Key Features of the Time to Pay Arrangement 

Who can use it? Any taxpayer (individual or business) facing short-term financial difficulty in paying tax liabilities (including income tax, VAT, and corporation tax) can apply to HMRC for a Time to Pay arrangement. 

What are the benefits? Entering into a Time to Pay arrangement can result in suspension of late payment penalties, provided the taxpayer adheres to the agreed payment schedule. 

Which taxes are covered? The scheme covers most major taxes, including income tax, corporation tax, VAT, and capital gains tax. The precise rules and availability may vary depending on the tax in question. 

How to apply? Taxpayers should contact HMRC as soon as they anticipate difficulty paying a tax bill by the due date. Early engagement improves the likelihood of a favourable arrangement and minimises penalty exposure 

Why Is This Tip Especially Relevant Now? 

Penalty Regime Changes Recent updates mean late payment penalties can quickly escalate if not addressed promptly. For example, for VAT accounting periods beginning on or after 1 January 2023, a 2% penalty applies after 15 days, another 2% after 30 days, and from day 31, a daily penalty based on a 4% annual charge applies. Income tax self-assessment will follow similar rules from 2026/27 for many taxpayers. 

Support for Businesses and Individuals HMRC has explicitly signalled a willingness to support those facing genuine short-term difficulties, reflecting an understanding of current economic pressures. 

Additional Practical Considerations 

Time is of the Essence Contacting HMRC early is essential. If you reach out within the first 15 days after a missed payment, penalties can often be avoided altogether. 

Stay Compliant with the Arrangement If the arrangement is not adhered to, penalties and surcharges may be reimposed retroactively.