Tax is unavoidable. We know we must pay our taxes but how we pay isn't necessarily straightforward
There are several ways you can pay your tax bill but the rules can be complex and subject to change. The best way to pay your tax will depend on how much tax you owe, how close to the payment deadline you are, whether you have submitted your tax return and whether you are comfortable with modern payment methods. Here's a guide to paying your tax bill:
Pay your tax using the HMRC app
HMRC want as many people as possible to use their app and these days most of us have our smartphones with us all the time. You can download the app from:
- the App Store
- the Google Play Store
To access the app, you will need your government gateway ID and password to sign in. Once set up, you can sign in securely using a six-digit pin, face ID or fingerprint.
You can use the app to check other personal tax information including:
- your tax code
- your National Insurance number
- your employment and income history
- your Unique Taxpayer Reference (UTR) for Self Assessment
- how much Self Assessment tax you owe
- any gaps in your National Insurance contributions
Pay your tax bill online
Most people make an online payment via HMRC's online payment system. You'll need your UTR (Unique Tax Reference) code to ensure the payment is allocated to your personal HMRC account. The whole amount must be paid at once, from the same card, specified for a particular type of tax (such as income or capital gains); otherwise it won't be processed.
Frustratingly, there are limits on how many times you can spend on the same card in one year. The guidelines for this rely on "a view of what's reasonable based on card payment industry standards".
NOTE: You cannot pay your tax using a personal credit card.
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Pay HMRC by direct debit
The easiest way your tax bill might be a direct debit agreement. You can set up direct debit payments through your HMRC online account. You can use direct debits for your 31 January payments and any payments on account. You can also set up weekly or monthly direct debit payments if you want to set up a budget payment plan for your tax bill. Your payments will be used towards your final tax bill.
The first payment will take five working days to process, but any others should cut that down to three, as your details are added to the database.
Pay HMRC via a bank
If you still get paper statements from HMRC, you can pay your tax bill at your bank or building society. You can pay by cash or cheque. You will need the paying in slip that HMRC has sent to you.
If you are paying by cheque, make the cheque out to "Her Majesty's Revenue & Customs only". Write your payment reference on the back of the cheque (this will be your UTR followed by the letter K).
Paying your tax via your bank or building society can be a good option if you are paying close to the deadline - the government will count the day you paid as the day received, even if it doesn't hit their account for a while.
NOTE: You can no longer pay your bill using a Post Office payment.
Paying your tax bill by cheque
Traditional payment methods still exist, such as a cheque made out to "Her Majesty's Revenue & Customs only". Write your payment reference on the back of the cheque (this will be your UTR followed by the letter K). Any deadlines are counted as the date of receipt, so leave at least three working days for delivery and get proof of postage.
To make the cheque valid, you'll have to pair it with a special pay-in slip which HMRC will send to you if you still get paper statements. If you do not have a payment slip, you can print a paying in slip; make sure the two aren't stapled together or folded up.
Pay using your tax code
HMRC will collect your tax automatically through PAYE providing you:
- own less than £3,000
- already pay tax through PAYE
- have submitted your tax return on time
The tax will be deducted from your salary or pension in equal instalments, along with your usual tax deductions.
A final note
However you pay, just remember to check that your tax bill is correct before you make the payment. Make sure you also allow sufficient time for the payment to clear as you may have to pay a penalty if it is late.
Help is available if you are unable to pay your tax bill on time. There's also scope for phone payments too.
You can read HMRC's guide to paying your self assessment tax and find a detailed guide to paying other types of tax on the GOV.UK website.
Written by Mike Parkes, technical director, GoSimpleTax.
