax obligations and you also have a personal Self Assessment bill due, these need to be handled separately.
Your personal tax position is yours alone, and HMRC self assessment debt is your personal liability. If the company is under financial pressure, it is easy to focus entirely on the business and let personal filings or personal payments slip, which compounds the problem.
Making sure both are dealt with, and that both TTP applications are handled properly and separately if needed, is important.
Our UK income tax guide gives a clear overview of how income tax works for individuals, and our tax tables for 2025/26 are a useful reference for key rates and thresholds, though current-year figures should always be checked before making decisions.
If your directors loan accounts position also needs attention alongside any TTP arrangements, getting that reviewed as part of the same conversation avoids complications. Overdrawn director’s loan accounts can create additional tax charges that further complicate an already difficult cash flow situation.
When TTP Is Not Enough
In some cases, a Time to Pay arrangement is not the right answer because the underlying problem is not a temporary cash flow issue but a structural one.
If your business is trading at a loss, carrying debts it cannot realistically repay, and TTP simply delays the inevitable, you need to take different advice. HMRC will not usually agree to a plan that is not affordable, and even if an arrangement is granted, it will fail if the business cannot keep up with both the instalments and its ongoing tax obligations.
If you are in this position, taking advice early gives you more options. Informal arrangements with creditors, Company Voluntary Arrangements, restructuring, cost reduction, refinancing and insolvency advice all require time and professional support to assess properly. Waiting until HMRC begins enforcement action removes options progressively.
For businesses reconsidering their whole operating model in response to persistent financial pressure, understanding what dubai relocation services for uk businesses can offer in terms of future structure and tax planning may be worth exploring for the right businesses. It is not a solution to an existing HMRC debt or insolvency, but for viable businesses where the long-term UK cost base is part of the issue, it can form part of a broader strategic review.
FAQs: Time to Pay Arrangements
Can I apply for a TTP arrangement before my tax deadline?
Yes, and this is strongly encouraged. HMRC generally prefers businesses and individuals to make contact as soon as they know they cannot pay in full, rather than waiting until the debt is older and penalties have started to build.
Does a TTP arrangement affect my credit rating?
A TTP arrangement with HMRC does not usually appear on personal or business credit reports in the way that a County Court Judgment or insolvency process would. However, if you ignore the debt and HMRC takes enforcement action, the consequences can become more serious and may affect your wider financial position.
Will HMRC always agree to a TTP arrangement?
No. HMRC assesses each application individually and can decline arrangements where it does not believe the repayment plan is credible, where the business has a poor payment history and no reasonable explanation, or where the business appears unable to meet even the proposed instalments. If HMRC refuses, you should take professional advice immediately.
What happens if I miss a payment under a TTP arrangement?
If you miss a payment without contacting HMRC first, the arrangement may be cancelled. If that happens, the full outstanding balance can become due and HMRC may begin enforcement action. Contact HMRC as soon as you know you cannot meet a payment.
Can I apply for a TTP arrangement for more than one tax type at once?
Yes. If you owe VAT, PAYE and Corporation Tax, for example, you may need arrangements for more than one tax type. HMRC will look at your overall position and affordability. The important point is to be clear about every tax debt, not just the one with the closest deadline.
Is there a minimum or maximum amount for a TTP arrangement?
There is no single formal minimum or maximum that applies to every tax and every case. The online Self Assessment TTP option has a £30,000 limit, but larger debts may still be considered by HMRC directly. Each case is assessed on its own facts, including your ability to pay.
Does interest stop if HMRC agrees a TTP arrangement?
No. Interest continues to accrue on the outstanding balance throughout the arrangement at HMRC’s late payment interest rate. From 9 January 2026, that rate is 7.75%, but it changes when the Bank of England base rate changes.
Get the Right Support Before Things Get Difficult
If you are worried about meeting a tax deadline, the most valuable thing you can do right now is speak to someone who understands both the HMRC process and your business finances. The sooner you take advice, the more options you have.
At U&W Chartered Accountants, we work with businesses across Stockport and the wider UK to manage their tax obligations and deal with HMRC proactively. Whether you need support preparing for a Time to Pay conversation, reviewing your cash flow to prevent the problem recurring, or getting your accounts in order, we are here to help.
Find out more about what we do on our about page or reach us directly through our contact page. You can also get an instant quote for your limited company or a quote as a sole trader to see how our services are priced.
