VAT and Income Tax Deferrals – What Support Is Available in 2026?

During the COVID-19 pandemic, the government introduced temporary tax deferrals to help businesses manage sudden cashflow shocks.
These included VAT deferrals in 2020 and Income Tax Self-Assessment deferrals for the self-employed.

Those automatic COVID-era deferral schemes have now ended and are no longer available.
However, HMRC continues to offer support for businesses and individuals experiencing financial difficulty.

Historic COVID-19 VAT and Income Tax Deferrals (Now Ended)

In 2020, businesses were allowed to defer VAT payments due between March and June, and self-employed individuals could defer Self-Assessment payments due in July 2020. These measures were temporary emergency responses to the pandemic and do not apply to current tax periods.

Any business still carrying VAT or Income Tax arrears originating from this period should now treat them as normal HMRC arrears, subject to standard enforcement and collection processes.

What Support Is Available Today?

HMRC Time to Pay (TTP) Arrangements

HMRC’s Time to Pay service remains the primary form of tax support for businesses and individuals facing short-term financial pressure.

A Time to Pay arrangement allows you to:

• Spread VAT, PAYE, Corporation Tax or Income Tax liabilities over an agreed period
• Avoid escalation to enforcement action where an agreement is in place
• Bring historic tax arrears under control while stabilising cashflow

Unlike the COVID deferrals, Time to Pay is not automatic. HMRC will assess:

• Your current financial position
• Whether the difficulty is temporary
• Your compliance history
• The realism of the proposed repayment plan

Interest and Penalties

Unlike the COVID deferral schemes, interest may accrue on outstanding tax liabilities under a Time to Pay arrangement.
However, agreeing terms early can help minimise penalties and reduce the risk of enforcement action.

When Tax Arrears Become a Wider Business Problem

Persistent VAT or PAYE arrears are often an early warning sign of deeper cashflow or profitability issues.
In some cases, HMRC pressure can escalate quickly, including:

• Demand notices and enforcement action
• Direct recovery of debts
• Winding-up petitions where arrears are significant

Where tax liabilities are no longer manageable through informal arrangements, formal restructuring or insolvency
options may need to be considered.

How RMT Can Help

RMT regularly assists businesses dealing with VAT, PAYE and Corporation Tax arrears.
We can help by:

• Assessing whether a Time to Pay arrangement is realistic and sustainable
• Supporting negotiations with HMRC
• Advising on Company Voluntary Arrangements (CVAs) where HMRC debt is significant
• Helping directors understand their duties and options if pressure escalates

Early advice is critical. The sooner tax problems are addressed, the more options remain available.

This page is for general information only and does not constitute tax or legal advice.
HMRC support and enforcement policies can change, and outcomes depend on individual circumstances.