How Do I Set up a Payment Plan for My Tax Liability?

24 December 2020

Once you have submitted your tax return, you will know how much you are due to pay by 31 January

To arrange an instalment plan (a ‘time to pay’ agreement), you will need your Government Gateway account details to log on to HMRC’s online tool.

You must meet all the following criteria to be eligible:

  • No outstanding tax returns, debts or existing payment plans with HMRC
  • Owe no more than £30,000
  • You must set the payment plan up within 60 days of the original payment date
  • You have to pay the instalments by direct debit.

The tool will ask you whether you want to pay a lump sum upfront and the amount of the instalments you wish to pay and over what period (up to the maximum of 12 months). 

Unfortunately, arranging an instalment plan with HMRC does not mean you can avoid interest charges. You will be charged interest at a rate of *2.6% per annum from 1 February. (*correct at the time of posting)

You should avoid any late payment penalties if an instalment plan is in place and is stuck to (or varied by agreement with HMRC).

If you can’t use HMRC’s online payment plan tool, you can still contact HMRC on 0300 200 3822 to discuss setting up a payment plan.

If you ask to spread your payments over more than 12 months, HMRC will likely need more information such as details of current income and expenses before agreeing to a more extended payment period.

If you have any questions regarding the above, please don’t hesitate to contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

How Do I Set up a Payment Plan for My Tax Liability?

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