Direct answer
A second charge for a tax bill, or HMRC Time to Pay? What to weigh
HMRC's Time to Pay lets Self Assessment customers who owe £30,000 or less, have filed their returns and have no other tax debts or payment plans set up a plan online. Larger debts need a call to HMRC. Late payment interest still runs, at Bank Rate plus 4%: 7.75% from 9 January 2026.14
An agreed Time to Pay arrangement stops late payment penalties that would otherwise fall due after the request, but not those already incurred. A second charge clears the bill at once, at the cost of a longer, secured debt. Where the client is struggling to pay, MCOB asks the adviser to consider whether an arrangement with creditors would be more appropriate.68
Key points
- Time to Pay can be set up online for Self Assessment bills of £30,000 or less.
- HMRC charges late payment interest at Bank Rate plus 4% throughout. It was 7.75% from 9 January 2026.
- An agreed plan stops future late payment penalties, not ones already charged.
- A second charge swaps a short HMRC plan for years of secured repayments. Show the total cost of both.
- First-charge lenders can be wary of tax-bill lending. Check consent early.
01
How Time to Pay works
For Self Assessment, HMRC's online service is open to customers who owe £30,000 or less, are up to date with their returns, and have no other tax debts or HMRC payment plans. Anyone who owes more can call HMRC on 0300 123 1813. A plan cannot be set up until the return has been filed.12
HMRC also says that if the customer has savings or assets, it will expect them to be used to reduce the debt as much as possible. That matters here: HMRC may ask about the home.3
02
Interest and penalties
Late payment interest is charged at Bank of England Bank Rate plus 4%, up from plus 2.5% before 6 April 2025. HMRC's published rate was 7.75% from 9 January 2026. It moves with Bank Rate, so check the current figure on the day.4
Under the standard Self Assessment regime, penalties of 5% of the unpaid tax arise at 30 days, 6 months and 12 months. If HMRC agrees to defer payment, the taxpayer is not liable to a penalty that would otherwise arise between the request and the end of the deferral period. Breaking the agreement can bring the penalty back.56
Clients in Making Tax Digital for Income Tax move to a different penalty regime from the tax year they join. For 2026-27 nothing is charged for the first 15 days, staged penalties of 3% follow, and a yearly 10% charge applies from day 31. If a payment plan is agreed and kept to, penalties are paused from the date the customer contacted HMRC.7
03
Comparing the two
The illustration below compares a £20,000 bill. It assumes Time to Pay over 12 months at 7.75%, and a second charge at 9.5% with a £995 lender fee and a £2,000 broker fee added to the loan. Every figure is hypothetical.
The second charge lowers the monthly outgoing a long way and costs several times as much in total. That can still be the right answer, for a bill too big for a short plan or where the monthly budget cannot carry Time to Pay. The file has to show the client saw both.
| Route | Monthly payment | Total repaid | Cost above the £20,000 bill |
|---|---|---|---|
| Time to Pay, 12 months at 7.75% | £1,737 | £20,849 | £849 |
| Second charge, 5 years at 9.5% | £483 | £28,976 | £8,976 |
| Second charge, 10 years at 9.5% | £298 | £35,706 | £15,706 |
04
What the rules ask of the adviser
Where the main purpose of a regulated mortgage is consolidating existing debts, MCOB 4.7A.15R requires the adviser to weigh the cost of a longer repayment period, whether securing previously unsecured debt is appropriate and, where the customer is known to have payment difficulties, whether an arrangement with creditors would be more appropriate. MCOB 4.7A.16E warns against misdescribing the purpose so the rule does not apply.8
The rule does not mention HMRC by name. A client who cannot pay a tax bill when due owes money to a creditor, and Time to Pay is the arrangement HMRC offers. The FCA's March 2026 review listed advisers failing to consider whether consumers with known payment difficulties should negotiate with their creditors as poor practice.9
05
What the file should show
A short record that answers the question someone will ask later: why was securing this bill on the home right for the client?
- The tax owed, the type of tax, the due date and any penalties already charged
- Whether a Time to Pay arrangement was explored, and what HMRC offered or would likely offer
- The monthly cost and total cost of Time to Pay against the second charge, with every fee
- Why the second charge term was chosen, and the total cost at that term
- The client's other debts and whether any are in arrears
- Whether the bill is likely to recur, and how next year's tax will be paid
Common questions
Questions answered
Can I use a second charge to pay an HMRC tax bill?
Yes, subject to affordability, lender criteria and suitable advice. The comparison with HMRC's Time to Pay should be on the file, and the first-charge lender's consent may be needed.
Who can set up Time to Pay online?
Self Assessment customers who owe £30,000 or less, are up to date with their returns and have no other tax debts or HMRC payment plans. Larger debts can be discussed with HMRC by phone.
Does Time to Pay stop interest?
No. Late payment interest runs throughout, at Bank Rate plus 4%. An agreed arrangement stops late payment penalties that would otherwise arise after the request.
Is HMRC a creditor for MCOB 4.7A.15R?
The rule refers to creditors without defining the term or naming HMRC. A tax bill the client cannot pay is owed to HMRC, and Time to Pay is the arrangement on offer, so considering it is the sensible reading.
Evidence
Sources and review
Material factual claims were checked against the primary and public-interest sources below. Product criteria and the wider market can change after the review date.
- 1Pay what you owe in instalments: eligibility
HMRC. The £30,000 online limit, eligibility conditions, interest basis and phone number.
- 2HMRC offers time to help pay your tax bill
HMRC, 9 December 2025. Plans for bills up to £30,000 set up online, and the return must be filed first.
- 3Difficulties paying HMRC: pay in instalments
GOV.UK. HMRC expects savings or assets to be used to reduce the debt.
- 4HMRC interest rates for late and early payments
HMRC. Late payment interest of 7.75% from 9 January 2026, at Bank Rate plus 4% from 6 April 2025.
- 5Self Assessment tax returns: penalties
GOV.UK. 5% penalties at 30 days, 6 months and 12 months.
- 6Finance Act 2009, schedule 56, paragraph 10
legislation.gov.uk. No liability to penalties arising during an agreed deferral period, and the effect of breaking the agreement.
- 7Penalties for Making Tax Digital for Income Tax
HMRC. The 2026-27 late payment penalty regime and pausing penalties under a payment plan.
- 8MCOB 4.7A: Suitability of regulated mortgage contracts
Financial Conduct Authority Handbook. The debt consolidation requirements in MCOB 4.7A.15R and MCOB 4.7A.16E.
- 9Second charge mortgages: improving outcomes for consumers
Financial Conduct Authority. Failing to consider negotiation with creditors listed as poor practice.
- 10Ombudsman decision DRN-4478877
Financial Ombudsman Service. A first-charge lender's refusal of consent for a loan mainly to pay a tax bill.
Published 1 November 2026. Last reviewed 1 November 2026.