How to Pay Self Assessment

Paying your Self-Assessment tax bill is an essential part of being self-employed, working as a freelancer, or earning income that is not taxed at the source. Whether you’re filing for the first time or are a seasoned filer, understanding how to pay your Self-Assessment tax bill accurately and on time is crucial to avoid penalties and interest charges.

Self-Assessment is a system used by HM Revenue and Customs (HMRC) to collect Income Tax and National Insurance Contributions (NICs) from individuals and businesses whose income isn’t taxed automatically. This includes:

• Self-employed individuals

• Sole traders

• Partners in a partnership

• People with additional income such as rental income, dividends, or capital gains

If you need to pay tax via Self-Assessment, HMRC will inform you of the total amount owed based on the tax return you submit each year. Payments may include Income Tax, Class 2 and Class 4 NICs, and any other applicable taxes, such as Capital Gains Tax.

Payment Deadlines

There are two key deadlines to remember when paying Self-Assessment tax:

1. 31 January: This is the deadline for paying your balancing payment for the previous tax year and the first payment on account for the current tax year.

2. 31 July: This is the deadline for making your second payment on account for the current tax year.

If you file your tax return online, HMRC will tell you how much you need to pay when you complete your return.

Different Ways to Pay Self-Assessment Tax

You can pay your Self-Assessment tax bill in several ways, depending on how much time you have left before the deadline. Here’s a breakdown of the payment methods:

1. Online or Telephone Banking (Faster Payments)

If you use online or telephone banking, you can make a Faster Payment to HMRC. Most payments will reach HMRC on the same day or the next, even on weekends or bank holidays.

Bank details for paying Self-Assessment tax:

• Sort code: 08 32 10

• Account number: 12001039

• Account name: HMRC Cumbernauld

• Payment reference: Your 10-digit Unique Taxpayer Reference (UTR) followed by the letter 'K'

Make sure you use the correct payment reference to ensure your payment is correctly allocated to your account.

2. Direct Debit

If you prefer to set up a Direct Debit, you can do this through your HMRC online account. You need to set this up at least five working days before the payment is due for the first time, or three working days if you’ve previously made a payment using Direct Debit.

• Log into your HMRC online account and select the option to 'Set up a Direct Debit'.

HMRC will take the payment on the date you specify, but make sure it’s set up well before the deadline to avoid any late payment penalties.

3. Debit or Corporate Credit Card Online

You can also pay your Self-Assessment tax bill using a debit or corporate credit card. Payments made via debit card usually go through immediately, while corporate credit card payments may take up to 24 hours. Note that HMRC no longer accepts personal credit card payments.

• To pay by debit or corporate credit card, visit the HMRC payment page.

4. Bank Transfer (CHAPS or Bacs)

If you need to make a large payment, you can transfer the money directly from your bank using CHAPS or Bacs. CHAPS payments usually clear on the same day, while Bacs payments take three working days.

Bank details for paying Self-Assessment tax:

• CHAPS/Bacs account details: As per the Faster Payments details above.

• Payment reference: Your UTR followed by ‘K’.

5. Cheque by Post

If you prefer paying by cheque, make it payable to 'HM Revenue and Customs only', followed by your UTR number. Post your cheque to:

HMRC Direct BX5 5BD

Allow enough time for the cheque to clear before the deadline. HMRC will accept the payment on the day the cheque arrives, not the date you post it. Make sure you send the cheque well in advance to avoid missing the deadline.

6. Budget Payment Plan

If you struggle to manage your payments, you can set up a Budget Payment Plan through your HMRC online account. This allows you to spread your tax payments over the year by making regular weekly or monthly payments.

• To set up a Budget Payment Plan, log in to your HMRC account and follow the instructions for budgeting payments.

7. Paying at Your Bank or Building Society

You can pay at your bank or building society by cheque or cash, using a paying-in slip from HMRC. You will need to order a paying-in slip if you don’t already have one.

How to Check How Much You Owe

You can check how much tax you owe by logging into your HMRC online account. From your account dashboard, you can:

• View your balance

• See payment deadlines

• Check payment on account amounts

• Confirm payments received by HMRC

What Happens If You Can’t Pay Your Tax Bill in Full?

If you're struggling to pay your tax bill by the deadline, it’s essential to take action quickly to avoid penalties. HMRC offers a Time to Pay Arrangement, allowing you to spread your payments over a longer period.

To apply for a Time to Pay Arrangement:

1. Contact HMRC as soon as you know you won’t be able to pay your bill.

2. You can apply online if you owe less than £30,000 and are within 60 days of the payment deadline.

3. If your debt exceeds £30,000, or you need more than 12 months to pay, you’ll need to call HMRC on 0300 200 3822.

What Happens If You Miss a Payment Deadline?

If you fail to pay your Self-Assessment tax bill by the due date, you could face penalties and interest charges. The penalties are as follows:

• 30 days late: 5% of the tax owed

• 6 months late: A further 5% of the tax owed

• 12 months late: Another 5% of the tax owed

Additionally, you’ll be charged daily interest on the amount due until the full payment is made.

Conclusion

Paying your Self-Assessment tax bill is crucial to stay on the right side of HMRC. There are several convenient ways to pay, including online banking, Direct Debit, and cheque by post. Always ensure you meet the deadlines on 31 January and 31 July each year to avoid penalties and interest. If you’re facing financial difficulties, don’t hesitate to contact HMRC and discuss setting up a Time to Pay Arrangement to spread your payments over time.

With the right preparation, paying your tax can be straightforward and stress-free.