Paying Your Tax By Direct Debit Monthly

People owe debt to HMRC for a variety of reasons and the best payment solution differs from individual to individual. HMRC takes its responsibility seriously to make sure that people who can pay do so on time, whilst providing extra, bespoke support to people facing financial hardship or in personal difficulty.

If you’re facing difficulty in making a tax payment you should ask us about affordable monthly payment options. We’ll always try to work with you to negotiate time to pay based on your income and expenditure.

Time to pay arrangements are based on an individual’s specific financial circumstances, so there is no ‘standard’ time to pay arrangement. We look at what you can afford to pay and then use that to work out how much time you need to pay.

HMRC typically expects you to pay no more than 50% of your disposable income. This may be higher if you have a very high disposable income. There’s no upper limit on the amount of time that someone can have to pay.

A time to pay arrangement can cover all outstanding amounts overdue including penalties and interest.

It’s designed to be flexible and is not a fixed, formal contract. It can be amended over time, enabling it to be shortened if your earnings rise or if you receive a windfall, for example, an inheritance. Importantly it can also be lengthened should essential expenses increase, or income decrease.

90% of our time to pay arrangements complete successfully.

How to contact HMRC to discuss a time to pay arrangement

If you cannot pay your tax bill and need help you should contact HMRC as soon as possible.

For Self Assessment, you may be able to set up payment plan online. This will let you pay your Self Assessment tax bill in instalments without contacting HMRC.

You can set up a payment plan to spread the cost of your latest Self Assessment bill if:

  • you owe £30,000 or less
  • you do not have any other payment plans or debts with HMRC
  • your tax returns are up to date
  • it’s less than 60 days after the payment deadline

What to expect during a call

During the conversation, we’ll ask you a number of questions. Gather together the information you need before you call. This may include:

  • the reference number relating to the bill that you want to discuss
  • details of the amount of tax that you cannot pay, covering all debts outstanding to HMRC
  • why you’re not able to pay, and what your current financial circumstances are, outlined in what you can afford to pay
  • what you’ve done to try to pay your bill on time and in full
  • how you expect your finances to change in future
  • checking if a time to pay arrangement would be the best payment solution
  • your bank account details, so you can set up a Direct Debit for your arrangement

How we calculate what you can afford to pay

We will ask about your:

  • current financial position, including income and expenditure, savings, investments and other assets
  • what you’ve done or what you’re doing to get your tax affairs back on track

Example of the form we use to gather income and expenditure information (PDF, 158KB, 5 pages)

If you’ve discussed what you can afford with an independent debt adviser such as the Citizens Advice Bureau, we’ll accept their equivalent income and expenditure form, called the ‘Standard Financial Statement’.

Based on the information provided, we’ll calculate your monthly disposable income. This is your monthly surplus income after deducting your monthly expenditure. Usually, we’d expect 50% of your disposable income to be paid into your time to pay arrangement. We expect 50% rather than 100% because we want your arrangement to be sustainable, and for you to be able to manage any unexpected changes in expenditure. You may wish to pay more than 50% to reduce the amount of interest you pay.

If you have a high disposable income, but still need additional time to pay, we’ll work with you to agree a level of payment that balances clearing the debt quickly with your reasonable monthly expenses. This may mean that you pay more than 50% of your disposable income.

If your income and expenditure information shows that you do not have enough disposable income, we’ll pause collection activity until your circumstances change.

The length of the arrangement will depend upon how much you owe. There’s no upper limit on the length of an arrangement.

Your time to pay will be based on the information you’ve shared with us. We’ll make sure that your monthly payment reflects what you can afford to pay so that it’s sustainable over the length of the agreement. To help us support you in doing this:

  • be open and honest during the payment plan discussion
  • be ready to explain unusual or large items of expenditure
  • provide all the information asked for

We’ll usually accept what you tell us without asking for more details, but we may need more detail or evidence if your debt is large or complex.

How assets are treated when we agree a time to pay arrangement

If you have the means to pay your HMRC liabilities by realising assets, for example, savings, shares, or a second home, then we’ll discuss this with you.

If you have assets that both you and HMRC agree can be realised including equity in a property, then we expect you to do so to reduce the debt as much as possible before we agree an arrangement.

We’ll not ask you to sell your family home. We may consider taking a charge on your home to secure the debt payable to HMRC if it’s not possible to agree a time to pay arrangement with you and you’re not able to pay by any other means.

We’ll not expect you to access pension funds early to pay your debt. If you receive a pension this will be taken into account when considered as part of your income and expenditure position.

Debts that can be included in a time to pay arrangement

Any tax, duty, penalties or surcharges that you cannot afford to pay can be included.

Interest charged on time to pay arrangements

Interest accrues from the due date to the end of the time to pay arrangement. The interest payable will be included in overall debt covered by the arrangement. Find information on interest payable on tax debts and charges.

After a time to pay arrangement has been agreed

If payment instalments are made on time

No further is action is necessary and future time to pay requests will be considered.

If you have a change in circumstances

If your situation improves and you can pay the bill quicker, then contact us to increase your monthly payment.

If your situation worsens contact us and we will see if we can reduce your monthly payments.

If you cancel your Direct Debit or if payment fails

If you cancel your monthly payments or payments fail we’ll contact you. We’ll ask why the monthly payment was not paid. If possible, we’ll then restore the payment arrangement or renegotiate it if appropriate. If we cannot contact you, or we’re not able to renegotiate, we may decide to take other action to recover the debt which may mean:

  • an HMRC field force officer will visit your home or place of business
  • county court proceedings
  • insolvency proceedings

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