Owing HMRC money you don't have is frightening. The good news is that HMRC agree instalment arrangements every day. The key is to contact them early, with realistic figures, before enforcement starts.
Contact HMRC before the payment is missed if you can, or as soon as possible if it has been. Most people can agree a Time to Pay arrangement, paying in instalments based on what they can genuinely afford. Interest continues at the Bank of England base rate plus 4%, so pay as much as you realistically can.
A Time to Pay arrangement is an agreement to pay a tax debt in instalments. Smaller self assessment debts can often be set up online without speaking to anyone, if you meet the eligibility conditions shown on GOV.UK. Larger debts, business debts and investigation settlements are negotiated with HMRC directly and usually need an income and expenditure statement.
a clear picture of your income and essential spending evidence that you have used available savings or reasonable borrowing the shortest term you can genuinely afford that you are keeping up with current tax as it falls due
Even after reminders or enforcement letters, it is almost always worth contacting HMRC immediately. An arrangement can often still be agreed. Ignoring the letters is what leads to escalating action.
Where a bill arises from an investigation or a voluntary disclosure, payment terms can often be discussed as part of the settlement. HMRC would rather agree a realistic plan than chase an unpaid amount. Put affordable, evidenced proposals forward early.
Missing an instalment can cancel the arrangement and make the full balance due. If your circumstances change, contact HMRC before a payment is missed. Renegotiating is far easier than recovering a defaulted plan.
It is discretionary, but HMRC agree arrangements routinely where the proposal is realistic and supported by honest figures.
No. Late payment interest continues at the Bank of England base rate plus 4% on the outstanding balance, so a shorter plan costs less.
HMRC expect available assets and savings to be considered, but they will not usually expect you to sell your home to pay a tax debt.
Yes. Tax, interest and penalties can normally be included in the same instalment plan.