HOW TO PAY SELF ASSESSMENT BILL

It is a widely known fact that the deadline for payment of self assessment bill is 31^st January each year. This is the date by which HMRC should receive the funds and not the deadline of your dispatching them.  So before you choose how to pay self assessment bill you need to know the processing time for each method so that you can avoid interest and other HMRC penalties.

As of 13^th January 2018, the taxman has stopped accepting self assessment payments paid from personal credit card. The infamous decision is the result of EU regulations that put restrictions on passing processing charges to the payers. HMRC believes that this would effect service levels and unfairly pass on the burden to other taxpayers.

But there are numerous other  options for paying self assessment bill. Let’s have a look at them:

DEBIT CARD OR CORPORATE CREDIT CARD:

You can make an online payment of your self assessment bill by using your debit card or a corporate credit card. However, you must know that there is a non refundable fee charge for using the corporate credit card option. You will fill in your 10 digit Unique Tax Reference with an additional “K” at the end. This will become your payment reference.

As a general rule, you will have to use a single card for a similar tax type. You cannot use multiple cards for the same type of tax payment. If you have to make an extra payment of the same tax type you will have to use the same card that you used for the first payment. However if you are making payment for a tax of different category,  you may use another card.

BANK TRANSFER:

Bank transfers usually take three working days. This is a widely used option because most tax payers use online or telephone banking or mobile banking applications. If you are using CHAPS payments, it may reach the same working day given you pay within bank processing time. Overseas payers should check with their respective banks because cross border payments can take longer time.

DIRECT DEBIT:

You can use direct debit on your HMRC online account to automatically dispatch payment for your convenience. You will need your unique tax reference number also to file self assessment. If you are paying self assessment tax through direct debit, you should leave a margin of three to five working days before 31^st January.

CHEQUE IN POST:

You can pay your self assessment bill by posting a check to HMRC at the following address-

HMRC

Direct

BX5 5BD

The cheque will be payable only with “HM Revenue and Customs Only” as payee. You will attach your paying in slip that comes with HMRC paper statement. It takes three bank days for cheque processing once HMRC receives it. So you must allow three days over and above the relevant postage time.

AT BANK OR BUILDING SOCIETY:

You can physically check in your bank or building society and make an over the counter payment through cheque or cash. You need to attach Paper statements from HMRC and retain paying-in slips that the taxman has sent  to you. If you pay over the counter, the payment is considered as received on the same day by HMRC.

You can even decide in advance how you will pay self assessment tax bill.  If you have an online HMRC account you can select budget payment plan that allows you to process direct debit payments at frequent intervals so that you can avoid a lump sum payment at the end of January. In this case your final payment will be adjusted for the difference with your actual payment due.

There is also a do-it-yourself version of budget payment plan in which you can move certain amount each month or each week into a dedicated savings account that can later be used to cover up your self assessment tax. You must remember the 3 to 5 working days margin will still need to be applied just like in normal direct debit tax payments.

For those paying through the PAYE system, they will have to pay their self assessment tax bill through a tax code. For this they will have to submit an online return before 30^th December and the payment of self assessment bill must be less than £3000. HMRC will take twelve equal instalments from their pension or salaries through the tax code.

Remember it is HMRC’s priority to recover as much tax debt as possible. So do not ignore tax payments and if for some reason you cannot pay self assessment tax, talk to HMRC representative to devise a payment plan as suited to your cash flows. Your express intention to pay even when you actually cannot can also save you from penalties and trouble.