Key takeaways
- A budget payment plan lets you make regular weekly or monthly Direct Debit payments towards your next Self Assessment bill.
- You choose the amount and can change, pause or cancel it at any time.
- You can only use it if you are up to date with your previous Self Assessment payments.
- Payments are credited to your account; you still owe any shortfall on the normal 31 January and 31 July dates.
- If you are already behind, ask about a Time to Pay arrangement instead.
Self Assessment bills arrive in large lumps on 31 January and 31 July. A budget payment plan lets you spread the cost by paying HMRC in smaller amounts before the bill is due, a little like saving towards it in an account that HMRC holds.
How it works
- You set up a Direct Debit to pay HMRC a fixed amount weekly or monthly.
- The payments build up as a credit on your Self Assessment account.
- When your next payment is due, on 31 January or 31 July, the credit is used against it.
- If the credit is less than the amount due, you pay the difference by the deadline.
- If it is more, the surplus is carried forward or can be repaid.
You decide how much to pay. A common approach is to divide your expected next payment by the number of weeks or months until it is due.
Example
Sam’s 2025/26 bill was £6,000, so his payments on account for 2026/27 are £3,000 each, due 31 January 2027 and 31 July 2027. In May 2026 he sets up a budget payment plan of £500 a month.
| Period | Paid through the plan | Applied to |
|---|---|---|
| May 2026 to December 2026 | £4,000 | £3,000 for 31 January 2027; £1,000 carried forward |
| January 2027 to June 2027 | £3,000 | With the £1,000 credit, covers the £3,000 due 31 July 2027 and leaves £1,000 towards the next bill |
Who can use it
You can set up a budget payment plan if you are up to date with your previous Self Assessment payments. It is not available if you owe tax from earlier years; in that case contact HMRC about a Time to Pay arrangement.
How to set it up
- Sign in to your HMRC online account and go to your Self Assessment.
- Choose the option to set up a budget payment plan.
- Enter your bank details, how often you want to pay (weekly or monthly) and the amount.
- Confirm the Direct Debit.
You can change the amount or frequency, pause payments or cancel the plan through your account. Cancelling the Direct Debit with your bank instead may cause problems with the credit already held.
Budget payment plan or saving yourself?
| Budget payment plan | Saving in your own account | |
|---|---|---|
| Discipline | Money leaves automatically and is ring-fenced | Easy to dip into |
| Interest | None is paid on the credit held by HMRC | You earn interest, possibly tax-free in an ISA |
| Flexibility | Can change or pause, but getting money back takes time | Immediate access |
| Risk of missing a deadline | Lower, if the plan covers the bill | Depends on you making the payment |
Some people prefer the certainty of the plan; others keep the money in an easy access savings account and pay on the deadline. Either way, the key is to set aside money as income arrives, especially in the early years of self-employment when payments on account can make the first January bill large.
Other ways to spread the cost
- Collecting through your tax code: if you are employed or receive a pension and owe less than £3,000, you can have it collected through your tax code over the following year, if you file online by 30 December.
- Time to Pay: if you cannot pay a bill already due, HMRC may agree a payment plan, often set up online for debts up to £30,000. Interest still runs on late tax.
- Reducing payments on account: if your income has fallen, reduce them using your HMRC account or form SA303 so you are not paying more than needed.
Frequently asked questions
What is a budget payment plan?
A Direct Debit arrangement that lets you pay towards your next Self Assessment bill in regular weekly or monthly amounts that you choose.
Can I use a budget payment plan if I owe tax?
No. You must be up to date with previous Self Assessment payments. If you owe tax, ask HMRC about a Time to Pay arrangement instead.
Does HMRC pay interest on budget payment plan credits?
No interest is paid on the credit while it waits to be used against your bill.
Can I change the amount I pay?
Yes. You can change the amount or frequency, or pause or cancel the plan, through your HMRC online account.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.