HMRC Time to Pay: how it works for UK businesses

A Time to Pay arrangement spreads a tax bill you cannot pay in one go (VAT, PAYE or corporation tax) into instalments agreed directly with HMRC. HMRC agrees these routinely for businesses that ask before the deadline with a realistic proposal; it refuses far more often when asked after the deadline has already passed.

What follows covers how to ask, what HMRC weighs up, what an arrangement costs and what breaks one, and where tax funding fits instead.

How do I actually ask HMRC for Time to Pay?

For smaller debts, HMRC runs online self-serve Time to Pay for VAT, PAYE and Self Assessment through your business tax account — eligibility thresholds and terms are set out on gov.uk and change periodically, so check the current rules there. Above the self-serve thresholds, you call the Payment Support Service and propose a plan.

Before contacting HMRC, prepare three things: the exact amount owed, a realistic monthly instalment your cash flow genuinely supports, and a short explanation of why the bill cannot be paid in full now and why the business is viable going forward. File the return itself on time regardless — late-return penalties are separate from late payment, and an unfiled return usually blocks any arrangement.

What does HMRC look for before agreeing?

HMRC is assessing one question: is this a viable business with a temporary problem, or a failing business deferring the inevitable? Arrangements are agreed when the proposal is affordable but meaningful, when returns are filed and up to date, and when the business has a reasonable compliance history. A history of previous broken arrangements makes a new one much harder.

Shorter plans are easier to agree than longer ones. Businesses that propose the largest instalment they can genuinely sustain, rather than the smallest they can get away with, tend to get agreement more readily and clear the interest-bearing balance sooner.

What does Time to Pay cost, and what breaks it?

Interest runs on the outstanding balance at HMRC’s late payment rate, which since 6 April 2025 is set at the Bank of England base rate plus 4% (the current figure is published on gov.uk). On penalties, HMRC’s guidance is specific: for VAT under the points-based penalty regime, no late payment penalty applies if you pay within 15 days of the due date, or if a Time to Pay arrangement is agreed from proposals made within that window and you keep to it.

An arrangement breaks when an instalment is missed or when new tax bills fall due and go unpaid, since staying current on new liabilities is a condition of every plan. The consequence of breaking one is severe: HMRC can cancel the agreement and charge late payment penalties calculated as if the arrangement had never existed. If circumstances change mid-plan, call HMRC before missing a payment rather than after.

The arithmetic that decides between them

Time to Pay is not free money and a tax facility is not automatically dearer. Both carry a cost, and the comparison only works when you put the two totals next to each other rather than comparing an interest rate to a feeling. HMRC charges interest on the outstanding balance for the life of the arrangement, and the arrangement usually has to clear within a short window rather than a term of your choosing.

On our side, at £25,000 there are 36 lenders with a product covering the amount over terms of 1 to 72 months, published rate floors from 4.1% and a median floor of 19.2% a year (checked September 2026). At £50,000 the count rises to 47 and the median floor falls to 17%.

Dedicated tax lenders sit on our unsecured panel of 55 alongside general working-capital providers, including Adsum, BloomSmith, White Oak, Premium Credit. A specialist usually pays HMRC directly.

The point most people miss is that these are not alternatives so much as sequenced. A Time to Pay arrangement already in place is a strike against a later credit application at some lenders, because it shows on the accounts and in the conversation. Where you expect to need borrowing for something else within the year, arranging the tax facility first and keeping the HMRC record clean is often the better order. That is a judgement about your circumstances, and the lender still makes its own decision either way.

Time to Pay or tax funding — which fits when?

Both spread the same bill; they differ in who you owe and what it signals. Time to Pay costs HMRC interest and requires the conversation with HMRC; funding costs a lender’s fee and keeps HMRC paid in full and on time. Businesses planning a larger finance application soon often prefer funding, because lenders ask about tax arrears and an HMRC arrangement is exactly that. Businesses with no borrowing plans and a solid HMRC history often prefer Time to Pay for its simplicity.

Frequently asked questions

Related pages

• Can't pay your VAT bill: options before the deadline
• VAT and tax funding
• Cash flow problems: practical options
• Business funding glossary

Sources

HMRC guidance was read on 7 September 2026. Panel counts cover available products only.

1. HMRC: if you cannot pay your tax bill on time
2. HMRC: pay your VAT bill
3. HMRC: set up a Self Assessment payment plan
4. HMRC: interest rates for late and early payments
5. British Business Bank: business guidance