18,000 sole traders spread tax bills with HMRC payment plans

The festive season is well and truly underway, which means that many households across the UK might be feeling the financial pinch. For freelancers and sole traders, the looming Self-Assessment deadline on 31 January 2026 may be the source of added pressure. 

Fortunately, HMRC sent out a reminder that help is available through its Time to Pay service, which allows taxpayers to pay their bill in monthly instalments. Nearly 18,000 payment plans have already been set up since April.

If monthly instalments would ease the pressure and make Christmas a little more enjoyable, we’d recommend filing your tax return sooner rather than later and getting your payment plan sorted. 

What is Time to Pay?

HMRC’s Time to Pay service is designed for taxpayers who otherwise wouldn’t be able to settle their Self Assessment tax bill in full by the 31 January deadline. 

Customers owing no more than £30,000 can set up a repayment plan online without contacting HMRC directly. Payments can then be made through the HMRC app, online via GOV.UK, or through a variety of other methods.

For larger bills or longer repayment periods, HMRC advises calling directly to arrange a plan.

Regarding the scheme, Myrtle Lloyd, HMRC’s Chief Customer Officer, said: “Our online payment plans offer financial flexibility and can be tailored to individual circumstances. We want to support all our customers in meeting their tax obligations with confidence.”

Time to Pay arrangements can only be set up after actually filing a Self-Assessment tax return, but they give customers the ability to plan repayments around their finances and are intended to reduce unnecessary financial pressure. 

What else is changing for sole traders and freelancers?

HMRC has also reminded its customers who might have received Simple Assessment letters that they do not need to complete a tax return. Instead, they have three months from the date of issue to pay. 

These letters will have been sent to those with outstanding Income Tax due from the 2024–25 tax year that cannot be collected via PAYE.

Looking ahead to 2026, remember that sole traders and landlords with a turnover above £50,000 will soon be required to use Making Tax Digital for Income Tax. 

From 6 April, those with qualifying income will need to submit quarterly income and expense summaries to HMRC using MTD-compatible accounting software. Getting to grips with this sooner rather than later will support a smoother transition with fewer technical hiccups. 

Should the self-employed set up a plan?

For many, Time to Pay will be a helpful way to smooth the potential blow to cash flow from a hefty tax bill while avoiding late-payment penalties. 

If you decide to set up a payment plan, it’ll be based on your income and expenditure. You can choose how much to pay upfront, then the rest will be spread across the period you choose. Your arrangement can be altered as and when necessary to reflect any changing circumstances. 

That said, interest will still apply, so if you can pay in full, you should carefully weigh up the costs.

The most important first step is to file your tax return in good time, to keep as many payment options open as possible. This way, you’ll maintain better control over your finances during what can be a stressful time of year for many.