If you can’t afford to make a Self Assessment payment at the end of this month, you can apply to set up a Self Assessment payment plan online.

A new online service, which can be used by the self-employed without having to speak to anyone at HMRC, is called a Time to Pay arrangement.

Once a time to pay arrangement is agreed, you will be able to pay what you owe in instalments by Direct Debit, rather than the whole sum in one go. You will only be able to use this service once you have missed the 31 January payment deadline.

To set up a payment plan, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you set up a payment plan.

Who is eligible?

To be eligible to set up an online payment plan you need to:

  • owe £10,000 or less
  • have no other tax debts
  • have no other HMRC payment plans set up

Time to pay arrangements are based on an individual’s specific financial circumstances. The limit for an online payment arrangement is 12 months. Interest of 3.25% per annum applies to this payment arrangement with HMRC.

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. This particular service is intended as a one-off payment plan to give the self-employed extra support.

It’s designed to be flexible and is not a fixed, formal contract. When calculating what you can afford to pay, take account of your current financial position, including income and expenditure, savings, investments and other assets. The plan 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.

Those who agree a instalment plan with HMRC are not charged any late payment penalties or surcharges from the time that the agreement is in place if they keep up to date with their payments. If payments are not met in full and on time, HMRC may cancel the arrangement and the full amount of the outstanding debt can become due again.

According to HMRC, 90% of all time to pay arrangements complete successfully.

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Karen Wilkinson works at London School of Finance and Law and writes articles on UK tax law for My Taxes Plus and other financial magazines.


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