What is Time to Pay and how do sole traders apply for it?

Understanding Time to Pay in plain English

“Time to Pay” (often shortened to TTP) is an arrangement that can allow you to spread certain tax debts over a longer period instead of paying the full amount immediately. It’s designed for situations where you can’t pay a tax bill on the due date, but you can pay it in instalments if HMRC gives you time. For many sole traders, cash flow can be unpredictable: invoices land late, seasonal dips arrive without warning, unexpected costs hit, and a tax deadline can suddenly feel unmanageable. Time to Pay exists to help people get back on track while still meeting their tax responsibilities.

It’s important to see Time to Pay for what it is and what it isn’t. It isn’t a way to avoid paying tax, reduce what you owe, or indefinitely delay deadlines. It’s a formal agreement with HMRC that acknowledges you owe a certain amount and sets out how and when you will pay it. When it works well, it can prevent immediate enforcement action and help you clear arrears in a structured way. When it’s used poorly (or applied for too late), you may still face penalties, interest, and collection steps.

Although Time to Pay is often discussed as if it’s one single process, in practice it covers a few different routes: online payment plans for certain debts, and bespoke arrangements negotiated by phone for more complex or larger amounts. Sole traders typically interact with TTP because of Self Assessment tax bills (income tax and Class 4 NICs, plus potentially payments on account) and sometimes VAT if they are registered for it.

Why Time to Pay matters for sole traders

Sole traders sit in a unique position: you are the business, and the business is you. That means one bad month can affect your ability to pay tax in a way that looks, from the outside, like a personal financial problem. But it’s often just normal trading volatility. A big customer pays late. A supplier requires upfront payment. You replace equipment. You take time off sick. Any one of these can knock your cash flow off balance around a tax deadline.

Time to Pay can be the difference between a short-term squeeze and a longer-term spiral. Without a plan, you may be tempted to ignore the bill and “catch up next month.” That approach can lead to accumulating penalties, rising interest, and increasing stress. A proper payment arrangement creates structure. It forces you to confront the numbers, commit to a timeline, and rebuild good financial habits. It also signals to HMRC that you are taking the debt seriously, which is crucial if you need them to pause stronger recovery action.

For many sole traders, the biggest challenge isn’t the total tax due, but the timing. Self Assessment bills can be lumpy: one or two large payments a year, sometimes alongside payments on account. That structure can feel harsh if your income is seasonal. Time to Pay can smooth that peak into manageable monthly payments, giving you room to trade your way out of trouble rather than shutting down work to deal with the immediate pressure.

What types of tax can Time to Pay cover?

Time to Pay is commonly used for a range of UK tax liabilities, but what you can arrange and how you arrange it may differ depending on the tax, your circumstances, and the size of the debt. For sole traders, the most relevant debts often include:

Self Assessment: This is the headline one for most sole traders. Your Self Assessment bill can include income tax, Class 4 National Insurance contributions, and sometimes additional amounts such as student loan repayments if they apply. It can also include payments on account, which can feel confusing if you’re already struggling with cash flow.

VAT: If you’re VAT-registered, a bad quarter can leave you short when the VAT return is due. A payment plan may be possible, but VAT arrangements can be stricter because VAT is collected on behalf of the government.

PAYE: Some sole traders also run payroll if they have employees or pay themselves through a separate arrangement (for example if they are also directors elsewhere). If you owe PAYE and NICs, a plan may be possible, but again HMRC will expect you to keep current payments up to date.

Other liabilities: Depending on your situation, there may be other taxes or charges involved. The key point is that Time to Pay is generally about settling an existing, known debt rather than delaying future obligations.

No matter the type, one principle tends to apply: HMRC typically expects you to pay what you can afford, as quickly as you can reasonably manage, and to stay compliant going forward. A payment plan is not a substitute for filing returns on time or paying ongoing taxes as they fall due.

What Time to Pay does not do: interest, penalties, and deadlines

It’s easy to assume that if you get a payment plan, everything “freezes.” In reality, Time to Pay deals with how you pay the debt, not always with the extra charges that may attach to it. You may still have to pay interest on outstanding amounts, and you may still face late payment penalties depending on the tax type and how late the payment is.

One of the most important things for sole traders to understand is that the best time to approach HMRC is as early as possible. If you contact HMRC before the due date and explain the situation, you’re generally in a stronger position than if you wait until you’ve missed the deadline and received warning letters.

Also, a payment plan does not mean you can ignore future tax periods. If you agree to pay an old debt in instalments but then miss your next Self Assessment payment or fall behind on VAT again, you can end up with multiple overlapping debts. That can cause a plan to fail and increase the risk of enforcement action.

Think of Time to Pay as a bridge: it helps you get from “I can’t pay now” to “I can pay over time,” but you still need to be moving forward. The plan should be part of a broader reset: better budgeting, more frequent saving for tax, and clearer forecasting.

When should a sole trader consider applying for Time to Pay?

Time to Pay is most useful when your inability to pay is temporary and solvable. You might be a good candidate if:

You have a tax bill due soon and you know you won’t have the funds in time, but you can pay monthly from trading income.

You have outstanding invoices that will be paid later, and once they come in you can clear the balance faster.

You’ve had a one-off shock (a lost client, a major repair, illness) and you need a few months to recover.

You can demonstrate that you are now taking steps to manage your finances and won’t keep falling behind.

On the other hand, if your business model is consistently unprofitable, your margins are too thin, or you don’t have a credible way to meet ongoing obligations, a payment plan may not solve the underlying issue. In those cases, it may still be possible to negotiate time to pay, but you should also consider getting independent financial advice on business restructuring, pricing changes, or other options.

What HMRC typically looks for in a Time to Pay request

When you apply for Time to Pay, HMRC is trying to answer a straightforward question: “Is this person willing and able to pay their tax, and is this plan realistic?” They will often consider:

How much you owe: Larger debts usually require more detail and negotiation.

Why you can’t pay now: They will want a clear reason, not just “cash is tight.”

What you can afford: Expect to propose a payment amount that is sustainable.

Your compliance history: If you have filed on time and paid on time historically, you may be treated more sympathetically than if there is a pattern of late payment.

Your current position: If you have funds available (for example in savings) they may expect you to use them. If you have assets, they may ask why you cannot raise funds.

Whether you can keep up with future taxes: A plan that leaves you unable to pay next year’s bill is a red flag.

None of this means you need perfect accounts to get a plan, but you should be prepared to speak clearly about your income, costs, and what has changed. The more organised you are, the smoother the conversation tends to be.

Preparation before you apply: get your numbers straight

Before contacting HMRC, it helps to do a quick but honest financial snapshot. This is about making a realistic proposal, not saying what you think HMRC wants to hear. If you promise too much and then miss payments, you can make your situation worse.

Start with the basics:

1) Confirm what you owe and the due date. Check your tax account and any correspondence. Make sure you’re working with the correct figure, including any payments on account. If you’re unsure what the bill includes, take the time to understand it before you propose a plan.

2) Map your expected cash inflows. List the invoices due, expected payment dates, and likely amounts. If clients are unreliable, be conservative.

3) Map your essential outflows. Include business costs you must pay to keep trading (materials, fuel, tools, software, insurance) and personal essentials (rent or mortgage, utilities, food). You don’t need to share every detail in all cases, but you do need to know what you can truly afford.

4) Decide on a feasible monthly payment. This should leave you enough to keep the business running and meet ongoing tax obligations. Many sole traders make the mistake of setting payments so high that they can’t buy stock, travel to jobs, or pay for basic operating needs.

5) Decide how long you need. Time to Pay arrangements typically aim to clear the debt within a reasonable period. The more quickly you can pay, the easier it may be to get agreement. But “quicker” should never mean “impossible.”

As a practical tool, some sole traders find it helpful to write a simple one-page statement: what happened, what is different now, what you owe, and what you propose to pay each month. That keeps you focused when you speak to HMRC and reduces the chance you panic and agree to something unrealistic.

How sole traders apply for Time to Pay: the main routes

There are two common ways a sole trader might apply for a Time to Pay arrangement:

Online payment plan (where available). HMRC may provide an online self-serve option for certain Self Assessment debts. This can be quicker and less stressful if your situation is straightforward and you fit the criteria. You typically choose a repayment schedule and set up a direct debit or similar arrangement.

Phone negotiation with HMRC. If you cannot use the online option, or if your case is more complex (larger debt, multiple tax types, prior arrears, or you need something outside standard terms), you may need to call HMRC to discuss a bespoke plan. This is also common if you have already missed the due date or if there are compliance issues that need resolving.

Regardless of route, the underlying aim is the same: present a credible plan, agree the instalments, and then stick to it. The method you use is largely about eligibility and complexity.

Applying online: what to expect and how to approach it

If you use an online payment plan option, the process is generally structured. You will usually need to log into your tax account, select the relevant debt, and follow prompts to set up instalments. The system may guide you toward a maximum repayment period, and it may require a direct debit.

To maximise your chances of success through an online route:

Make sure your tax return is filed and the debt is clearly recorded.

Apply as early as you can; if you are right up against the deadline, you may have fewer options.

Choose a repayment amount that you can actually maintain. “Getting it approved” is only step one. The plan is only helpful if you can keep it going.

Keep a copy of the confirmation and the schedule. Put the payment dates in your calendar and treat them like a non-negotiable expense.

Even if the online option seems simple, remember that it’s still a formal agreement. Missing a payment can cause the arrangement to end, and that can trigger collection activity. So treat it with the same seriousness you’d treat a contract with a major client.

Applying by phone: what the conversation is usually like

If you apply by phone, it can feel intimidating, but it’s usually more procedural than emotional. HMRC staff typically want clear facts and a workable plan. Your goal is to communicate calmly and show that you have thought it through.

Expect the conversation to cover:

Your identity and tax details. Have your Unique Taxpayer Reference (UTR), National Insurance number, and any reference numbers on letters to hand.

The amount owed and what it relates to. Be ready to confirm the tax year and the liability type.

The reason you can’t pay in full. Explain briefly and honestly. Avoid long stories. Focus on the key cause and the timeline.

Your proposed repayment plan. State the monthly amount and the duration. If you can make an initial payment immediately (even a smaller one), mention it. A willingness to pay something now can strengthen your position.

Your current financial situation. You may be asked about income, expenses, other debts, and whether you have assets or savings. The aim is to confirm affordability.

How you will pay. Direct debit is common for instalments. They may also discuss payment methods and dates.

One of the best ways to reduce stress on the call is to write your key numbers down in front of you. If you feel pressured, remember that agreeing to an unrealistic plan is not a win. It’s better to negotiate a sustainable arrangement than to accept terms that collapse in two months.

What to say (and not say) when negotiating a plan

When you speak to HMRC, clarity and credibility matter. Here are approaches that tend to help:

Be direct. “I owe £X for Self Assessment due on [date]. I cannot pay in full because [reason]. I can pay £Y per month starting [date].” Simple, factual statements create confidence.

Show willingness. If you can make a payment today, say so. Even a partial payment can demonstrate commitment.

Explain what has changed. If the issue was a one-off cash flow hit, say what you’ve done to prevent repeat problems (for example setting aside a percentage of each payment for tax going forward).

Do not overpromise. It can be tempting to say you can pay more than you can. But a failed plan can be worse than no plan because it can damage trust and accelerate enforcement.

Do not ignore ongoing obligations. If you have VAT or upcoming Self Assessment payments, factor those into your affordability. HMRC will expect you to stay current.

The most persuasive thing you can bring is not a perfect story but a realistic plan based on actual numbers. HMRC generally prefers a plan that completes than a plan that looks great on paper but falls apart.

Common sticking points for sole traders and how to handle them

Some issues come up repeatedly for sole traders applying for Time to Pay. Knowing them in advance can help you respond confidently.

Payments on account feel impossible. Many sole traders are surprised by payments on account, particularly after a good year. If your income has fallen significantly, you may be able to reduce payments on account so you’re not paying based on last year’s higher profit. Reducing them without justification can lead to interest, so it’s important to be accurate, but if your current year profit is genuinely lower, it can ease the immediate burden.

Irregular income makes monthly instalments hard. If your income fluctuates, consider proposing instalments that match your trading reality. In some cases, you might negotiate different amounts across months. Even if the plan is monthly, your budget can include building a buffer in high-income months to cover low-income months.

Multiple debts across different taxes. If you owe more than one tax type, the arrangement can be more complex. You may need to prioritise keeping current taxes up to date while paying down arrears. A clear cash flow plan is essential here.

Late filing as well as late payment. If your return isn’t filed, you may struggle to set up an arrangement because HMRC needs a confirmed liability. Filing as soon as possible is often a key step before a plan can be agreed.

Existing direct debits and other commitments. HMRC may ask about other monthly commitments. Be ready to explain what is essential and what is discretionary. This isn’t about judgement; it’s about affordability.

What happens after you agree a Time to Pay arrangement?

Once you have an arrangement, your main job is to follow it exactly. That means paying on time, every time, using the method agreed. If you set up a direct debit, ensure the funds are available in your account before the collection date. A failed direct debit can count as a missed payment and may trigger the end of the arrangement.

You should also keep an eye on your tax account to make sure payments are being allocated correctly. Mistakes are uncommon but can happen, especially if you have multiple liabilities. If something doesn’t look right, raise it quickly.

Most importantly, keep filing future returns and paying future liabilities on time. Think of the arrangement as dealing with the past while you keep the present under control. If you fall behind again, you risk the plan being cancelled and HMRC taking stronger action.

If you can pay more later: can you settle early?

If business improves and you can clear the debt sooner, that is usually a good idea. Paying early reduces the period over which interest may apply and removes the psychological weight of the plan. If you want to make an extra payment, keep records and check that it is credited properly.

If you intend to settle the full amount early, you can typically do so by making a final payment that clears the balance. In some cases, it may be sensible to contact HMRC to confirm the outstanding amount on the day you pay, especially if interest is being added and you want to avoid being a small amount short.

What if you miss a payment?

Missing a payment is serious, but it doesn’t always mean instant disaster. What matters is what you do next. If you know you will miss a payment, contact HMRC immediately rather than waiting for the missed payment to trigger letters or enforcement. In some cases, a plan may be renegotiated if your circumstances have changed and you can demonstrate what you can afford now.

That said, repeated missed payments can lead to the arrangement being cancelled. If the arrangement ends, HMRC may request immediate payment in full and may take recovery steps. This is why a realistic plan is crucial from the start. A payment plan that is just barely possible in a “perfect month” is usually not robust enough for real life.

Enforcement action: how Time to Pay can help reduce risk

One reason Time to Pay is so valuable is that it can reduce the chance of harsher collection activity, provided you engage with HMRC promptly and keep to the agreement. HMRC has powers to collect unpaid tax in various ways, and those powers can feel intimidating. The best protection is early communication and a track record of sticking to arrangements.

Time to Pay does not magically remove HMRC’s powers, but it can change the immediate trajectory. Instead of an escalating series of letters and actions, you can move into a managed repayment process. That is better for you and, in many cases, better for HMRC too because it increases the likelihood the debt will actually be paid.

If you are already receiving warning letters or notices, it becomes even more important to engage. Ignoring correspondence rarely improves the situation. A well-handled Time to Pay request can sometimes stabilise things even at a later stage, but the earlier you act, the more options you tend to have.

Practical tips to improve your chances of getting approved

Sole traders often ask what makes an application “strong.” While every case is different, these practical steps can help:

File first, then negotiate. If your return is outstanding, submit it as soon as you can. A confirmed liability makes it easier to set up a plan.

Pay something upfront if possible. Even a modest immediate payment can demonstrate commitment and reduce the balance.

Keep your proposal simple. A straightforward monthly amount over a sensible period is often easier to agree than a complex schedule, unless your income pattern genuinely requires it.

Use realistic figures. Base your monthly offer on what is left after essential business and personal costs, and after allowing for ongoing tax saving.

Show that you’ve learned from the issue. Mention any changes you’ve made: separate tax savings account, regular budgeting, chasing invoices faster, adjusting pricing, or cutting unnecessary costs.

Don’t wait until you’re panicking. Contacting HMRC early makes everything easier, including your own stress levels.

Building tax resilience after Time to Pay: avoiding repeat problems

Once you’re on a Time to Pay plan, it’s worth using the experience as a turning point. The goal is not only to clear the existing debt but to stop the cycle from repeating.

One of the most effective habits for sole traders is to treat tax like a cost of sales: as soon as you get paid, set aside a percentage for tax. Many people use a separate bank account for tax so the money is out of sight and less tempting to spend. If your income fluctuates, saving a percentage rather than a fixed amount helps the savings adapt to your trading reality.

Regular bookkeeping also makes a huge difference. If you only look at your numbers once a year, tax bills can feel like a surprise. If you update your records monthly, you can estimate your likely bill and adjust your spending and saving long before the deadline.

It can also help to plan around the Self Assessment cycle. The January payment date is well known, but it still catches people out because it falls right after a costly holiday period and often in a slower trading season for some industries. Planning for that reality—by building a buffer from autumn onwards—can make future years much calmer.

Special considerations: new sole traders and first-time tax bills

If you’re a newer sole trader, your first Self Assessment bill can be a shock. You may not have realised how much to set aside, or you may not have budgeted for both the balancing payment and payments on account. In that situation, Time to Pay can be particularly helpful as a “first-year reset,” allowing you to spread the bill while you put better systems in place.

If you’re in your first or second year of trading, be prepared to explain that you’re still stabilising your cash flow and that you now understand the timing of tax payments. HMRC will typically want to see that you are taking the obligation seriously and not treating the bill as optional.

Newer sole traders can also benefit from forecasting the next year’s tax early. If payments on account are due, consider whether your profits are likely to be higher, lower, or similar. Planning for that can help you avoid needing another arrangement later.

Time to Pay and mental load: staying calm and organised

Tax debt can create a heavy mental load. For sole traders, it can feel personal: as if it reflects your competence or your worth. In reality, it is often just a cash flow timing problem. Treat it like a business challenge: define the problem, build a plan, execute it.

A simple system can reduce stress dramatically:

Keep a folder (digital or paper) for all tax letters and confirmations.

Write down your payment plan dates and set reminders.

Update your budget monthly and track whether you are building a tax buffer.

Chase invoices earlier than you used to, and consider stricter payment terms for future work.

When you take control in this way, the arrangement stops feeling like a looming threat and starts feeling like a manageable project with an end date.

Frequently asked questions sole traders have about Time to Pay

Is Time to Pay only for people in serious trouble? No. It’s often used by otherwise healthy businesses experiencing temporary cash flow issues. It’s better to use it early than to wait until the situation becomes severe.

Will HMRC always agree? Not always. Agreement depends on your circumstances, the credibility of your proposal, and your compliance history. But a well-prepared request can improve your chances.

Do I have to explain personal spending? You may be asked about your financial position to assess affordability. Being honest and prepared helps. The focus is usually on whether the plan is realistic rather than scrutinising every detail.

Can I apply if I’ve already missed the deadline? Often yes, but the later you apply, the fewer options you may have and the more likely interest or penalties may already apply. Engage as soon as you can.

Will a Time to Pay plan affect my credit score? A tax payment arrangement is not the same as a consumer credit product, but unpaid debts and enforcement actions can have wider consequences. If you’re worried about knock-on effects, it can be helpful to seek professional advice specific to your situation.

A step-by-step checklist for sole traders applying for Time to Pay

To bring everything together, here is a practical checklist you can follow:

Step 1: Confirm the debt. Identify the tax type, tax year, amount owed, and due date.

Step 2: File any outstanding returns. If a return is overdue, submit it as soon as possible so the debt is confirmed.

Step 3: Build a basic cash flow view. List expected income and essential outgoings for the next few months.

Step 4: Decide what you can pay monthly. Choose an amount you can sustain without damaging your ability to trade.

Step 5: Consider an upfront payment. If you can pay something immediately, decide how much.

Step 6: Apply via the appropriate route. Use the online option if available for your situation, otherwise contact HMRC to negotiate.

Step 7: Record the agreement details. Save confirmations, note payment dates, and set reminders.

Step 8: Stick to the plan and stay current. Pay instalments on time and keep future taxes and filings up to date.

Step 9: Improve your tax system. Start setting aside money for tax regularly to avoid needing another plan.

Final thoughts: Time to Pay as part of a healthier business routine

Time to Pay can be a lifeline for sole traders when a tax bill arrives at the wrong moment. It offers a structured way to clear a debt without derailing your work, and it rewards proactive communication and realistic planning. The key is to treat it not as a last-minute escape, but as a practical business tool: assess the numbers, propose a sustainable plan, and commit to it.

If you approach the process calmly and prepare your figures in advance, applying for Time to Pay becomes far less daunting. And if you use the arrangement as a chance to rebuild your tax habits—regular bookkeeping, consistent saving, and forward planning—you can move from reactive stress to confident control. For many sole traders, that shift is the real value: not just getting through this tax bill, but setting up a way of working that makes future tax deadlines far easier to handle.