HMRC refreshed a number of pages covering Time to Pay within its Debt Management and Banking Manual at the start of September 2026. There has been no major overhaul of the policy, nor a significant change accompanied by a wider HMRC announcement, but the updated pages provide a useful reason to revisit what Time to Pay actually requires and the principles business owners should understand before approaching HMRC.
Those principles are fairly clear for any businesses or accountants that may be thinking of using this service as a useful working capital “hack” for your business. To be exact, Time to Pay is intended for businesses that genuinely cannot pay a tax liability in full by the due date, rather than businesses that would simply prefer to spread the cost. HMRC expects the proposed repayments to be affordable, expects other tax liabilities falling due during the arrangement to be paid, and wants the outstanding debt cleared over the shortest reasonable period.
For businesses considering an arrangement, the important question is therefore not simply whether HMRC offers instalments, it is whether Time to Pay fits the company’s circumstances once future tax bills, cash flow and other available funding options are taken into account.
We covered the application process in detail in our 2025 guide, How to set up a Time to Pay (TTP) arrangement with HMRC, including how to apply and what HMRC may ask for. This September update is instead focused on the wider points businesses should consider before reaching that stage.
Time to Pay is for businesses that cannot pay, not simply those that want more time
HMRC’s starting position remains that businesses with the means to pay their tax should do so in full by the due date. Time to Pay gives HMRC discretion to accept repayment over a longer period where that is not possible.
Its internal guidance describes this as the difference between a customer who “can’t pay” and one who “won’t pay”. HMRC also recognises that the position can be more complicated for a trading business: a company may have money in the bank but require some of it for essential expenditure such as wages.
That means a business does not necessarily need to have exhausted every pound of liquidity before seeking help, but it should be able to explain why the liability cannot reasonably be paid in full and what it can afford instead. HMRC’s own guidance also says businesses should consider whether the money can be raised through normal commercial means before applying for Time to Pay, including by reviewing available borrowing facilities and other sources of business finance.
For debts below £250,000, HMRC says it will look at the total amount owed across HMRC, why the taxpayer cannot pay, how much can be paid immediately and what repayment proposal is being made. Where a business needs more than three months, the level of financial information required can increase.
The next tax bill matters just as much as the current one
One of the most important parts of HMRC’s current guidance is the requirement to remain capable of paying new tax liabilities while a Time to Pay arrangement is running.
A business must not only be able to afford the agreed monthly payments. HMRC also expects it to have the means to pay other liabilities that become due during the TTP period.
This can easily be overlooked when a business is focused on an immediate VAT, PAYE or Corporation Tax bill.
A company may, for example, be able to spread a £60,000 liability over six months without difficulty when viewed in isolation. If another substantial VAT payment falls due three months later, the combined commitment may be much harder to sustain.
The sensible calculation is therefore not simply “how much can we afford each month?” It is whether that repayment remains affordable once payroll, suppliers, existing finance commitments and the next round of tax payments are included.
This is also why tax funding increasingly needs to be considered as part of wider working-capital planning rather than only after a payment has been missed. In July, we covered research from Premium Credit which found that 52% of UK SMEs were struggling to pay tax bills, with Corporation Tax creating the greatest pressure among the businesses surveyed.
HMRC wants the debt repaid as quickly as reasonably possible
Time to Pay does not come with a standard 6, 12 or 24-month term that a business can simply select.
HMRC says arrangements are tailored to what the customer can afford and are typically for a few months. Its internal guidance describes arrangements lasting more than 12 months as exceptional and requiring additional authorisation.
The practical implication is that HMRC will generally work from what it believes the business can realistically pay rather than from the repayment term the company would ideally like.
A business should therefore approach HMRC with a realistic understanding of its disposable cash flow and the reason a particular repayment period is required. Asking for a longer term purely because it would leave more cash available for other purposes is unlikely to fit the underlying purpose of TTP.
HMRC expects businesses to consider other ways of raising the money
This is one of the more commercially important parts of the guidance.
HMRC says it is “not a source of working capital for businesses” and expects customers to have tried to raise funds through normal commercial means before approaching it for Time to Pay. Its current guidance on business debts says companies would be expected to have considered their banking and borrowing facilities, and identifies loans, overdrafts, directors’ loans, invoice finance and other forms of commercial funding as possible sources.
That does not mean borrowing will always be preferable. A Time to Pay arrangement may be the right solution where commercial finance is unavailable, where additional borrowing would create too much pressure or where the business is experiencing genuine temporary distress.
There is, however, an important difference between a tax debt arrangement and finance arranged before the tax becomes overdue.
A viable business that identifies the problem early may still be able to compare its existing cash, Time to Pay and commercial funding before deciding which route makes the most sense. Finance can potentially allow HMRC to be paid in full while the cost is spread over a predetermined term, although the interest and repayments need to be considered carefully.
We looked at that distinction in more detail in How to Get a Tax Loan in 2026: Business Tax Funding Explained, including how dedicated tax funding compares with Time to Pay and other forms of business finance.
Repeat reliance on Time to Pay deserves attention
HMRC does not automatically reject another Time to Pay request simply because a business has previously used one. It does, however, say repeat requests should be scrutinised more closely.
HMRC may consider why another arrangement is required, whether the previous arrangement was maintained, what the business has changed to improve its cash flow and whether it is likely to return to normal compliance.
For the business itself, repeated requests can be a sign that the tax bill is exposing a more persistent working-capital problem. If VAT creates the same funding gap every quarter, or Corporation Tax repeatedly arrives without enough cash having been retained, another payment arrangement may solve the immediate liability without dealing with the underlying cause. Debtor days, margins, stock commitments, existing loan repayments and the structure of the company’s working-capital facilities may all be worth reviewing.
What should businesses take from the September 2026 guidance?
The September manual updates do not appear to signal a new HMRC crackdown on Time to Pay. The more useful takeaway is that they reaffirm what HMRC expects from businesses seeking additional time.
A business should be able to explain why it cannot pay in full, what it can afford now and over the proposed arrangement, and how it will continue meeting new tax liabilities. It should also have considered whether other available funding could resolve the immediate problem more appropriately.
For businesses already unable to pay, engaging with HMRC early remains important. For those that can see a VAT, PAYE or Corporation Tax funding gap developing several weeks or months in advance, there is a different advantage to acting early: there is still time to compare the available options before the tax becomes overdue.
Time to Pay can be an important solution, but it is not designed as routine working capital. Businesses with an upcoming liability should consider the tax payment in the context of their wider cash flow and decide whether paying from cash, approaching HMRC or arranging commercial finance leaves the company in the strongest position after the bill has been dealt with.
