January can be a tough financial month, and if you’re finding it hard to pay your Self Assessment tax bill, you’re not alone. But ignoring it won’t make it go away—in fact, it will only make things worse as interest and penalties start adding up.
The good news? There are options available to help you manage your tax payments and avoid unnecessary penalties. Here’s what you need to know.
What Happens If You Miss the Tax Payment Deadline?
If you’re self-employed or pay tax through Self Assessment, you’ll have needed to pay your 2023/24 tax bill (and your first 2024/25 payment on account) by 31 January 2025.
Missed the deadline? Here’s what happens:
- Interest starts immediately – HMRC charges interest at 2.5% above the Bank of England base rate (currently 7.25%). From April 2025, this will increase to 4% above the base rate, so delaying payments will cost you even more.
- Penalties kick in after 30 days – If your tax bill remains unpaid for 30 days, HMRC will charge an extra 5% penalty on the outstanding amount.
- Further penalties at 6 and 12 months – If the tax is still unpaid, you’ll be charged another 5% penalty at six months, and again at 12 months.
With these charges adding up quickly, it’s important to take action as soon as possible.
How to Set Up a Payment Plan with HMRC
If you can’t pay your tax bill in full, you might be able to set up a Time to Pay arrangement with HMRC. This allows you to pay in instalments, helping you manage your cash flow without the stress of a lump sum payment.
Who Can Set Up a Payment Plan Online?
You can arrange a Self Assessment payment plan online if:
✔️ You have filed your latest tax return (2023/24)
✔️ It’s within 60 days of the deadline
✔️ You owe £30,000 or less
✔️ You don’t have any other HMRC debts or payment plans
Setting this up stops penalties from being applied—but interest will still be charged until the tax is fully paid.
If You Can’t Set Up a Payment Plan Online
If you owe more than £30,000 or have other debts, you’ll need to contact HMRC directly to discuss an arrangement.
HMRC will ask about:
- Your income and expenses
- Any savings you have (they’ll expect you to use these first)
- What affordable monthly payments you can make
Be realistic about what you can afford—you can always pay off more later if your situation improves.
What Happens If You Miss a Payment?
If you miss a payment, HMRC will contact you to discuss why. In some cases, they may let you renegotiate the plan.
However, if you regularly miss payments, HMRC may:
- Send debt collectors
- Take money directly from your wages or bank account
- Start court proceedings
To avoid this, make sure your payment plan is manageable from the start.
Plan Ahead to Avoid Future Tax Stress
To avoid tax bill panic in future years, consider setting up a budget plan.
This works like a savings account, where you make regular payments to HMRC throughout the year. When your tax bill is due, the money is already there!
If you haven’t put aside enough, you’ll still need to pay the balance, but this method can reduce the last-minute financial strain.
Need Help Managing Your Tax Payments?
If you’re worried about your tax bill or need help setting up a payment plan, we’re here to help.
Jon and the team can advise you on your best options, helping you stay on top of your tax without unnecessary penalties. Get in touch today!
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Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk