What Happens If You Can’t Pay HMRC on Time? Your Options in 2025

Missing a payment to HMRC is a stressful situation for any business or individual. Whether it’s VAT, Corporation Tax, PAYE, or Self-Assessment, falling behind on tax obligations can lead to penalties, interest, and further action from HMRC. But the good news is, you have options.

In this 2025 guide, we’ll explain exactly what happens if you can’t pay HMRC on time, how to minimise damage, and what support options are available to help you navigate the situation.

What Happens If You Miss a Tax Deadline?

Failing to pay HMRC on time can trigger a series of consequences depending on the type of tax and how long the payment is overdue.

Initial Consequences:

• Interest on the outstanding amount (currently at 7.75% as of 2025, subject to change)

• Late payment penalties, which increase the longer the debt remains unpaid

• Suspension of HMRC services or repayment claims, especially for VAT or Self-Assessment refunds

Escalated Enforcement Actions:

If the debt continues unpaid:

• HMRC may contact you via phone, letter, or email

• Debt collectors (field agents) may be sent to your business or home

• Assets may be seized and sold through a process called distraint

• HMRC may apply to close your business (winding-up petition) in extreme cases

Common Reasons Businesses Struggle to Pay HMRC

Understanding the root cause can help you communicate with HMRC more effectively:

• Seasonal cash flow issues

• Late-paying clients or customers

• Economic downturns or market disruption

• Rapid growth causing unexpected tax liabilities

• Administrative oversight or accounting errors

Your Options If You Can’t Pay HMRC on Time (2025)

1. Time to Pay Arrangement (TTP)

What is it?

A formal payment plan with HMRC that allows you to spread tax payments over a period, usually 3 to 12 months.

Who can apply?

Individuals and businesses who are temporarily unable to pay but are otherwise viable.

How to arrange it:

• Call the HMRC Payment Support Service as soon as possible

• Be ready to provide cash flow forecasts and repayment proposals

• Apply before the payment deadline where possible

Benefits:

• Avoid further penalties and legal action

• Pay in affordable monthly instalments

• Protect your credit rating

2. Apply for a Short-Term Business Loan

If you're confident in your business's ability to repay over time, a short-term tax loan or VAT loan may offer a fast, flexible solution.

Benefits:

• Quick approval and funding (24-72 hours)

• Keeps your relationship with HMRC in good standing

• Avoids enforcement action or asset seizure

Best for:

Businesses awaiting incoming payments, funding, or seasonal income.

3. Use a Business Line of Credit

A revolving credit facility works like a business overdraft. You only pay interest on what you use, making it a good option for recurring tax liabilities such as VAT or PAYE.

4. Invoice Finance (If You’re Owed Money)

If you’re waiting on clients to pay invoices, invoice financing can release the cash tied up in your accounts receivable.

How it works:

You get an advance of up to 90% of the invoice value, use that to pay HMRC, then repay the lender once your customer settles the invoice.

5. Communicate with HMRC Early

The worst thing you can do is ignore the issue. HMRC is far more likely to be flexible if you:

• Contact them before the payment is due

• Offer a reasonable repayment proposal

• Show that you're willing to cooperate

Even if you can't pay in full, showing good intent can help avoid penalties and enforcement.

What NOT to Do If You Can’t Pay HMRC

Don’t ignore HMRC letters or calls – This escalates the situation
Don’t make promises you can’t keep – Broken arrangements damage credibility
Don’t take on unsustainable debt – Only borrow if repayment is realistic

How Much Time Do You Have Before HMRC Acts?

The timeline varies depending on the type of tax and the size of the debt. Typically:

• Interest begins the day after the deadline

• Penalties start from 15 days overdue (for VAT, as of 2023 rules)

• Debt recovery may begin within 30–60 days

In 2025, HMRC is using more automated systems to monitor unpaid taxes, so early action is even more critical.

Final Thoughts: Take Action Early

If you’re worried about paying your HMRC bill in 2025, don’t panic, but don’t wait. Whether you negotiate a Time to Pay arrangement or explore external funding options, acting quickly gives you more control and fewer consequences.

The sooner you speak to HMRC or a finance advisor, the more options you'll have.

Need Help Managing Your HMRC Payments?

We help businesses across the UK find fast, flexible funding solutions to meet tax obligations without hurting cash flow. Whether it’s a short-term loan or invoice finance, we’ll help you choose the right path.

Get in touch today to speak with a business finance expert.