Falling behind on your tax bill can feel overwhelming and scary, especially if your business is already dealing with tight cashflow. If you’re currently in this situation then take a deep breath, as there are things you can do. HMRC knows that sometimes businesses and individuals might struggle to pay their tax bill. That’s why the Time to Pay arrangement was created.
If you’re worried about missing a tax deadline or simply can’t afford to pay what you owe in full, you may be able to set up a payment plan. In this blog, we’ll be explaining what that means, how to apply, and what you should consider before requesting an extension.
What is the HMRC Time to Pay scheme?
The Time to Pay scheme is essentially an agreement between you and HMRC to spread your tax payments over a longer period, usually in monthly instalments. It’s available for most types of tax, including:
- Corporation Tax
- VAT
- PAYE
- Self-Assessment (personal tax)
Whether you’re a sole trader, a limited company, or somewhere in between, there’s a good chance this option is available to you. HMRC has even set up a Business Payment Support Service specifically to help people like you navigate this process. The goal isn’t to punish businesses for being unable to pay, but to help them get through temporary financial challenges without adding unnecessary penalties or stress.
How to apply for a payment plan
The process for setting up a Time to Pay arrangement depends on how much you owe.
Online applications
If your tax debt is within a certain limit (usually under £30,000), you can apply online using your Government Gateway account. This is typically the fastest and easiest route.
Once logged in, you’ll be guided through a series of questions about your financial situation. If your circumstances fit the criteria, you’ll get an immediate decision, and you can set up your payment plan right there and then.
Phone applications
For larger amounts, or if your financial situation is more complex, you’ll need to speak with someone directly at HMRC. When you call, they’ll ask questions about your income, expenses, assets, and liabilities to assess what kind of plan is reasonable.
While this might feel intimidating, don’t panic, HMRC is generally more supportive than most people expect. They understand that keeping a business afloat is in everyone’s best interest.
Considerations before requesting an extension
Before you go ahead and set up a payment plan, there are a few important things to think about.
Don’t let it snowball
Deferring a payment is helpful in the short term, but it shouldn’t throw off your future obligations. If you’re putting off this quarter’s VAT bill, make sure you’ve still got enough set aside for the next one. Otherwise, you could find yourself stuck in a cycle of playing catch-up.
Think ahead
A payment plan might solve today’s problem, but you’ll also need a strategy for upcoming tax deadlines. Work with an accountant to forecast your liabilities and plan accordingly. That way, you’re not just pushing the problem down the road, you’re actively managing it.
What next?
If you’re struggling to pay a tax bill, here’s what steps you should take next:
Contact HMRC early
The sooner you speak to them, the better your chances of getting a flexible arrangement. Waiting too long could result in penalties or enforcement action, so don’t bury your head in the sand.
Check if you’re eligible for an online plan
Log in to your Government Gateway account to see if your tax bill qualifies for a self-serve payment plan. If not, prepare to make a phone call.
Have your information ready
Whether you’re applying online or by phone, you’ll need to know your tax reference numbers and be clear about which period the payment relates to. This helps make sure your payment is allocated correctly.
Be honest about your finances
HMRC wants to work with you, but they need an accurate picture of what you can realistically afford. Make sure to be transparent about your cashflow and expenses.
Plan for future payments
As mentioned above, don’t just focus on the tax you owe now. Build a plan for the rest of the financial year so you’re not caught off guard later on.
Speak to an accountant
If possible, try to speak to an accountant. A professional can help you figure out how much you can afford to pay each month without jeopardising the rest of your business. They can also help you avoid surprises when the next tax bill rolls around.
Need help with your taxes or any other aspect of your finances? Talk to our friendly team, we’d love to help.
