Can't pay your tax bill? Payment plans and what to do next (US, UK, Canada)

A slow-paying client, a bigger year than you expected, or nothing set aside: the tax is due and the money isn't there. The IRS, HMRC and the CRA all let you pay over time in many cases. Here's what each one says about payment plans, why you should still file on time, what keeps adding up while you pay, and when penalties can be taken off.

General information, not tax or legal advice. Not written or reviewed by a lawyer or an accountant. It isn't debt advice either. The short answer, the side-by-side summary, the what-to-have-ready table, the steps, the checklist and all the wording are ours; the official items come from the US, UK and Canadian government pages linked below. They are general rules for individuals and businesses, and none of them is a freelance law. US state taxes, sales taxes, payroll taxes, companies, Quebec and other countries were not checked. Official pages were read on 2026-10-17.

The short answer

1. File on time anyway. In all three countries, a late return brings its own penalty on top of paying late.
2. Pay what you can now. Interest keeps adding up on whatever is left.
3. United States: the IRS has short-term payment plans with no setup fee and long-term monthly plans (installment agreements). Individuals who qualify, including sole proprietors, can apply online.
4. United Kingdom: HMRC may agree a payment plan, also called Time to Pay, if it's affordable. You can check online or contact HMRC.
5. Canada: schedule pre-authorized debit payments in your CRA account, or call the CRA to set up a payment arrangement.
6. A plan doesn't make the tax go away. Penalty or interest relief is a separate request, with its own rules.

On this page

• 1. First: file on time and pay what you can
• 2. United States: IRS payment plans
• 3. United States: penalties and relief
• 4. United Kingdom: an HMRC payment plan (Time to Pay)
• 5. Canada: a CRA payment arrangement
• 6. Canada: interest, penalties and relief
• 7. Side by side
• 8. What to have ready
• 9. Step by step
• 10. Stop it happening again
• Free tools and kits
• Where the sources differ
• When to get advice
• Related
• Sources

1. First: file on time and pay what you can

• US: "If you're not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There's also a penalty for failure to file a tax return, so you should file timely and pay as much as you are able, even if you can't pay your balance in full." (IRS: Topic no. 202, Tax payment options, page date 25-Sep-2026).
• UK: "You’ll get a penalty if you need to complete a tax return and you:"
  • send your return late
  • pay your tax bill late
  (GOV.UK: Self Assessment penalties, page date 2024-11-05). "You’ll be charged interest and may be charged a penalty if your payment is late." "You can get help if you cannot pay your tax bill on time." (GOV.UK: Pay your Self Assessment tax bill, page date 2024-11-22).
• Canada: "If you cannot pay your balance owing by the return due date, file on time to avoid being charged a late-filing penalty." "If you file after the due date and owe tax, you will be charged a late-filing penalty. Filing late can also delay your benefit and credit payments." (CRA: Interest and penalties on late taxes, page date 2026-01-20).

Filing tells the tax agency what you owe, and the IRS and CRA pages both expect your returns to be filed and kept up to date while you pay over time. If clients owe you money, chasing it now helps too: see how to chase an unpaid invoice.

2. United States: IRS payment plans

• What a plan is: "A payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe. You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame." (IRS: Payment plans installment agreements, page date 13-Aug-2026).
• The options: "Payment options include full payment, a short-term payment plan (paying in 180 days or less) or a long-term payment plan (installment agreement) (paying monthly)." (IRS: Online payment agreement application, page date 14-Sep-2026).
• Short-term: "If you can't pay in full immediately, you may qualify for additional time --up to 180 days-- to pay in full. There's no fee for this short-term payment plan. However, interest and any applicable penalties continue to accrue until your liability is paid in full." "If you qualify for a short-term payment plan you will not be liable for a user fee."
• Long-term: "If you're not able to pay your balance in full immediately or within 180 days, you may qualify for a monthly payment plan (installment agreement) that lets you make a series of monthly payments over time." (IRS: Topic no. 202, Tax payment options).
• Applying online: "You may qualify to apply online if:"
  • Simple payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest. You have filed all required returns.
  • Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.
  "If you are a sole proprietor or independent contractor, apply for a payment plan as an individual." "Once you complete your online application you will receive immediate notification of whether your payment plan has been approved." "Setup fees may be higher if you apply for a payment plan by phone, mail, or in-person." "Business accounts are unable to apply online for a payment plan." (IRS).
• Before a bill arrives: "Even if the IRS hasn’t yet issued you a bill, you may establish a pre-assessed agreement by entering the balance you’ll owe from your tax return. An online payment agreement is quick and has a lower user fee compared to other application methods." "Alternatively, you can complete and mail paper Form 9465, Installment Agreement Request, file through tax filing software, or call us, preferably at the number on your bill if you received one."
• Filing comes first: "Before your payment plan request can be considered, you must be current on all filing and payment requirements." (IRS).
• While you pay: "Interest and some penalty charges continue to be added to the amount you owe until the balance is paid in full." "Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action." (IRS).
• If you can't pay anything right now: "If you can't pay any of the amount due because payment would prevent you from meeting your basic living expenses, you can request that the IRS delay collection until you're able to pay." "However, being currently not collectible does not mean the debt goes away." "It's important to respond to an IRS notice." (IRS).
• Settling for less: "An offer in compromise (OIC) may allow you to settle your tax debt for less than the full amount you owe if you can’t pay in full or doing so would cause financial hardship." "Generally, we won’t accept an offer if you can pay your tax debt in full through a payment plan and/or equity in assets." "To be eligible, you must:"
  • File all required tax returns
  • Make required estimated tax payments
  • Not be in an open bankruptcy
  • If you’re an employer, make required federal tax deposits for the current and last two quarters
  (IRS: Offer in compromise, page date 14-Oct-2026).

The IRS also says this about borrowing: "You should consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institution or a credit card. The interest rate and any applicable fees charged by a bank or credit card company may be lower than the combination of interest and penalties set by the Internal Revenue Code." (IRS). Borrowing has its own costs and risks, so weigh it with an adviser. Setup fees depend on the plan and how you apply and pay; they're listed on the IRS pages and can change. State taxes weren't checked; your state's tax agency handles those.

3. United States: penalties and relief

• Filing late: "The penalty is 5% of the tax due (less any tax paid on time and available credits) for each month or partial month the return is late. The penalty accrues up to a maximum of 25%." "If failure to file and failure to pay penalties both apply, the failure to file penalty is reduced by the amount of the failure to pay penalty (0.5% for each month). After 5 months the failure to file penalty will max out, but the failure to pay penalty continues." (IRS: Failure to file penalty, page date 05-Oct-2026).
• Paying late: "The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won’t exceed 25% of your unpaid taxes." "If you don’t pay your tax in 10 days after getting a notice from us with our intent to levy, the failure to pay penalty is 1% per month or partial month." (IRS: Failure to pay penalty, page date 05-Jun-2026).
• Why a plan helps: "If you filed your tax return on time as an individual and you have an approved payment plan, the failure to pay penalty is reduced to 0.25% per month (or partial month) during your approved payment plan." "If you can't pay the full amount of your taxes on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan."
• An extension isn't more time to pay: "If you need more time to prepare your tax return, apply for an extension of time to file. This does not grant you an extension of time to pay."
• Taking penalties off: "We may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for why you weren’t able to meet your tax obligations. By law we cannot remove or reduce interest unless the penalty is removed or reduced." (IRS). "You may qualify for penalty relief if you tried to comply with tax laws but were unable due to circumstances beyond your control." "You may be given one of the following types of penalty relief depending on the penalty:"
  • First time penalty abate and administrative waiver
  • Reasonable cause
  • Statutory exception
  "Some penalty relief requests may be accepted over the phone." If that doesn't work, the IRS page points to Form 843, Claim for Refund and Request for Abatement. "We’ll automatically reduce or remove the related interest if any of your penalties are reduced or removed." (IRS: Penalty relief, page date 09-Sep-2026).

Self-employment tax is part of the same federal bill: see US self-employment tax and Schedule C. The underpayment penalty for estimated tax is covered in US estimated tax.

4. United Kingdom: an HMRC payment plan (Time to Pay)

• The basics: "If you cannot pay your tax bill in full, you may be able to set up a payment plan to pay it in instalments." "HM Revenue and Customs (HMRC) will check if a payment plan is affordable for you. If you cannot agree a payment plan with them, they’ll ask you to pay the amount you owe in full." (GOV.UK: If you cannot pay your tax bill on time, page date 2014-12-11).
• Its other name: "If you’ve missed your Self Assessment payment deadline or you cannot pay the amount you owe, you might be able to set up a payment plan (also known as a ‘Time to Pay’ arrangement)." (GOV.UK: Pay weekly or monthly, page date 2024-11-22).
• Setting one up: "You may be able to set up a payment plan to pay your overdue tax bill in monthly instalments." "To set up a payment plan you’ll need:"
  • the relevant reference number for the tax you cannot pay, such as your unique tax reference number - you can usually get this from any letters HM Revenue and Customs (HMRC) has sent you
  • your UK bank account details - you must be authorised to set up a Direct Debit
  • details of your income and spending, or your company’s income and spending if you owe company tax
  "Use this service to check if you’re eligible for and to set up a payment plan online."
• If you can't do it online: "You’ll need to tell HMRC:"
  • if you can pay in full
  • how much you can repay each month
  • if there are other taxes you need to pay
  • how much money you earn
  • how much you usually spend each month
  • what savings or investments you have
  "If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible." "If you’ve received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’. HMRC will accept this as evidence of what you earn and spend each month." (GOV.UK: Setting up a payment plan, page date 2014-12-11).
• How much you'll pay: "The amount you’ll be asked to pay each month will be based on how much you have left after you pay any rent, food or utility bills and fixed outgoings you have, like subscriptions." "You’ll usually be asked to pay around half of what you have left over each month towards the tax you owe." "You can also agree to pay more if you want. Paying your debt quicker means you’ll pay less in total because you’ll pay less interest."
• How long it lasts: "There’s no time limit on how long a payment plan can last. It will depend on how much you owe and what you can afford to pay each month." "You should contact HMRC if anything changes that could affect your payment plan. You can make the payment plan longer or shorter."
• If you miss a payment: "HMRC will contact you to find out why. Where possible, they’ll try to rearrange or renegotiate the payment plan with you." "If you cannot pay another tax bill, contact HMRC. You may be able to include the new tax bill in your payment plan." (GOV.UK: How much you'll pay, page date 2014-12-11).
• If you ignore it: "If you do not get in contact with HMRC or cannot agree an instalment plan then HMRC may:"
  • ask a debt collection agency to collect the money
  • collect what you owe directly from your wages or any monthly pension payments you get
  • take things you own and sell them (if you live in England, Wales or Northern Ireland)
  • take money directly from your bank account or building society savings (if you live in England, Wales or Northern Ireland)
  • take you to court
  • make you bankrupt
  • close down your company if the tax is a business tax
  "HMRC will tell you before taking any of these actions and will explain your rights, costs and options." (GOV.UK: If you do not contact HMRC, page date 2014-12-11).
• Penalties and interest: "You’ll get penalties of 5% of the tax unpaid at:"
  • 30 days
  • 6 months
  • 12 months
  "You’ll also be charged interest on the amount owed." "If you have a reasonable excuse, you can appeal against a penalty." (GOV.UK: Self Assessment penalties).
• Help: "If you’re in England or Wales, Money Helper can give you more information about debt management and where to get free debt advice." The same page lists services for Scotland and Northern Ireland. "You cannot appeal against HM Revenue and Customs’ (HMRC) decision, but you can make a complaint if you’re unhappy about how you were treated." (GOV.UK: Help and advice, page date 2014-12-11).

The late filing penalty amounts and the Self Assessment deadlines are in UK Self Assessment for freelancers; payments on account are in UK payments on account.

5. Canada: a CRA payment arrangement

• Two ways to set it up: "If you can’t pay your debt right away, you can schedule a series of payments in your online CRA account using a pre-authorized debit (PAD) agreement. You can also call the CRA to set up a payment arrangement." "Use the personal income and expense worksheet to determine what you can afford to pay on a regular basis." "For personal income tax debt only, call our automated line to make a payment arrangement." (CRA: Arrange to pay your debt over time, page date 2026-09-18).
• Before you call: "When you call, you may need to have:"
  • Social Insurance Number or business number
  • Full name and date of birth or business name
  • Complete personal or business address
  • Assessed return, notice of assessment, reassessment, or other tax document, or be signed in to My Account or My Business Account
• Keeping it going: "To start your payment arrangement, you need to make your first payment towards your debt." "Once you have set up your payments, you must continue to make payments on the agreed upon dates. You have to file all future returns on time and stay up to date with your obligations. We may review your payment arrangement periodically." "If you need to change a payment arrangement or you are unable to make a payment, call us." "Even if you have a payment arrangement and are making payments, we may use some benefits and other credit payments you receive to pay your debt." (CRA).
• What the CRA looks at: "Any amount you owe is payable in full as soon as your return is assessed or reassessed." "We will consider mutually satisfactory payment arrangements, based on your ability to pay. We will consider this when you have tried all reasonable ways of getting the necessary funds, either by borrowing or rearranging your financial affairs, and you still cannot pay the balance in full." "To help us determine your ability to pay, you will have to give us supporting documentation as proof of your income, expenses, assets, and liabilities." (CRA: IC98-1 Tax collections policies, page date 2023-07-19).
• If you can't pay right now: "If you cannot make a payment on your debt due to circumstances beyond your control, we may allow you to postpone payment until your financial situation improves. During that time, any interest and penalties that apply will continue to be added to your debt." (CRA). "Call us to:"
  • Set up a payment arrangement
  • Change an existing payment arrangement
  • Get help if you cannot pay right away
  (CRA: Call us if you can't pay in full or on time, page date 2026-10-05).

Phone numbers and opening hours are on the CRA pages linked here; use the number on your notice if you have one. If you're required to pay instalments, see CRA tax instalments; for the self-employment income itself, Form T2125.

6. Canada: interest, penalties and relief

• Interest: "If you owe taxes for 2025, the CRA charges compound daily interest starting the day after the due date." "Until an amount is paid in full, we will continue to charge interest at the prescribed annual interest rate. Interest is compounded daily, and applied to tax and penalties." (CRA; CRA).
• Late filing: "Late-filing penalty"
  • 5% of your 2025 balance owing, plus
  • 1% of your 2025 balance owing for each full month late (up to 12 months)
  (CRA: Interest and penalties on late taxes).
• Paying something still helps: "Making a full or partial payment toward your debt will reduce the amount of interest that may be added, and doesn't prevent you from asking for relief:" The page then links to the payment options and to arranging to pay over time (CRA: Getting debt relief under special circumstances, page date 2026-01-27).
• Relief: "You can ask the CRA to cancel or waive penalties or interest if circumstances beyond your control prevented you from meeting your tax obligations." (CRA). "When events beyond your control prevent you from meeting your tax obligations, the CRA may grant relief of penalties and interest." "While the current average processing time is approximately 16 months, your request may take less or more time", depending on factors the page lists (CRA: Cancel or waive penalties and interest, page date 2026-09-25).
• Financial hardship: "When we have confirmed that you are not able to pay what you owe, we may waive or cancel interest in whole or in part to allow you to pay your debt. For example, this may occur when:"
  • you cannot pay due to financial hardship
  • interest charges make up a major amount of what is due and you are unable to make a reasonable payment arrangement
  • for individuals, paying the interest would make it difficult to provide basic necessities, such as food, medical care, transportation, or shelter for a prolonged period
  "While this page lists certain criteria, meeting them does not guarantee that relief will be granted." "For penalties, the CRA will consider a request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make a request." The tax itself isn't waived: "The following do not qualify for relief under the Taxpayer Relief Provisions:" The list includes "assessed tax" (CRA: Who can apply, page date 2026-10-01).

The CRA page lists GST/HST among the debts you can schedule payments for in My Business Account; setting money aside for it is in GST/HST and setting money aside.

7. Side by side

Our summary of sections one to six, not official wording. Companies, payroll and sales taxes are left out.

8. What to have ready

Before you apply online or call, gather these (our summary of the official lists above, not an official checklist):

9. Step by step

1. File your return by the deadline, even if you can’t pay all of it.
2. Pay what you can now. Every payment cuts the interest that builds up on the rest.
3. Work out a monthly amount you can keep up after rent, food and bills.
4. Set up the plan online if you qualify, or call the number on your bill or letter.
5. Pay by automatic debit so a payment isn’t missed.
6. Keep filing and paying new tax on time while the plan runs.
7. If your situation changes, contact the tax agency before you miss a payment.
8. Ask about penalty relief separately if something outside your control caused the problem.

Our order of steps, based on sections one to six; your notice or letter comes first if it says something different.

10. Stop it happening again

• Set aside part of every client payment as it arrives.
• Make US estimated tax payments, UK payments on account or CRA instalments if they apply to you.
• In the UK, a Budget Payment Plan lets you pay towards your next bill before it’s due.
• Chase unpaid invoices early, so a late client doesn’t turn into a late tax payment.
• Compare this year’s income with last year’s before the deadline, so the bill isn’t a surprise.
• Keep your records up to date so you can file on time.

"You can set up a Budget Payment plan to make weekly or monthly Direct Debit payments towards your next Self Assessment tax bill." "To set up a plan you must be up to date with any payments from your last Self Assessment tax bill." (GOV.UK: Pay weekly or monthly). For the US and Canada, see US estimated tax and CRA tax instalments; for the UK, payments on account.

Free tools and kits

• Our free US estimated tax planner, UK payments on account checker, CRA instalment checker and tax set-aside calculator (Canada) run in your browser; nothing you type is sent or saved. They help you plan ahead; none of them sets up a payment plan.
• Our paid Freelance Billing Kit by Small Rows (US$12, one-time) is for next time, not for a bill you already owe. Its Tax Set-Aside tab applies a set-aside rate you choose to money actually received, so you can move that amount to savings; the optional US quarterly set-aside and UK payments on account tabs do the same with a rate you type there and record the payments you make. It doesn't estimate what you owe, set up a payment plan or contact the IRS, HMRC or the CRA.
• All three kits together: the All-Kits Bundle by Small Rows (US$24, one-time).

Where the sources differ

• Names: the IRS says payment plan or installment agreement, GOV.UK says payment plan or Time to Pay, and the CRA says payment arrangement.
• Online limits: the IRS pages give amount limits for applying online; the GOV.UK pages we read point to an online eligibility check instead, and the CRA pages we read give no amount limit for a payment arrangement.
• How the amount is set: GOV.UK says usually around half of what's left each month after essential bills; the CRA says it's based on your ability to pay; the IRS pages describe plan types, limits and fees rather than a formula.
• Penalties during a plan: only the IRS page says a plan lowers a penalty (the failure to pay rate, if you filed on time). The GOV.UK and CRA pages we read don't say a plan stops penalties, and the CRA says interest continues.
• Old page dates, current wording: every part of the GOV.UK guide "If you cannot pay your tax bill on time" shows a page date from years ago (in Sources). We go by the wording on the day we checked.
• What we did not check: US state tax agencies; IRS setup fee amounts in detail (they're on the IRS pages and change); the amount limits for HMRC's online payment plan service; whether a UK plan agreed before a penalty date avoids that penalty; National Insurance, VAT, GST/HST or payroll debts beyond the general pages; companies and corporations; Revenu Québec; bankruptcy or insolvency options for tax debts; effects on credit; the EU and other countries.

When to get advice

• the tax agency says no to a plan, or you owe more than the online limits;
• you've had a letter about a lien, a levy, a debt collection agency, court action or bankruptcy;
• you can't afford any regular payment at all;
• you have past returns you haven't filed;
• you're thinking about borrowing to pay the bill;
• you owe VAT, GST/HST or payroll taxes as well as income tax, or you work through a company.

Talk to an accountant or a tax adviser where you file. In the US, the IRS pages add: "See if you qualify for help from a Low Income Taxpayer Clinic." "If you can't resolve the penalty on your own, contact Taxpayer Advocate Service, an independent organization within IRS." (IRS). In the UK, GOV.UK lists free debt advice services (section four). This page is general information only.

Related

• US quarterly estimated tax
• UK Self Assessment payments on account
• CRA tax instalments (Canada)
• UK Self Assessment for freelancers
• How to chase an unpaid freelance invoice
• Cash vs accrual accounting for freelancers

Sources

• United States: IRS: Payment plans installment agreements (page date 13-Aug-2026) · IRS: Online payment agreement application (page date 14-Sep-2026) · IRS: Topic no. 202, Tax payment options (page date 25-Sep-2026) · IRS: Failure to file penalty (page date 05-Oct-2026) · IRS: Failure to pay penalty (page date 05-Jun-2026) · IRS: Penalty relief (page date 09-Sep-2026) · IRS: Offer in compromise (page date 14-Oct-2026)
• United Kingdom: GOV.UK: If you cannot pay your tax bill on time (page date 2014-12-11) · Setting up a payment plan (page date 2014-12-11) · How much you'll pay (page date 2014-12-11) · If you do not contact HMRC or refuse to pay (page date 2014-12-11) · Help and advice (page date 2014-12-11) · GOV.UK: Pay your Self Assessment tax bill (page date 2024-11-22) · Pay weekly or monthly (page date 2024-11-22) · GOV.UK: Self Assessment tax returns, Penalties (page date 2024-11-05)
• Canada: CRA: Arrange to pay your debt over time (page date 2026-09-18) · CRA: IC98-1, Tax collections policies (page date 2023-07-19) · CRA: Call us if you can't pay in full or on time (page date 2026-10-05) · CRA: Interest and penalties on late taxes (page date 2026-01-20) · CRA: Cancel or waive penalties and interest (page date 2026-09-25) · CRA: Who can apply (page date 2026-10-01) · CRA: Getting debt relief under special circumstances (page date 2026-01-27)

Checked 2026-10-17. Found a mistake? Tell us via Support.