How to pay your HMRC Self Assessment tax

Self Assessment tax returns are a method of paying tax for those that are self-employed, partners in a partnership business, ministers of religion, or trustees and executors of an estate. There are also a number of other reasons you may be responsible for paying your own tax, such as if tax cannot be collected via your PAYE code, so it is important to understand how to pay your Self Assessment tax before the end of a tax year.

You are required to inform HM Revenue & Customs (HMRC) if you earn an income through any of the above means, which can be done by completing a Self Assessment Tax Return online or on paper. Completing this type of assessment will allow HMRC to determine how much tax is owed on your yearly income and capital gains. You will then be informed of how much you must pay HMRC and when your Self Assessment payment is due at the end of the tax year.

Quickbooks’ easy-to-use Self Assessment accounting software allows you to obtain real-time tax estimates for Self Assessment Tax Payments.

You can also calculate, organise, and prepare Making Tax Digital for VAT and Construction Industry Scheme tax returns.  

Different methods of making your Self Assessment payments

There are a number of convenient ways you can pay your Self Assessment tax bill. How you pay your Self Assessment tax is up to you, as long as you choose the right method that ensures you complete your payments on time and in full.

Direct debit

Direct debit is one of the easiest ways to complete your Self Assessment payments. You can set up a direct debit payment through your HMRC online account to make easy monthly payments toward your Self Assessment tax bill.

Make sure to find your 11 character payment reference number before making a direct debit payment to HMRC. This will be your 10 digit Unique Taxpayer Reference followed by the letter ‘K’. You can find this number using your HMRC online account, or on your payslip if you are given paper statements.

You can use direct debit to make Self Assessment monthly payments, as well as one-time payments.

Through your banking app

Another quick option for paying your Self Assessment bill is through your mobile or desktop banking app. Once logged into your HMRC online account, you can select the ‘pay by bank account’ option, which will direct you to your online or mobile banking app to approve a payment to ‘HMRC Shipley’.

Connect your banking apps to QuickBooks’ software to simplify your self-assessment processes.

Bank or building society

If you still receive paper statements from HMRC, or have obtained a Self Assessment paying-in slip sent to you by HMRC, you can make a payment at your local branch by cash or cheque. 

You will also need an 11 digit reference number to pay by this method. This is your 10 digit Unique Taxpayer Reference followed by the letter ‘K’.

Unfortunately, if you do not have a paying-in slip then you will not be able to pay your Self Assessment tax bill at your bank or building society.

By cheque

The HMRC still accepts Self Assessment Bill payments via cheque, which can take up to 3 working days to reach HMRC.

You can make your cheque payable to ‘HM Revenue and Customs only’, using the following postal address:

HMRC DIRECT BX5 5BD

Make sure to include your 11 character payment reference number on the back of the cheque. If you still receive paper Self Assessment payslips from HMRC, then you should include this with the cheque. Make sure not to fold or staple these together.

Pay in instalments weekly or monthly

Pay weekly and monthly options are also offered by HMRC, which will allow you to make regular payments towards your next tax bill using HMRC’s Budget Payment Plan.

You do not need to pay the full amount of your tax bill using this method, but any amount you have paid using a Budget Payment Plan will be taken off your tax bill total when payment is due. HMRC also offers options to pause payments on your Budget Payment Plan for up to 6 months, which can give you a much needed break if other priority payments come up during this time.

What are the conditions for paying in instalments?

If you find yourself facing a Self Assessment tax bill and the idea of making a lump-sum payment is daunting, you can consider setting up a payment plan. Here are the criteria that need to be met for this option:

• Debt Threshold: To qualify for a payment plan, your outstanding tax liability should be £30,000 or less.

• No existing payment plan: It's essential that you don't have any existing payment plans or debts with HMRC. This condition simplifies the process and ensures that your payment plan is focused solely on your current tax bill.

• Up-to-date tax returns: Your tax returns should be up to date, meaning that you have filed all the returns that are due. 

• Request within 60 days: The request for a payment plan should be made within 60 days after the payment deadline. HMRC provides this window of opportunity for those who need more time to address their tax bill.

Pay through your tax code

Paying your tax payments through your tax code is the simplest and easiest way of making your HMRC Self Assessment payments. HMRC will automatically deduct a percentage of your monthly earnings from your salary or wages, using your PAYE tax code to calculate the amount that you owe. This method of payment is available to anyone who receives their salary or wages through PAYE, provided they meet the following conditions.

• You must owe less than £3000 on your tax bill

• You already pay tax through PAYE

• You have submitted your paper tax return by the 31st of October, or your online tax return by the 30th of December

As long as these conditions are met, HMRC will automatically deduct any tax you owe each time you are paid via PAYE.

How long will each method take?

Note: 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.

What happens if I can't pay my Self Assessment tax bill on time?

If you're unable to pay your Self Assessment tax bill by the deadline, it's important to take action as soon as possible. HMRC may charge you interest and late payment penalties. Here’s what to expect:

• Interest on late payments: HMRC will charge daily interest on any unpaid tax from the day after the payment is due until it is paid in full. The current interest rate is set at 7.75%.

• Penalties: If you miss the payment deadline, you could face penalties, which increase over time:

  • 30 days late: 5% of the unpaid tax

  • 6 months late: an additional 5% of the unpaid tax

  • 12 months late: another 5% on top of the previous charges

If you’re struggling to pay, you can contact HMRC to discuss setting up a Time to Pay arrangement, which allows you to spread the cost of your tax bill into affordable monthly instalments. It's crucial to reach out to HMRC before the penalties escalate.

Reducing your payments on account

If you’re self-employed, your Self Assessment tax payments may also include Class 4 National Insurance Contributions (NIC). If you believe that your tax bill for the next tax year will be lower than the one on which your payments on account are based, you can apply to reduce these payments.

To reduce your payments, you can submit form SA303 either online or by post at any time before the balancing payment is due. Alternatively, if you know you’ll need to reduce your payments when you’re completing your tax return, you can make the claim directly in your Self Assessment tax return, providing the necessary details in the additional information section.

Important: If you reduce your payments below the actual amount owed once your final tax bill is calculated, you will have to pay interest on the shortfall from the date each payment was originally due. In some cases, if the reduction is significantly too low, HMRC may also charge a penalty.

If you’ve already made payments on account but later realise they are too high, you can still reduce them by submitting form SA303. Any overpaid amount can either be refunded (if it’s at least 30 days before your next payment is due) or held by HMRC and set against your next payment. If your next payment is due within 30 days, the excess will automatically be used for that payment.

Simplify Self Assessment with QuickBooks here

FAQs 

What is the best way to pay Self Assessment?

Paying your Self Assessment tax through your tax code is the simplest and most stress-free way to pay. Once this method is set up, HMRC can automatically deduct your tax contributions whenever you receive a payment through PAYE. Provided your tax code is correct, you are unlikely to owe an excess on your Self Assessment Tax payments at the end of the tax year.

When do I need to pay my Self Assessment tax return by?

The deadline for filing your Self Assessment Tax Return is typically January 31st following the end of the tax year. For example, for the tax year ending on April 5th, 2023, the deadline for filing would be January 31st, 2024. It's important to file on time to avoid penalties. 

Can I pay my Self Assessment tax in instalments?

You can pay your Self Assessment Tax by setting up payments on your HMRC online account using the Budget Payment Plan. This type of plan will allow you to set up weekly or monthly payments that contribute towards your next Self Assessment tax bill.

Can I pay my Self Assessment bill at the post office?

You can no longer pay your Self Assessment tax at the Post Office. You can, however, pay your tax at your local bank, provided you obtain a pay-in slip from HMRC.

Found this article about how to pay HMRC Self Assessment tax useful? Using software like QuickBooks is a great way to make sure you stay on top of your taxes.

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