If your company cannot pay its VAT bill on time, act before the deadline if you can. Pay what you can, contact HMRC, and compare your options: an HMRC payment plan (Time to Pay), a VAT loan that pays the bill in full, or a mix of the two. Doing nothing is the costly choice. Late payment interest starts on the first day the VAT is overdue, penalties start on day 16, and HMRC can take further action. Our VAT late payment penalty calculator shows what paying late would cost.
What happens if you cannot pay your VAT bill on time?
HMRC’s charges depend on how many days the payment is overdue. The table follows GOV.UK’s guidance on VAT late payment penalties and late payment interest.
| Days overdue | What HMRC charges or does |
|---|---|
| From day 1 | Late payment interest on the VAT unpaid, at the Bank of England base rate plus 4%, until it is paid in full. HMRC will try to contact you about the missed payment. |
| Days 1 to 15 | Interest only, with no penalty. Paying in full, or asking for Time to Pay, by day 15 avoids the penalty that starts on day 16. |
| Day 16 | A first late payment penalty of 3% of the VAT still unpaid at day 15. |
| Day 31 | The first penalty rises to 3% of what was unpaid at day 15 plus 3% of what is still unpaid at day 30. A second penalty starts, at 10% a year on the balance, charged every day. |
| Later | If you do not respond, HMRC may visit you or use a debt collection agency. Enforcement powers are the last resort (see below). |
Asking for a payment plan early matters. GOV.UK says a Time to Pay arrangement can mean lower or no late payment penalties, but if you do not keep to its conditions it may be cancelled, and HMRC would then charge both penalties as if the arrangement had never existed. To work out the figures for your own bill, use the penalty and interest calculator. Check the amount and the date in your VAT account: for most businesses the deadline for the return and the payment is one calendar month and seven days after the end of the VAT period, and our VAT payment deadlines guide lists the dates.
Your options if you cannot pay your VAT bill
There are three main routes, and they can be combined. None is right for every company, so compare them on your own figures.
| Option | How it works | What to weigh |
|---|---|---|
| Pay what you can now | Paying part of the bill reduces the VAT on which penalties and interest are worked out. | It does not stop penalties and interest on the balance that remains unpaid. |
| HMRC Time to Pay | You agree monthly instalments with HMRC, based on what your company can afford. GOV.UK says HMRC checks the plan is affordable and expects you to use savings and assets first. HMRC’s online service can set up a VAT plan if your company has missed the payment deadline, owes £100,000 or less and has no other payment plans or debts with HMRC. Read our guide to HMRC Time to Pay. | HMRC charges interest on the outstanding balance while you pay. Penalties can be lower or nil if it is agreed in time, and a missed payment can cancel the plan. |
| A VAT loan | A lender pays HMRC in full, and your company repays the lender over three months. Loans start from £5,000, for UK limited companies, and a decision is normally given within 24 hours of receiving the information the lender needs. | The quotation sets the interest and any fees, the repayments must fit your cash flow, and a personal guarantee depends on the lender. Estimate the repayments before you apply. |
Two things help whichever route you choose. Chase any overdue customer invoices, because the cash you are owed may cover part of the bill. And check whether your business could use the VAT Cash Accounting Scheme, which lets some businesses pay VAT on sales only when their customers pay them; GOV.UK sets the eligibility rules.
Time to Pay or a VAT loan: how to decide
Time to Pay is agreed with HMRC, charges interest while the VAT is unpaid, and can be cancelled if you miss a payment. A VAT loan is finance from a lender: HMRC is paid in full, and the agreement is between your company and the lender. Compare the total you would repay, the monthly amount, and what happens if a payment is missed. Our Time to Pay and VAT loan comparison sets the two side by side.
A VAT loan can fund the whole bill or only part of it. For part-funding, the lender will usually need to see that you have paid the rest. The finance provider pays HMRC using your VAT registration number as the reference, so the payment is allocated to your VAT account. Confirm the payment date with the team, because applying for finance does not extend your deadline. Only borrow if the repayments are affordable: check them against your cash-flow forecast first. Check eligibility or read how a VAT loan works.
What does HMRC do next? Debt management, debt collectors and enforcement
People often call this “HMRC debt management”: the letters, calls and visits that follow an unpaid bill. GOV.UK’s guidance on what will happen if you do not pay your tax bill says:
- HMRC contacts you first. If you have a tax debt, HMRC says it will try to contact you and agree a way forward before it takes any action, unless it suspects fraud. It may write, text, phone or visit your home or business address. Reply as soon as possible, so HMRC knows you need support and are not refusing to pay.
- Debt collection agencies. If you do not respond or refuse to pay, HMRC may pass the debt to an agency. GOV.UK says the agencies contact you only by letter, text message or phone and never visit, are regulated by the Financial Conduct Authority, and pass your case back to HMRC if you cannot pay or agree Time to Pay. GOV.UK’s list on 30 September 2026 was: 1st Locate (trading as LCS); Advantis Credit; Ardent Credit Services (trading as Debt & Revenue Services, DRS); BPO Collections; BW Legal Services (trading as BWL); CCS Collect (Commercial Collection Services); Moorcroft Debt Recovery; Pastdue Credit Solutions. Check the current list on GOV.UK, and check that a letter or call is genuine.
- Enforcement powers, as a last resort. HMRC uses them if it cannot contact you, you refuse to pay, or an agency returns the debt. They include taking control of goods to sell them (in England and Wales after a formal notice of enforcement, which costs £75, with further fees), taking money directly from a bank account, and taking you to court. GOV.UK says HMRC can also close down a company that owes business tax. Costs such as auction fees are normally added to the debt, and HMRC says it will tell you before taking these actions and explain your rights, costs and options.
Who to contact at HMRC about a VAT payment problem
HMRC gives two phone lines for VAT payment problems, and they cover slightly different things:
- To set up a VAT payment plan by phone: 0300 123 1813 (from outside the UK, +44 2890 538 192), Monday to Friday, 8am to 6pm, closed weekends and bank holidays. HMRC’s VAT payment plan page gives this line if you cannot set up a plan online.
- For a VAT payment you have missed: HMRC’s Payment Support Service on 0300 200 3831, Monday to Friday, 8am to 6pm, closed bank holidays, listed on GOV.UK’s payment problems page.
- Online: ask HMRC’s digital assistant, which can transfer you to a webchat with an adviser if one is available, or check your business tax account.
- Not the VAT helpline. GOV.UK says you cannot pay, or agree time to pay, using the VAT helpline number (0300 200 3700).
- Through an agent. If your accountant or another agent acts for you, GOV.UK lists a dedicated agent line for debt management.
Have your VAT registration number, the amount and period, your UK bank account details (you must be authorised to set up a Direct Debit) and details of your company’s income and spending. Read GOV.UK’s guide to what to do if you cannot pay your tax bill on time.
Can VAT debt be written off?
GOV.UK’s guidance is about agreeing a way to pay what you owe, in full or in instalments. It does not offer to cancel a VAT bill, and it says HMRC can close down a company that owes business tax and does not deal with the debt. If your company cannot afford the bill, a payment plan or loan repayments, speak to your accountant or a licensed insolvency practitioner before you borrow more. The options above are for a viable company with a temporary cash gap.
Frequently asked questions
What happens if I can’t pay my VAT bill on time?
Late payment interest starts on the first day the VAT is overdue, at the Bank of England base rate plus 4%. A first penalty of 3% of the VAT unpaid applies from day 16. From day 31 the first penalty rises by another 3% and a second penalty starts, at 10% a year, charged daily. HMRC will try to contact you, and if you do not respond it can use a debt collection agency and, as a last resort, enforcement powers. Contacting HMRC early and agreeing a payment plan can mean lower or no penalties.
Can I pay my VAT bill in instalments or installments?
Yes, in two ways. You can ask HMRC for a Time to Pay arrangement, or fund the bill with a VAT loan, which pays HMRC in full while your company repays the lender over three months. Our comparison sets the two side by side.
Who do I call if I can’t pay my VAT bill?
To set up a VAT payment plan by phone, HMRC’s VAT payment plan page gives 0300 123 1813 (from outside the UK, +44 2890 538 192), Monday to Friday, 8am to 6pm, closed weekends and bank holidays. For a VAT payment you have missed, GOV.UK’s payment problems page lists HMRC’s Payment Support Service on 0300 200 3831, Monday to Friday, 8am to 6pm, closed bank holidays. You can also ask HMRC’s digital assistant online, which can transfer you to a webchat with an adviser if one is available. HMRC’s VAT helpline cannot agree a payment plan.
Will HMRC send debt collectors for unpaid VAT?
If you do not respond to HMRC or refuse to pay, it may visit you or use a debt collection agency. GOV.UK says the agencies contact you only by letter, text message or phone and never visit, are regulated by the Financial Conduct Authority, and pass your case back to HMRC if you cannot pay or agree a Time to Pay arrangement. See the GOV.UK list of agencies.
Does HMRC charge interest if I can’t pay VAT on time?
Yes. Late payment interest is charged from the first day the VAT is overdue until it is paid in full, at the Bank of England base rate plus 4%. Under a Time to Pay arrangement HMRC charges interest on the outstanding balance until it is paid. Use our penalty and interest calculator for your own figures.
Can I get a VAT loan if my VAT is already overdue?
Yes. A VAT loan can still pay HMRC in full after the deadline. Late payment interest runs from the first day, and paying within 15 days avoids the first late payment penalty. Applying for finance does not extend your deadline.
Is a VAT loan the same as HMRC Time to Pay?
No. Time to Pay is a payment plan agreed with HMRC, which charges interest while the VAT is unpaid and can cancel the plan if you miss a payment. A VAT loan is finance from a lender: HMRC is paid in full, and your company repays the lender. See the two side by side.
To discuss whether VAT finance could help, check eligibility or call 01494 956 871. Finance is subject to status, affordability and lender approval. VAT Loans is a credit broker, not a lender. HMRC facts on this page were checked against GOV.UK on 30 September 2026.