Self Assessment Deadlines Loom- Clients Struggling to Pay

The 31 January payment deadline comes at a time when clients are faxing Christmas credit card bills amid the cost of living crisis. It may be that some will struggle to pay their tax bill in full by 31 January 2026.

Where this is the case, there are various options to consider. The client may be able to set up a Time to Pay arrangement if they are not eligible to pay their tax through PAYE.

They may be able to set up a payment plan online themselves as long as:

• They have filed their 2024/25 tax return’
• They owe £30,000 or less;
• They are within 60 days of the payment deadline; and
• They do not have any other payment plans with HMRC.

The plan will enable them to pay in instalments. The instalments will include the tax that is due and the associated interest. A client may be able to pay some of the tax that they owe by 31 January 2026, and pay the rest in instalments.

Using a Time to Pay arrangement will prevent the client from running up late payment penalties. However, interest will still be charged on payments made after the due date. This is at a rate of 4% above the base rate (a rate of 8% at the time of writing) .Where the client is able to borrow money at a cheaper rate to pay their tax bill, this may be a preferable option.

If the client is unable to set up a payment plan online, they may still be able to pay what they owe in instalments. However, they will need to call HMRC to discuss setting up a plan. HMRC will assess how much the client is able to pay each month, taking account of their income and outgoings and any savings and other assets that the client has. If the client is able to pay their bill in full, for example, from their savings, they are expected to do so.

Where a payment plan is in place, the payments will be collected by direct debit. It is important that the client does not default as this will jeopardise the payment plan and HMRC may then seek to collect the outstanding amount in full.

Clients should be warned not to ignore tax bills. If they are struggling to pay and do set up a payment plan or contact HMRC, HMRC may take action to recover the tax that is owed.

Going forward, the client may find it easier to set up a Budget Plan and make weekly or monthly payments towards future bills.