What happens if I can't pay my self-assessment tax bill on time?

If you miss the 31 January payment deadline, HMRC charges interest from the due date (currently 7.5% per year). After 30 days, a 5% surcharge is added to the unpaid amount. Further 5% surcharges apply at 6 months and 12 months. However, if you contact HMRC before the deadline to arrange a Time to Pay plan, you can avoid the surcharges.

Can I set up a payment plan with HMRC for self-assessment?

Yes. HMRC's Time to Pay service lets you spread your bill over up to 12 months. If you owe £30,000 or less and are within 60 days of the payment deadline, you can set this up online without speaking to anyone. For larger amounts, call the Payment Support Service on 0300 200 3835.

Will HMRC take me to court for an unpaid tax bill?

HMRC prefers to agree payment plans and will usually try multiple times to contact you before taking enforcement action. However, if you ignore all correspondence and make no effort to pay, HMRC can use debt collection agencies, county court judgments, distraint (seizing goods), bankruptcy proceedings, or direct recovery from bank accounts. The key is to engage with HMRC — they are far more lenient when you communicate.

Can I reduce my self-assessment tax bill after filing?

Yes, you can amend your tax return within 12 months of the original filing deadline. Common reasons to amend include claiming expenses you forgot, correcting income figures, adding pension contributions, or claiming the marriage allowance. If your amendment reduces the tax owed, HMRC will issue a refund or reduce your outstanding balance.

Does setting up a Time to Pay plan affect my credit score?

No. HMRC Time to Pay arrangements are not reported to credit reference agencies. As long as you keep up with the agreed payments, there is no impact on your credit score. However, if HMRC escalates to a county court judgment (CCJ), that would appear on your credit file.

← Back to blog

Can't Pay Your Self-Assessment Tax Bill? Here Are Your Options (UK 2026)

Published: 2026-03-09 · For UK freelancers, sole traders, and self-employed

🚨 The most important thing: Do NOT ignore it. File your return even if you can't pay. Late filing penalties stack up independently of late payment penalties. And contact HMRC before the deadline if possible — they are dramatically more flexible when you come to them first.

You've done the numbers and your tax bill is more than you have in the bank. It's a horrible feeling, but you're not alone — thousands of self-employed people face this every January. And there are genuine options available to you.

Step 1: File your return (even if you can't pay)

This is critical. The filing penalty and the payment penalty are separate:

Penalty type	What triggers it	Amount
Late filing	Not submitting the return by 31 January	£100 immediately, then escalating
Late payment	Not paying the tax by 31 January	Interest + 5% surcharges at 30 days, 6 months, 12 months

By filing on time, you eliminate one entire set of penalties. Even if you owe £10,000 and have £0, file the return.

Step 2: Work out exactly what you owe

Before you panic, make sure the bill is correct:

Have you claimed all expenses? Many first-timers leave money on the table. Working from home, phone bills, travel, software, insurance — check our expenses guide.
Is the payment on account correct? If your income has dropped this year, you may be able to reduce your payment on account.
Marriage allowance: If your spouse/partner earns less than £12,570, you could save up to £252.
Pension contributions: Any personal pension payments reduce your taxable income.

💡 You can amend your return within 12 months of the filing deadline. If you find expenses you forgot, amend the return and your bill will reduce.

Your options (ranked by urgency)

Option 1: HMRC Time to Pay (best option for most people)

HMRC's Time to Pay service lets you spread your bill into monthly instalments over up to 12 months.

You can set this up online if:

You owe £30,000 or less
You're within 60 days of the payment deadline
You have no other HMRC debts or payment plans
Your tax returns are up to date

How to set up online:

Go to your HMRC online account
Select "I can't pay in full today"
Choose your monthly payment amount and dates
Set up a Direct Debit

If you owe more than £30,000 or don't qualify for online setup, call the Payment Support Service on 0300 200 3835 (Monday to Friday, 8am to 6pm).

Interest: You'll still pay interest on the outstanding amount (currently 7.5% per year), but the 5% late payment surcharges are avoided if you set up the plan before the first surcharge kicks in (30 days after due date).

Option 2: Pay what you can now, Time to Pay the rest

You don't have to pay nothing or everything. If you can afford £500 of a £3,000 bill, pay £500 now and set up Time to Pay for the remaining £2,500. This reduces the interest you'll pay.

Option 3: Reduce the bill by amending your return

Go back through your return and check for missed deductions:

Use of home as office — flat rate of £6/week (£312/year) requires no receipts, or calculate actual costs
Mileage — 45p per mile for first 10,000, 25p after (if you haven't claimed)
Professional subscriptions — union fees, professional body membership
Clothing — uniforms or protective clothing (not everyday clothes)
Bad debts — invoices you issued but were never paid

Amend online through your Government Gateway account. If expenses reduce your profit by £1,000, that could save you £200-£400 in tax.

Option 4: Reduce payment on account

If your income has dropped compared to last year, you can apply to reduce your payments on account. This is done through your tax return or by contacting HMRC. See our payment on account guide for details.

Option 5: Use a 0% credit card (with extreme caution)

HMRC accepts credit card payments (with a small processing fee). If you have access to a 0% purchase credit card, you could pay the tax bill and then pay off the card interest-free over the promotional period.

⚠️ Warning: Only do this if you are confident you can pay off the card before the 0% period ends. Credit card interest rates (typically 20-30%) are far worse than HMRC's interest rate (7.5%). This should be a last resort, not a first choice.

What happens if you don't pay (the timeline)

Day 1 (1 February): Interest starts accruing on unpaid amount (currently 7.5% per year)

Day 30 (2 March): First late payment surcharge — 5% of unpaid tax

Day 31+: HMRC sends payment reminders and may phone you

6 months (1 August): Second surcharge — another 5% of unpaid tax

6-12 months: HMRC may issue a formal demand, use debt collection agencies, or apply for a county court judgment

12 months (1 February next year): Third surcharge — another 5% of unpaid tax

Beyond 12 months: Enforcement action — distraint (seizing goods), bankruptcy petition, or direct recovery from bank accounts

Example: On a £5,000 unpaid bill, the surcharges alone add £750 (3 × 5%) plus interest. That's nearly £6,000 total on a £5,000 bill — just for not engaging with HMRC.

HMRC are more reasonable than you think

This surprises people, but HMRC would generally rather get paid slowly than not at all. If you:

Contact them before the deadline (or as soon as possible after)
Are honest about your situation
Propose a realistic payment plan
Stick to the agreed payments

...they will almost always work with you. The people who get into serious trouble are the ones who bury their heads and ignore everything.

What to say when you call HMRC

If you need to phone the Payment Support Service, have these ready:

Your UTR (Unique Taxpayer Reference)
National Insurance number
Details of the tax you owe
Your monthly income and essential expenses
How much you can afford to pay each month
When you expect your situation to improve

Be straightforward: "I'm self-employed, I've filed my return, and I can't pay the full amount. I'd like to set up a payment plan. I can afford £X per month."

Preventing this next year

Set aside 25-30% of every invoice payment in a separate savings account
Review your tax position quarterly — don't wait until January to discover the bill
Track expenses properly throughout the year — use our free expense tracker
Consider voluntary payments on account — spreading the cost through the year
Budget for payments on account — if this is your first year, expect to pay 150% of your tax bill in January (this year's bill plus 50% advance for next year)

Related guides

📦 Sort Your Self-Assessment Once and For All

The Getting-Paid Toolkit includes everything you need to stay on top of your freelance finances — invoice templates, expense trackers, payment chasing sequences, and compliance checklists.

Get the toolkit — £19 →

Landolio helps UK freelancers and small businesses get paid and stay compliant. Home · Blog · Free tools