- Interest
- Bank of England base rate plus 4 percentage points (7.75% from 9 January 2026)
- Time to Pay
- Spreads the bill but does not stop interest
- Online plan
- For Self Assessment debts of £30,000 or less
- Priority debt
- Yes: HMRC has strong powers
On this page
What kinds of HMRC debt are there?
- Self Assessment income tax and Class 2 or 4 National Insurance.
- VAT, PAYE and National Insurance for businesses, and corporation tax.
- Overpaid tax credits or other benefits HMRC is recovering.
- The High Income Child Benefit Charge.
Interest and penalties
HMRC charges interest on unpaid tax at the Bank of England base rate plus 4 percentage points, which was 7.75% from 9 January 2026. The rate changes when the base rate changes, so check GOV.UK for the current figure.
Late payment penalties can also apply. For Self Assessment they can be added at 30 days, six months and 12 months after the due date. You can appeal a penalty if you had a reasonable excuse.
Talk to a free adviser first
An adviser can look at your whole budget, deal with creditors for you and explain which option suits you. Get free debt advice.
Time to Pay
Time to Pay is a payment plan with HMRC. There is no set-up fee, and agreeing one before a deadline can avoid some penalties, but interest keeps running on what is unpaid, so a shorter plan costs less.
- You can set up a Self Assessment plan online if you owe £30,000 or less and have no other payment plans.
- For other taxes or larger debts, you usually need to phone HMRC.
- HMRC will ask about your income, spending and savings, and expects you to pay what you can.
What can HMRC do if you do not pay?
HMRC can write and phone, use debt collection agencies, send enforcement agents to take control of goods, and in some cases collect money directly from your bank account, with safeguards. It can also take county court action, and for businesses, winding-up action. These steps cost you more, so it is better to contact HMRC early.
For more on enforcement agents, see our bailiffs advice.
If you cannot pay
- Contact HMRC as early as possible and explain.
- If you have several debts, a debt management plan, an IVA, a debt relief order or bankruptcy may deal with tax debts as well.
- For tax credit overpayments, you can ask for a payment plan or dispute the overpayment.
- Businesses can see our business debt guide.
Frequently asked questions
Does Time to Pay stop interest?
No. It spreads the bill and can avoid some penalties, but late payment interest continues on the unpaid balance.
Can HMRC take money from my bank account?
In some cases, yes. HMRC has a power to take money directly from accounts for certain debts, with conditions and safeguards. It should contact you first.
Can I get HMRC penalties cancelled?
You can appeal if you have a reasonable excuse. If you cannot pay, contacting HMRC early helps.
Can HMRC take my home?
Only through the courts, and it is unusual. HMRC generally prefers to agree a plan or use other recovery methods first.
Are tax debts included in an IVA or bankruptcy?
Yes, they are generally included, but the rules vary between insolvency routes and HMRC votes as a creditor. Ask an adviser.
This guide gives general information and is not personal advice. Rules and limits change, so check with a free adviser before acting. Last reviewed 11 November 2026.