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Are there different ways to pay a tax return?

7th April 2021

How to pay my tax return

We’re glad you asked. There are indeed multiple ways that you can pay your tax bill. Time was that we were talking paper returns and a cheque payment – but today, thankfully, things are different. There’s actually a bunch of methods that you can use. So here’s a list of how and when to pay as a sole trader:

Wait, what’s a sole trader?

A sole trader is just another way of saying that you’re self-employed. When you run a company of one (yourself) and you don’t have any employees or pay VAT, HMRC views you as a sole trader. 

When you do have employees or you pay VAT, you’re what’s known as a limited company. For this, you have to register with Companies House. There are benefits to both – but choosing between the two depends on your personal preference and business needs. 

Is there a deadline?

There is a deadline to pay your tax bill. In fact, there are multiple deadlines. But it all depends on how you choose to pay. 

Via HMRC online

  • Deadline ➡️ 31st January

Paying your tax bill online is probably the quickest and easiest way to pay your tax bill. To use this method, you have to register for Self Assessment online by 5th October. You pay in a lump sum by 31st January following the end of the tax year. 

  • Important to note
    • You need your UTR number
    • You will have to pay with a debit card
    • HMRC will accept the payment the day you make it (including weekends), not the day it hits the account

By cheque

  • Deadline ➡️  31st January, but allow 3 working days for your return to be processed

Paying by cheque is an old school method that relies on the post. If you can avoid paying this way, you might consider a more immediate method, especially given the pandemic. But it is, after all, your choice. When you send your payment, address it to: HMRC, Direct, BX5 5BD.

  • Important to note
    • You’ll need to include a paying in slip
    • Write your UTR number on the back of the cheque, followed by the letter ‘K’
    • Cheque payable to HM Revenue and Customs only

Direct Debit

  • Deadline ➡️  31st January, but allow 5 working days for the setup and payment process

You can set up a Direct Debit with HMRC to pay your tax bill but be aware that you’ll have to set a new one up each time that you need to pay. This includes your second Payment on Account payment in July. 

  • Important to note
    • Your payment reference will be your UTR number plus the letter ‘K’ at the end

PAYE

  • Deadline ➡️  30th December (online)
  • Deadline ➡️  31st October (paper)

When you’re employed and you usually pay tax directly from your salary, HMRC lets you pay your undeclared tax via your tax code. You can use this method if your bill is less than £3,000. The tax payments will be removed in instalments from your salary, which a lot of people prefer to paying a lump sum.

  • Important to note
    • The deadline to file is earlier – if you miss it, you’ll have to pay in one
    • The bill is taken in equal instalments over 12 months 
    • It’s taken from your salary or pension
    • If you owe Class 2 National Insurance, you won’t be able to pay this via PAYE

Faster payment by bank transfer or phone, or CHAPS

  • Deadline ➡️  31st January

You can pay via a bank transfer or the payment transfer method, CHAPS. Both of these should clear in the same working day. They’re popular methods for people paying from overseas. The bank account details to pay to should be on your tax bill. But if it’s not, you can use the below details:

Account nameSort CodeAccount NumberReference
HMRC Cumbernauld08-32-1012001039[your UTR number] + K
Account nameAccount Number (IBAN)Reference (BIC)
HMRC CumbernauldGB62BARC20114770297690BARCGB22

Important to note

  • The payment should clear on the same working day
  • If you’re paying from overseas, the payment may take longer

I’m filing a paper return

If you’d rather file your tax return on paper than doing it online, make sure that you know the earlier deadline:

  • Pay your tax bill – 31st October 

You can print a paper return from HMRC online. They can also post it to you – but make sure that you give yourself a few weeks before the October deadline to receive it.

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