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Paying a debt to HMRC with a time to pay arrangement

HMRC has issued guidance for UK taxpayers on how to settle an outstanding debt with a time to pay arrangement.

If you’re worried about paying an outstanding debt to HMRC but don’t have the funds to do so, you can consider a flexible time to pay arrangement that is based on your specific financial circumstances.

time to pay arrangement

Debts that can be included in a time to pay arrangement

The following can be addressed in an arrangement:

  • Tax
  • Duty
  • Penalties
  • Surcharges

How does HMRC structure a time to pay arrangement?

HMRC looks at what you can afford to pay and work out how much time you need based on an income and expenditure assessment. This considers your income, savings, disposable assets and expenditure.

Time to pay arrangements are based on an individual’s financial circumstances, therefore there is no standard way to pay. HMRC works with each taxpayer to ensure payments are sustainable. That’s why they expect 50% of disposable income to be paid into the arrangement rather than 100%.

It’s crucial that you are open and honest so that your personal time to pay agreement reflects your financial circumstances. If the debt is large or complex, HMRC may ask for additional details and evidence.

How will your assets be affected?

If you can pay your debts by releasing the value of assets, for example savings, shares or a second home, HMRC will want to discuss this with you.

You won’t be expected to sell your family home but HMRC may consider taking a charge on your home to repay your debt liabilities. This occurs if no other time to pay arrangement has been agreed and you are not able to finance the debt by any other means.

Similarly, you won’t be expected to access your pension funds early to pay your debt. However, your pension will be considered as part of your income and expenditure position.  

Change in circumstance

Debts can often be complex and longstanding, so if your financial situation worsens, discuss your situation with HMRC to see if your payments can be reduced.

If you can pay back your debts more quickly, you can increase your monthly payments to reduce interest payments.

Get in touch as soon as possible

90% of time to pay arrangements are paid off, according to HMRC. However, unpaid tax bills incur penalties and interest charges. These can build up over time and cause added stress. It’s important to get in touch with HMRC as soon as possible to negotiate a payment plan which works for you.

Note: interest payments are not waived during this period as interest accrues from the due date of a tax bill to the end of the time to pay arrangement. Interest payable will be added to your overall debts in the arrangement.

If all this sounds overwhelming and a little daunting, give Cardens a call on 01273 739592 or email us at to book your free consultation. Our personal tax services are available for business owners and private clients.

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