Spreading your tax costs with Time To Pay

HM Revenue & Customs (HMRC) expects timely payment of your taxes. However, if you’re facing difficulty in paying the full amount, you can approach HMRC to discuss a Time to Pay arrangement.

A Time to Pay arrangement allows you to gradually repay your debt through agreed-upon instalments, reducing the impact of a significant tax bill and aiding you in managing your debt and cash flow effectively.

How does Time to Pay work?

For self-assessment tax, Employer’s PAYE, and VAT, you can often request a Time to Pay arrangement online using a user-friendly ‘self-service’ system.

In cases where you owe other types of taxes or don’t meet the criteria for online applications, you’ll need to contact HMRC directly to discuss your situation.

The most convenient method (although not always the quickest) to discuss your Time to Pay request is by telephoning 0300 200 3835. HMRC agents will inquire about all taxes owed, not just the one(s) for which you wish to spread the payment. They will also request details of your income, expenses, and any savings or assets that may help reduce the amount owed. If you agree to a payment plan during the call, HMRC will usually set up a Direct Debit promptly.

Utilising the self-service Time to Pay system

If you don’t have any existing payment plans or debts with HMRC, the self-service system may offer a more straightforward process, provided that you have already filed the relevant tax returns. The eligibility conditions and allowable amounts vary depending on the specific tax involved.

For instance:

  • Self-Assessment: You must apply within 60 days of the payment deadline and owe no more than £30,000.
  • Employer’s PAYE: The application must be made within 35 days of the deadline, and the debt must not exceed £15,000 and have no outstanding penalties. The maximum repayment period permitted is six months.
  • VAT: To be eligible for the self-service Time to Pay arrangement, you need to apply within 28 days of the due date, and the amount owed should not exceed £20,000. However, if you use either the cash accounting or annual accounting schemes, you cannot apply through the self-service scheme.

It’s important to note that while the self-service option streamlines the process, HMRC is not obligated to offer instalment plans for settling tax liabilities.

Failure to pay your taxes may result in HMRC taking recovery action in the County Court and, where appropriate, applying for liquidation or bankruptcy of the taxpayer.

Discuss the benefits of Time to Pay with us

Working closely with your accountant is one of the most effective ways to avoid difficulties with your tax liabilities. As your tax adviser, we can provide regular forecasts to anticipate any potential financial challenges well in advance.

In the event of unforeseen circumstances, establishing a suitable payment plan with HMRC is the most sensible approach to managing the situation. Ignoring tax problems won’t make them disappear, and neglecting the issue can lead to significant penalties and legal action.

Please feel free to get in touch with us to discuss Time to Pay further.