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.
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.
| HMRC Time to Pay | VAT / tax funding | |
|---|---|---|
| You owe | HMRC, in instalments | A lender; HMRC paid in full |
| Cost | HMRC late-payment interest | Lender's fixed cost, quoted upfront |
| Affects future borrowing | Lenders ask about tax arrears | Tax record stays clean |
| Best asked for | Before the deadline | Before the deadline |
Frequently asked questions
Will HMRC agree a Time to Pay arrangement for my business?
Time to Pay is commonly agreed when a business asks before the deadline, has its returns filed, and proposes instalments it can genuinely afford. It is far less flexible after a missed deadline or a previously broken arrangement. Smaller debts can often be set up online through your business tax account; larger ones go through the Payment Support Service by phone.
Does a Time to Pay arrangement stop penalties and interest?
It can stop late payment penalties: under the VAT penalty rules, no penalty applies if a Time to Pay arrangement is agreed from proposals made within 15 days of the due date and kept to. Interest is different — it continues to run on the outstanding balance at HMRC’s late payment rate (Bank of England base rate plus 4% since April 2025) until the debt is cleared.
What happens if I miss a payment on a Time to Pay plan?
The arrangement can be cancelled, penalties revive, and HMRC enforcement options come back into play. New tax bills must also be paid on time while a plan runs — falling behind on those breaks the arrangement too. If circumstances change, contact HMRC before a payment is missed.
Is it better to get funding than a Time to Pay arrangement?
It depends what the business needs next. Funding keeps HMRC paid in full and the tax record clean — which matters if you expect to apply for finance soon, since lenders ask about arrears. Time to Pay avoids a lender relationship and suits businesses with no borrowing plans. Compare HMRC interest against a lender’s quoted total cost for your actual numbers.
Is CapExpand FCA regulated?
No. CapExpand Ltd is not authorised by the Financial Conduct Authority and only completes non-regulated introductions, which is why we currently work with limited companies and LLPs for business purposes rather than sole traders or partnerships.
Weighing Time to Pay against funding?
Tell us the bill and the deadline. We show you the funding side of the comparison with real numbers.
Important information
CapExpand Ltd is not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. We work with UK limited companies and LLPs only, for business and commercial purposes. We are not a lender and we do not provide financial, tax or legal advice. We work with a panel of lenders whose particulars are available on request, and we receive commission from the lender if a deal completes, at no cost to you. All lending is subject to status, valuation where applicable and the lender's own checks.
Registered office: Pure Offices, Lake View Drive, Annesley, Nottingham, NG15 0DT. Company No. 14433858.