How do I pay my tax bill?

A common question asked by many people is, “how do I go about paying my tax bill?” There are many different options available which this blog will explore.

Deadlines to pay your tax bill

First, before looking into the different payment options, we should begin by highlighting the deadlines that are in place for paying your tax bill:

• 31st January – this deadline is for any tax that you owe for the previous year, which is also known as a balancing payment and your very first payment on account.
• 31st July – this deadline is for your second payment on account.

For those who prefer to pay regular installments throughout the year, gov.uk have put together a budget payment plan.

Important point #1 – if you don’t pay HM Revenue and Customs (HMRC) by the deadline you’ll end up paying interest and may even be faced with a penalty!

Methods available to pay your tax bill

When paying your tax bill, you have the following options:

Payment options for the same or next day:

• Online/telephone banking
• CHAPS
• Debit/credit card online
• Visiting your bank or building society
• Visiting your Post Office

Important point #2 – if you are paying at your bank, building society or Post Office, you will need a paying-in slip from HMRC.

Payment options for 3 working days:

• BACS
• Direct Debit (depending on if you’ve set one up with HMRC before, if not you need to allow 5 working days)
• Cheque through the post

Important point #4 – when a deadline falls on a weekend/bank holiday, payment needs to be received by HMRC either on or before the last working day.

Let’s look into the different payment options in more detail, starting with paying by debit or credit card online.

Paying by debit or credit card online

Paying by debit rather than a credit card is better, as if you pay with a credit card you will be charged a fee that is non-refundable.

Unfortunately, you can longer pay HMRC using BillPay, instead you will be automatically directed to a new services for you to pay online.

To pay your bill online you will need your payment reference. Your payment reference is made up of your 10-digit Unique Taxpayer Reference (UTR) and the letter K. Don’t know your UTR? You’ll find your UTR either:

• By logging into your HMRC online account
• Looking at your paying-in-slip (if you receive paper statements)

Important point #5 – Your payment will be accepted by HMRC on the day you make it not the day they receive it in their account.

HMRC have limited the number of times you can use your credit or debit card within a certain timeframe to pay your tax.

Many people ask if there is a set limit and the answer is no. HMRC decides what is reasonable by taking into account payment card industry standards and guidance.

Important point #6 – rules apply to multiple card payments against the same tax. You will only be able to make extra card payments if each one’s for a different tax.

It is recommended that if you are unable to pay your tax bill in full by card, you should look at another payment method e.g. a bank transfer.

Bank details for online or telephone banking, CHAPS, BACS

If you prefer to make a transfer from your bank account, this can be done by Faster Payments, CHAPS or BACS. If you look at your bill, this will tell you which account to pay into.

When using this method, you will need your payment reference. Your payment reference is made up of your 10-digit Unique Taxpayer Reference (UTR) and the letter K. Don’t know your UTR? You’ll find your UTR either:

• By logging into your HMRC online account
• Looking at your paying-in-slip (if you receive paper statements)

Paying at your bank or building society

If you still get paper statements from or have the paying-in slip from HMRC, you have the option to pay at your branch by either cash or cheque.

Cheques should be made payable to ‘HM Revenue and Customs only’ including your reference number (this is your UTR followed by the letter ‘K’). Don’t know your UTR? You’ll find your UTR either:

• By logging into your HMRC online account
• Looking at your paying-in-slip (if you receive paper statements)

Paying at the Post Office

Paying at the Post Office is an available option to those who still get paper statements from HMRC or have the paying-in slip from HMRC.

Important point #7 – you can pay up to a limit of £10,000 at a Post Office

Paying by Direct Debit

To make single payments for 31 January, you’ll need to set up a direct debit through your HMRC online account. You’ll need to set up another debit before 31 July, if you need to make a payment on account.

Important point #8 – you’ll need to set up single payments each time you want to pay by Direct Debit.

You’ll need your reference number which is made up of your UTR followed by the letter ‘K’. Don’t know your UTR? You’ll find your UTR either:

• By logging into your HMRC online account
• Looking at your paying-in-slip (if you receive paper statements)

Paying by cheque through the post

If you want to send a cheque by post to HMRC use the following address:

HMRC
Direct
BX5 5BD

You don’t need to include a street name, city name or PO box with this address.

When writing your cheque, make sure you make it out to ‘HM Revenue and Customs only’ and include your Unique Taxpayer Reference (UTR) number (you can find your UTR by looking at your paying-in slip.

If you still get paper statements, include the paying-in slip that you received from HMRC, make sure that you don’t fold the paying-in slip or cheque and definitely don’t fasten them together.

Important point #9 – if you have a reply envelope showing a different address (HMRC, Bradford BD98 1YY), you can still use the envelope to post your cheque.

Paying through your tax code

You have the option to pay your self assessment tax bill using your PAYE tax code but only if all of the below apply to you:

• Paper tax return was submitted by the deadlines (31/10 for a paper tax return and 30/12 for an online tax return)
• The total amount on your tax bill is less than £3000
• You already pay tax through PAYE

If all the above are met, HMRC will automatically collect what you owe, unless you’ve said otherwise.

You won’t be able to pay via this method if:

• You’d end up paying more than 50% of your total PAYE income tax
• You’d end up paying more than double the amount of tax that you normally do
• You don’t have enough PAYE income for HMRC to collect it

Important note #10 – when you’re self employed, there isn’t the option to pay Class 2 National Insurance through your tax code (unless it’s been due since before 6/14/15).

People often ask the question, “how are deductions made?” Tax owed is taken from your salary (or pension) in equal installments over 12 months – along with your usual tax deductions.

Checking your payment has been made to HMRC

To check whether your payment has been successfully made to HMRC, you can view your online HMRC account. It should show as paid between 3 and 6 working days. IF you decide to pay by post you can include a letter to ask for a receipt from HMRC.

Talk to the team

If you would like to talk to a member of the RDG team about paying your tax bill or anything else related to accounting, simply fill in the form below and we will be in touch: