How HMRC decides what you can pay
- Take your monthly income and subtract essential outgoings, housing, food, utilities and fixed bills.
- HMRC usually asks for about half of what's left.
- Savings and assets above what you need are used to cut the debt first.
- Interest keeps running on the balance until it's paid.
Worked example
You owe £8,000. You take home £2,600 and essentials cost £1,900, leaving £700. HMRC is likely to ask for about £350 a month. You have £2,500 saved and keep £1,000 for emergencies, so £1,500 goes to HMRC straight away. The remaining £6,500 at £350 a month takes about 20 months, with roughly £447 of interest.
Limits
- Interest is estimated as simple interest at today's rate; the rate changes with the Bank of England base rate.
- HMRC makes the final decision on affordability and may ask for more evidence.