IRD instalment arrangements: how a payment plan really works

An instalment arrangement is IRD’s own answer to “I can’t pay it all right now”. It’s free to apply for, it can stop penalties building, and it keeps enforcement at bay while you pay. For a lot of businesses with a manageable debt, it’s the right first move. It also has limits and traps that are worth understanding before you rely on one.

What is an instalment arrangement?

It’s a formal agreement with IRD to pay tax you owe in regular amounts over an agreed period. It can cover tax that can’t be paid in full by the due date, and tax that’s already overdue (IRD).

The key word is formal. IRD warns that if you pay regular amounts, for example by direct debit, without an agreed arrangement, “you might still be charged penalties and interest at the full rate” (IRD).

How do you apply?

You apply in myIR. You’ll choose:

• an amount for each payment;
• a frequency: weekly, fortnightly or monthly;
• a start date; and
• a payment method.

IRD then decides. It may approve the plan, ask for more information, or want to talk through other options (IRD). Companies, partnerships and trusts seeking relief or instalment support may be asked about assets, liabilities, the shareholder current account, what’s stopping repayment, and whether they’ve tried getting a loan to pay the debt. A 12-month cash flow forecast on IRD’s IR591 form is optional supporting evidence (IRD). Our IR591 guide shows how to build a credible one.

What happens to penalties and interest?

This is where people often get caught out.

Penalties. Under IRD’s penalties guide, keeping to an agreed instalment arrangement means no new late payment penalties from the date the arrangement began. If you set it up before the due date, only the first 1% penalty applies. If it’s set up on or after the due date, the 1% and 4% penalties already charged stay on the account (IR240, March 2026).

Interest. Use-of-money interest keeps running during an arrangement. IRD’s practice statement on relief says the term should be as short as possible, without being so short that it causes serious hardship (SPS 18/04). A longer plan means more interest.

Enforcement. IRD’s practice statement on deduction notices says one won’t be issued while you keep to an arrangement. Under the original credit-reporting conditions, a company with an instalment arrangement in place isn’t reportable either.

What do you have to keep doing?

Two things, every time:

1. Make each payment on the agreed date and for the agreed amount.
2. Stay current with new tax. IRD expects new GST, PAYE and income tax to be filed and paid on time while the arrangement runs.

The second one is where many arrangements fail. A business that was short of cash for its old tax often finds the next GST return hard to pay too. If that happens, talk to IRD before you miss anything.

Not sure an arrangement will hold? Compare it against clearing the debt with a loan. Ask us here. No credit check to enquire.

What happens if the arrangement breaks?

IRD can cancel an arrangement if you don’t comply with it. If it’s cancelled because of default, IRD’s practice statement says monthly incremental penalties “will be imposed retrospectively as if the instalment arrangement had not been entered into” (SPS 18/04). A broken arrangement can also count against you if you ask for relief later. Our broken arrangement page explains how to recover.

Is IRD harder to convince now?

Advisers say yes. A December 2025 article from an accounting firm described IRD taking a tougher stance, wanting cash flow forecasts, evidence that the business can both make the payments and keep up with new tax, and sometimes budgets, asset and liability statements or term sheets for expected capital (McIsaacs, secondary). On the other hand, IRD also uses a decision tool that can offer pre-approved arrangements to some customers. Your experience will depend on your history and the size of the debt. If your plan is declined, see payment plan declined.

Arrangement or loan: how do they compare?

	Instalment arrangement	Loan to pay IRD in full
Cost	UOMI continues on the balance	Loan costs, known upfront
Penalties	Stop while kept; can return if broken	Stop once IRD is paid
Approval	IRD decides	Lender decides
Enforcement	Paused while kept	Ends once paid
Flexibility	Must keep current tax up to date	Same, but no risk of IRD cancellation

Neither is always better. Use our arrangement vs loan cost check, or read the full comparison.

Tips for a plan that lasts

• Set the payment at a level you can manage in your worst month, not your best.
• Line up the payment date with when money comes in.
• Move tax for new periods into a separate account as you earn.
• Tell IRD early if something changes. A conversation before a missed payment is very different from one after.

Want to compare an arrangement with a loan?

If you’re weighing up an IRD payment plan against clearing the debt in one go, send us a short enquiry. There’s no credit check when you first get in touch, we don’t pass your enquiry around, and a real person will help you compare the dollars and the risks. Give us accurate numbers for the balance and what you can afford each month, and you’ll get a straight answer on which route looks stronger.