How do I pay my Self Assessment Tax?
When are Self Assessment Tax payments due?
Self Assessment payments are due on January 31st each year and on July 31st, if you need to make a ‘payment-on-account’.
What is a Payment-on-Account?
A payment-on-account is an amount paid in advance of your next tax bill. The amount you pay is 50% of the liability of your tax bill. So, for example, if your tax liability in January is £1,000, you will pay the £1,000 tax liability, plus £500 ‘payment-on-account’ and another £500 payment on account in July. Payments on account can be considered as payments in advance of, or towards your next tax bill. You may also need to pay a ‘balancing payment’.
What is a Balancing Payment?
If your tax liability the following year was £1,250, (£250 more than the two instalments had made on account during the year), you would need to make a ‘balancing payment’ of £250. This time in January you would pay the tax libaility of £1,250, plus the £250 balancing payment along with a payment-on-account of £625 (which is exactly half of £1,250). You will pay another £625 in July.
What information do I need to pay?
You will need your Self Assessment tax payable amount, your ten digit UTR number issued by HMRC, the link to pay the tax to HMRC and your payment details.
How can I pay?
You can pay your Self Assessment Tax by Bacs, CHAPS, Telephone Banking or with your debit card. Different payment methods clear in different time periods, is it therefore best to allow up to five days for payment to clear before the payment deadline.
What happens if I pay late?
HMRC may charge interest and penalties if you don’t pay on time, however, if you pay too early, HMRC will pay you interest.
What if I can’t pay it all right now?
It’s important you contact HMRC if you feel you are unable to meet the payment deadline. HMRC operate the ‘Business Support Service’, to help people who are struggling to pay their tax liability.
HMRC will want to know why you cannot pay the tax and what is affordable. They will consider your circumstances and may allow you to spread payments over a number of months until the liability is paid in full.
Ensure you have the tax liability amount and your UTR number to hand. This is a ten-digit number which can be found on your Self Assessment Tax return. The helpline number is 0300 456 3565.
What’s the bottom line?
Plan ahead for your Self-Assessment Tax by transferring the recommended amount from your Equation monthly financial report to your tax savings account. You can move the money into a ISA or simular savings account to earn interest whilst you are waiting to pay HMRC, ensuring you allow enough time to draw it out before the payment deadline.