How to pay tax: corporation tax, self-assessment, PAYE and VAT

The process of paying taxes can be complex, however there are numerous ways to make it more manageable and convenient. In this article, we will explore some of the most effective and commonly used methods of paying self assessment, VAT, PAYE and corporation tax. By understanding these various options, you can choose the one that suits you best and ensure timely and accurate tax payments.

1. Self assessment

The Deadlines for paying tax bills are:

• 31st January - for tax owed for the previous year (known as balancing payment) and your first payment on account.

• 31st July - second payment on account.

Depending on your situation, you set up a budget plan to make make weekly or monthly payments towards your tax bill. You can choose how much you want to pay and how often. HMRC explain how you can do this here.

Ways to pay

Ensure that you pay your tax bill on time otherwise HMRC could charge you interest or you may have to pay a penalty fee if your payment is late. The amount of time you need depends on the way in which you pay.

Important to note: you can no longer pay at the Post Office.

Same or next day

• through your online bank account

• online or telephone banking (Faster Payments)

• CHAPS

• by debit or corporate credit card online

• at your bank or building society

You need a paying-in slip from HMRC to pay at a bank or building society.

3 working days

• Bacs

• Direct Debit (if you’ve set one up with HMRC before)

• by cheque through the post

5 working days

• Direct Debit (if you have not set one up with HMRC before)

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before (unless you’re paying by Faster Payments or by debit or credit card).

2. VAT

You should pay your VAT bill by the deadline shown on your VAT return. You may have to pay a surcharge or penalty if you do not pay on time.

There are different deadlines if you use:

• the Annual Accounting Scheme

• payments on account

Ways to pay

Make sure your payment will reach HM Revenue and Customs’ (HMRC) bank account by the deadline.

You can use the VAT payment deadline calculator to work out how much time to allow.

Same or next day

• online or telephone banking by Faster Payments or CHAPS

• through your online bank account

3 working days

• Direct Debit

• online or telephone banking by Bacs

• standing order (only for businesses using the Annual Accounting Scheme or Payments on Account)

• online by debit or corporate credit card

• at your bank or building society

If the deadline falls on a weekend or bank holiday, your payment must arrive in HMRC’s bank account on the last working day before it (unless you pay by Faster Payments).

3. Employers' PAYE

Overview

You must pay your PAYE bill to HM Revenue and Customs (HMRC) by:

• the 22nd of the next tax month if you pay monthly

• the 22nd after the end of the quarter if you pay quarterly - for example, 22 July for the 6 April to 5 July quarter

If you pay by cheque through the post, it must reach HMRC by the 19th of the month. You may have to pay interest and penalties if your payment is late. There’s a different way to pay penalties.

You’ll need to use your 13-character accounts office reference number as the payment reference. You can find this:

• in your HMRC online account

• on the letter HMRC sent you when you registered as an employer (or sent to your accountant or tax adviser if they registered on your behalf)

• in the front of your payment booklet if you have one

You need to add 4 extra numbers to the end of your 13-character accounts office reference number each time you make an early or late payment. If you use this service, it will work out the numbers for you.

What you’re paying

Your PAYE bill may include:

• employee Income Tax deductions

• Class 1 and 1B National Insurance

• Class 1A National Insurance on termination awards and sporting testimonials

• Student Loan repayments

• Construction Industry Scheme (CIS) deductions

• your Apprenticeship Levy payments (starting from April 2017) if you, or employers you’re connected to, have an annual pay bill of more than £3 million

You pay your Class 1A National Insurance on work benefits that you give to your employees separately.

PAYE Settlement Agreements are also paid separately.

Ways to pay

Make sure you pay HMRC by the deadline. The time you need to allow depends on how you pay.

You can no longer pay at the Post Office.

Same or next day

• online or telephone banking by Faster Payments or CHAPS

• through your online bank account

3 working days

• by debit or corporate credit card online

• online or telephone banking by Bacs

• at your bank or building society (cash or cheque)

• single payment Direct Debit, if you’ve already set one up

• by cheque through the post

5 working days

• single payment Direct Debit, the first time you set one up

6 working days

• automatic Direct Debit, the first time you set one up

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it (unless you’re paying by Faster Payments using online or telephone banking.

Payment booklets

You’ll need a payment booklet from HMRC to pay at your bank or building society, or by post. If you do not have one, ask HMRC to send it to you.

If you’re no longer using your payment booklet, you can ask HMRC to stop sending it.

HMRC will automatically stop sending your payment booklet if you make 2 or more electronic payments in a year.

4. Corporation tax

The deadline for your payment will depend on your taxable profits.

Taxable profits of up to £1.5 million

You must pay your Corporation Tax 9 months and 1 day after the end of your accounting period. Your accounting period is usually your financial year, but you may have 2 accounting periods in the year you set up your company.

Taxable profits of more than £1.5 million

You must pay your Corporation Tax in instalments.

Check the rules and deadlines:

• if your taxable profits are between £1.5 million and £20 million

• if your taxable profits are more than £20 million

Make sure you pay HM Revenue and Customs (HMRC) by the deadline. They may charge you interest if you do not pay on time. They’ll pay you interest if you pay your tax early. The time you need to allow depends on how you pay.

You cannot pay Corporation Tax by post.

Same day or next day

• online or telephone banking by Faster Payments or CHAPS

• through your online bank account

3 working days

• online or telephone banking by Bacs

• Direct Debit (if you’ve set one up before)

• online by debit or corporate credit card

• at your bank or building society

5 working days

• Direct Debit (if you have not set one up before)

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it (unless you’re paying by Faster Payments using online or telephone banking).