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Struggling to Pay Tax? Use HMRC’s Time to Pay Scheme


The Self Assessment deadline is fast-approaching and a year of COVID-19 has left many businesses struggling to pay.

Luckily, there is a solution so try not to panic too much. HMRC’s Time to Pay scheme allows businesses to pay tax in instalments instead. We’ll give you a quick breakdown on how the scheme works, who can use it and how you can apply.

This article contains:

  • How does the Time to Pay scheme work?
  • Can anyone use Time to Pay?
  • How do you apply for Time to Pay?

How does the Time to Pay scheme work?

The Time to Pay scheme is a payment plan that spreads the cost of your outstanding tax debt over an agreed number of months. The typical arrangement lasts 12 months.

The Time to Pay scheme usually comes with a 3.5% penalty charge to pay in instalments. Don’t worry though. The government announced that this fee will be waived for the duration of the pandemic.

Can anyone use Time to Pay?

For HMRC to accept your application, you will need to meet the following criteria:

  • You must have submitted your 2019/20 tax return
  • You must have no previous tax returns outstanding
  • The amount of tax you owe must be at least £32, but no greater than £30,000
  • You must not have any other tax instalment plans in place.

If these conditions are not met, you will be classed as ineligible for the payment plan. However, sometimes eligible businesses are rejected as well. A common reason for this is that the tax return has not been processed yet. If you have only just submitted your return, you may have to wait up to 72 hours before applying for the payment plan.

If you are still having trouble, it’s best to either ask your accountant for help or call the Self Assessment payment helpline on 0300 200 3822.

How do you apply for Time to Pay?

To apply for the payment plan, you can call the HMRC helpline to negotiate your agreement. You will need to outline your case and explain why you are unable to pay your tax bill by the deadline.

You will need to know exactly how much you owe and how much you can afford to pay per month. You will then need to make an offer to HMRC to pay the tax by a certain deadline. While it may be tempting to try and clear it as quickly as possible, it’s important to be honest about how much your business can comfortably afford.

Once an offer has been accepted, you will need to get this in writing and send any evidence of cash flow that they ask for. The HMRC adviser will tell you your rights, the terms of the agreement and discuss penalties if you don’t keep up with repayments.

For those who would rather not negotiate themselves, your accountant can act as an agent during the negotiation. This means they will represent you to HMRC on your behalf.

For more information on how to apply and what the process is, take a look at the Gov.uk online guide.