For Self Assessment taxpayers, January is often the dreaded month with annual tax bills and the first payment on account needing to be paid before 31 January.
But for those struggling to meet their tax payments in full before the deadline, help is at hand in the form of a Time to Pay arrangement.
Time to Pay arrangements allow you to organise an affordable monthly payment plan. To set this up, you will need the relevant reference number for the tax you cannot pay, such as your unique tax reference number, your UK bank account details and details of your income and spending (or your company’s income and spend if company tax is owed).
For debts of £30K or less for Self Assessment (or less than £50,000 for VAT/PAYE), this can be done via an online self-service tool available here: If you cannot pay your tax bill on time: Setting up a payment plan – GOV.UK. For larger amounts, taxpayers will need to contact HMRC.
A Time to Pay arrangement set up before a payment is due can prevent late payment penalties. However, late payment interest is still charged on outstanding amounts – and this can quickly add up.
Late payment interest is set at the Bank of England base rate plus 4 percentage points. HMRC has announced that from 9 January 2026, the late payment interest rate will be 7.75%. HMRC also charge an additional 1% ‘forward interest’ when fixing interest on Time to Pay arrangements, so the overall interest rate from 9 January 2026 would be 8.75%.
Recent data shows that the number of Time to Pay arrangements generally rises in the first quarter of the calendar year. In the first quarter of calendar year 2025, there were 913,209 customers in Time to Pay arrangements, up from 902,054 in the same period in the previous year.
Dawn Register, a tax dispute resolution partner at BDO said:
“Many individuals and businesses can find themselves in challenging financial circumstances in January – and this can be compounded if a large tax bill falls due at the end of the month.
“Time to Pay arrangements can therefore be a godsend for those who may just need a little time to stagger their payments and can demonstrate genuine hardship.
“However, those taking advantage of Time to Pay arrangements should be aware that late payment interest will be charged on outstanding amounts so this should be factored into any decision. Also, HMRC are swift to take debt enforcement action on those who ignore tax bills or default on Time to Pay arrangements, so care is needed to ensure tax bills are paid in full.”