The Ultimate Guide about How to Pay Self-Assessment Tax
Updated: Nov 29
7. By Bank Giro
8. With CHAPS
If you are self-employed or have other/multiple sources of income, you will most likely need to file an annual self-assessment tax return. The self-assessment tells HMRC how much money you have earned this year and some other details about your financial situation so that HMRC can calculate the amount of tax and/or national insurance (NI) you owe. This is also called "filing annual tax return" and you usually do it online. The name "self-assessment", should not imply that you have to do it yourself; you can hire an accountant to do it. An accountant can happily fill it out accurately for you and minimize the taxes you have to pay by avoiding any overpaid taxes.
After filing the tax return, HMRC will calculate the amount of tax due. They will then send you your notice of assessment, which you can view by logging into your account on the government website. You can then pay the self-assessment tax, usually online with a debit card, or Post by using cheque. This guide will remind you of the payment options available for paying taxes. We will see some options that you can use to pay taxes and these are:
Different Methods of Paying Self-Assessment Tax
1. Through Debit or Credit Card
If you have a debit or credit card issued by a UK card issuer, you can pay your self-assessment tax fee online using the “BillPay” service from Santander Corporate Banking. If you choose to pay by credit card, a 1.4% non-refundable transaction fee will be added to the price. All charges below £0.01 are rounded to the nearest penny. BillPay payment takes three working days to reach HMRC. Banking days are Monday to Friday, excluding public holidays.
2. Use of Online Banking
For the internet banking method, select 'HM Revenue & Customs' from your bank/builder payee list or use your HMRC bank account details to create your own instruction manual. You must also provide the reference number and payment amount, provided by HMRC. If you are using payroll from your bank or mortgage lender, be sure to carefully select the correct HMRC entry for the payment you wish to make.
3. Phone Banking
To opt for the phone banking method, call your bank/builder and give details of your HMRC bank account, self-assessment tax reference and charges to be paid. Before making a payment, you should contact your bank or mortgage company to confirm available services, daily value limits and the latest payment terms.
4. From Faster Payment
“Faster Payment” is a service introduced by the banking sector to send same-day or next-day payments via the internet or by telephone, provided that the value of the payment does not exceed the limit value set by the issuing bank.
5. By Bank Giro
If your bank or building society offers the By “Bank Giro” service, you can pay for your self-assessment at your bank branch by check or cash. HMRC processes each bank transfer electronically.
If you pay like this:
● Bring your proof of payment from HMRC to your bank branch where you have an account (other banks may refuse or charge you for this service).
● Present your cheque for payment to Queen's Revenue & Customs only and write your self-assessment reference number after HM Revenue & Customs only.
To compensate for any delays in bank processing (for which HMRC is not responsible), please allow at least three working days for the payment to arrive. Working days are Monday to Friday, excluding public holidays. If paying by bank Giro, please only use official proof of payment from HMRC. HMRC payment slips contain correct HMRC bank account information and ensure prompt payment to your account.
6. With CHAPS
This allows you to ask your bank to make a payment that will be received by HMRC the same day, provided you arrange payment within the time frame set by your bank (usually between 9 am and 3 pm). CHAPS payments are more expensive than other payment methods but can be useful if you have to make very large payments.
7. Pay at the Post Office
You can pay a self-assessment tax at the post office by cheque, cash, or debit card. HMRC treats each postal payment as an electronic payment.
If you pay like this:
● Bring your proof of payment from HMRC (otherwise you will be charged for using this service)
● Make cheques payable to "Post Office Ltd."
To compensate for any delays in bank processing, please allow at least three working days for the payment to arrive.
The Information You Need to Have Before Paying Self-Assessment Tax
Different Thresholds of Self-Assessment Tax
Self-Assessment Tax is a system in the UK that allows individuals to pay tax on their income and other earnings. In the UK budget for 2023-24, the tax thresholds of the previous year (2022-23) have been maintained. The system is designed to be simple and easy to use, but it can be confusing for those who are not familiar with it. One of the most important aspects of Self-Assessment Tax is the different thresholds that are used to determine how much tax an individual needs to pay. These thresholds are used to ensure that people are paying the correct amount of tax based on their income level. In this article, we will discuss the different thresholds of Self-Assessment Tax in the UK.
The first threshold is the basic rate threshold. This is the amount of income that is subject to basic rate tax. In the tax year 2023-2024, the basic rate threshold is set at £37,700. This means that anyone earning less than this amount will not have to pay any tax at the basic rate. However, anyone earning more than this amount will have to pay a basic rate tax on their earnings above this threshold.
The second threshold is the higher rate threshold. This threshold is used to determine how much tax an individual needs to pay if they earn more than the basic rate threshold. In the tax year 2023-2024, the higher rate threshold is set at £150,000. This means that anyone earning more than £150,000 will have to pay tax at the higher rate of 40% on their earnings above this threshold.
The final threshold is the additional rate threshold. This threshold is used to determine how much tax an individual needs to pay if they earn more than the higher rate threshold. In the tax year 2023-2024, the additional rate threshold is set at £160,000. This means that anyone earning more than £160,000 will have to pay tax at the additional rate of 45% on their earnings above this threshold.
It is important to note that these thresholds can change from year to year, and it is always a good idea to check the current thresholds before filing your tax return. Failure to pay the correct amount of tax can result in penalties and interest charges, so it is important to ensure that you are paying the correct amount of tax based on your income level.
In conclusion, the different thresholds of Self-Assessment Tax in the UK are designed to ensure that individuals are paying the correct amount of tax based on their income level. The basic rate threshold, higher rate threshold, and additional rate threshold are used to determine how much tax an individual needs to pay based on their earnings. It is important to stay up to date with the current thresholds to ensure that you are paying the correct amount of tax and avoiding any penalties or interest charges.
What is the Tax Reference Number?
When paying for the self-assessment, use the self-assessment tax reference number, also known as the UTR. UTR stands for unique transaction reference number. This is stated on the payment slip sent to you by HMRC and in the reference box. The reference number consists of ten digits followed by the letter “K”, for example, 9876543210K.
What If You Don’t Have Proof of Payslip?
If you are paying for the self-assessment electronically, you do not need a payslip unless you are paying at a bank or post office. HMRC recommends that you make your payments electronically using one of the methods described elsewhere in this guide. Electronic payments are generally more efficient and secure as long as you provide HMRC with an accurate reference number.
However, if you are paying by post and do not have access to the electronic payment receipt sent by HMRC; Instead, you can complete and print a self-assessment receipt yourself. This should be sent to HMRC with payment.
Deadlines for the Tax Payment
The deadline for the payment of the Self-assessment Tax is 31st October if you send your tax returns on paper (by post) or 31st January of the following year if you send your complete tax returns to HMRC using the online method.
What Is Payment On Account?
“Payment On Account” is the tax payment made by taxpayers who undergo a six-monthly self-assessment plan to divide the tax burden for the following year. It is calculated based on the previous year's tax invoice. This means that HMRC predicts your future earnings based on your past earnings. It must be paid in two instalments: the deadlines are January 31 and July 31.
The first payment is due on January 31 of every year and your account will be charged off from the prior year. The second payment is due on July 31 and will be paid before the following year based on the amount you have paid in the past. It's worth having an accountant do them for you for at least the first year to make sure you're paying the right amounts.
What If You Have Never Completed A Self-Assessment Tax Return Before?
If you have not received a tax return but you had income or capital gains, you need to notify HMRC by 5 October following the end of the tax year in which you had the income, or you may face a penalty. HMRC will then send you a tax return to complete.
What Is a Short Tax Return?
If you receive a self-assessed tax return and file it on paper instead of online, but have minor tax issues, you may be able to receive a short tax return form instead of a full self-assessed tax return. This may be the case, for example, if you have employee income from work, self-employment benefits, an income of less than £85,000 (2022/23) and relatively little or low capital income. of property
A short tax return is four pages long and about one-third of the average self-esteem tax return with extra pages.
What Information Do I Need to Complete the Self-Assessment Form?
Make sure that you have:
● Your unique 10-digit tax number (UTR)
● your social security number
● Information on tax-free income for the fiscal year
● Any charitable contribution or pension that qualifies for tax relief
● P60 or other documents that certify how much income you have received and on which you have already paid taxes.
Who Needs to Submit a Self-Assessment Tax?
If you are earning a salary paid through the PAYE system or earning retirement income only, you do not need to submit your tax return as a starting point, as your income tax has already been withheld at the source.
Below are some examples of individuals who should normally pay this tax.
● people with more than one job
● Individuals who are receiving a pension while continuing to work and earn a living
● Managing Directors and Shareholders of Public Companies
● Anyone who earns a certain amount of money from investments (including real estate).
● Ministers of religion
● People who apply for family benefits and earn more than a certain amount
● Anyone who receives a P800 form (this is from HMRC saying they haven't paid enough tax)
To be sure if you are required or not to pay Self-Assessment Tax, you need to check it from the Free Tool offered by the government.
How Long Do You Need To Keep the Financial Record?
Individuals in self-assessment are required by law to retain financial records for a specified period of time. When HMRC examines your tax return, you may be asked to look at some of your paperwork. You can keep the records on paper or digitally. HMRC can fine you if your records are incomplete and inaccurate. If you report your taxes on time, you must keep your records for at least 22 months after the end of the tax year, unless you are self-employed.
However, the normal rule for self-employed people and renters is to retain employment records for at least five years after the January 31 application deadline. For example, tax returns for 2022/23 must be kept until January 31, 2028.
Can Someone Help Me Fill Out My Tax Return?
Self-assessment is easy if your financial matters are simple and you know what you are doing. However, this can take some time and you may be paying more tax than necessary if you are unsure of the costs and benefits you can claim. At worst, errors can lead to penalties. Hence, with more complex accounts, it is often a good idea to hire an accountant to do your taxes. In fact, the cost of hiring an accountant, which can improve value for money, is itself a tax-deductible expense.
Pro Tax Accountants has a team of professionals ready to help you with your Self-Assessment Tax. Contact us now!
A Step-by-Step Guide on How to Pay Self-Assessment Tax in the UK
Understanding Self-Assessment Tax
Self-assessment tax is a system in the UK designed for individuals who earn income outside of traditional employment, such as the self-employed, those with multiple income sources, or high-income earners. It's crucial to understand your tax obligations and how to accurately calculate and pay your due tax.
Step 1: Registering for Self-Assessment
Eligibility: Determine if you need to file a self-assessment tax return. Common criteria include self-employment, having multiple income sources, or earning above a certain threshold.
Registration Process: Register with HM Revenue & Customs (HMRC) if you’re not already. This can be done online at the HMRC website. You’ll receive a Unique Taxpayer Reference (UTR) number, essential for filing your return.
Step 2: Gathering Financial Information
Collect Relevant Documents: Before filling out your tax return, gather all necessary financial documents. This includes income statements, bank statements, records of expenses, and details of any contributions to pensions or charities.
Record Keeping: Maintain accurate records throughout the year to make the process smoother.
Step 3: Completing Your Tax Return
Filing Options: You can file your tax return online or on paper. Online filing has a later deadline and offers an immediate calculation of your tax bill.
Accuracy is Key: Ensure all information is accurate to avoid errors and potential penalties.
Step 4: Calculating Your Tax
Self-Calculation or HMRC Assessment: You can calculate the tax owed or let HMRC do it. Online filing systems often provide real-time calculations.
Consider All Income Sources: Include all taxable income and claim any allowable deductions.
Step 5: Understanding Deadlines
Filing Deadlines: The deadline for paper returns is October 31, while online returns are due by January 31 of the following year.
Payment Deadlines: The final deadline for tax payment is also January 31. Remember, late payments incur penalties.
Step 6: Making the Payment
Multiple Payment Options: HMRC allows several payment methods including debit/credit card, online banking, phone banking, bank giro, CHAPS, and payment at the post office.
Payment Reference: Always use your UTR number as the payment reference to ensure the payment is correctly allocated to your account.
Advance Payments: Consider making payments in advance or setting up a budget plan to spread the cost.
Step 7: Payment on Account
Understanding Payment on Account: This applies to taxpayers with substantial tax bills, requiring payments twice a year (January and July) towards the next year’s bill.
Calculations: It's based on your previous year's tax bill. Ensure you understand how much you need to pay and when.
Step 8: Handling Overpayments or Underpayments
Refunds: If you've overpaid, HMRC will usually refund the amount. You can check the status and request a refund through your HMRC online account.
Underpayment Consequences: Underpayments will need to be settled promptly to avoid interest and penalties.
Step 9: What If You Can't Pay?
Contact HMRC: If you’re unable to pay your tax bill, contact HMRC immediately. They can offer arrangements like payment plans to help manage your tax liabilities.
Step 10: Seeking Professional Help
Consider an Accountant: If your financial situation is complex, consider hiring an accountant. They can ensure accuracy and potentially identify tax-saving opportunities.
Keeping Updated and Compliant
Stay Informed: Tax laws and thresholds can change. Stay informed about any updates that may affect your tax situation.
Annual Review: Regularly review your tax affairs to ensure ongoing compliance and optimise your tax position.
Paying self-assessment tax in the UK requires careful attention to detail and adherence to HMRC guidelines. By following these steps, you can ensure a smoother process and avoid common pitfalls. Remember, seeking professional advice can be invaluable, especially in complex situations. Stay diligent with your record-keeping and always be aware of deadlines to maintain compliance and peace of mind.
Different HMRC Forms Used to Pay Self-Assessment Tax in the UK
Paying self-assessment tax in the UK requires using specific forms provided by Her Majesty's Revenue and Customs (HMRC). These forms cater to different types of taxpayers, including individuals, businesses, and trustees. Each form has its unique purpose, ensuring that taxpayers can accurately report their income and calculate their tax liabilities.
1. The Main Tax Return (SA100)
Purpose: This is the primary form used by individuals to file their self-assessment tax return.
Applicability: Ideal for taxpayers with varied income sources such as employment, self-employment, property, or investments.
Filing Method: The SA100 can be filed online, offering a streamlined process. For paper filings, it's necessary to request the form from HMRC.
2. Short Tax Return (SA200)
Purpose: A simplified version of the main tax return for those with straightforward tax affairs.
Applicability: Only fill in the SA200 if HMRC sends it to you. It's not available for download but is suitable for individuals with uncomplicated tax situations.
Filing Method: This form is provided directly by HMRC to eligible taxpayers.
3. Supplementary Pages
Purpose: These are additional forms attached to the SA100 to report specific types of income.
SA102: For employees or company directors.
SA103S/F: For self-employment.
SA104S/F: For business partnerships.
SA105: For UK property income.
SA106: For foreign income or gains.
SA108: For capital gains.
SA109: For non-UK residents or dual residents.
4. Non-Resident Companies (SA700)
Purpose: Specifically designed for non-resident companies to file their tax returns.
Applicability: Suitable for companies based outside the UK but with tax obligations within the country.
Filing Method: The SA700 form ensures that non-resident companies comply with UK tax laws.
5. Partnership (SA800)
Purpose: For business partnerships to declare their income and calculate their shared tax liabilities.
Applicability: All partners in a business partnership need to fill this form.
Filing Method: Accompanied by supplementary pages, the SA800 form allows partnerships to comprehensively report their financial activities.
6. Trust and Estate (SA900)
Purpose: For trustees and personal representatives of estates to report income and gains.
Applicability: This form is used by trustees of trusts, executors of estates, and personal representatives.
Filing Method: The SA900, along with its supplementary pages, provides a detailed framework for trust and estate taxation.
7. Trustees of Registered Pension Schemes (SA970)
Purpose: To file tax returns for registered pension schemes.
Applicability: Specifically designed for trustees managing registered pension schemes.
Filing Method: The SA970 enables trustees to report income and gains related to pension schemes.
Understanding the different forms provided by HMRC for self-assessment tax filing is crucial for compliance and accuracy. These forms cater to a wide range of taxpayers, each with its unique requirements. Whether you are an individual, part of a partnership, a trustee, or a non-resident company, selecting and correctly filling out the appropriate HMRC form is a key step in fulfilling your tax responsibilities in the UK.
How a Tax Accountant Can Help You with Paying Self-Assessment Tax in the UK
Navigating the complexities of self-assessment tax in the UK can be daunting, especially for those with multiple income streams or unique financial situations. A tax accountant plays a crucial role in simplifying this process, ensuring accuracy and compliance while potentially saving you money. This article explores how a tax accountant can be instrumental in managing your self-assessment tax affairs.
Understanding Self-Assessment Tax
Self-assessment tax applies to individuals who are self-employed, have untaxed income, or earn above a certain threshold. It requires the taxpayer to report income and calculate taxes owed. The process can be intricate, involving various HMRC forms and strict deadlines.
1. Expert Guidance on Tax Matters
Complexity Simplified: Tax accountants possess in-depth knowledge of the UK tax system, including recent changes in legislation. They can interpret these complexities, providing clear guidance tailored to your specific circumstances.
Personalized Tax Planning: An accountant can assist in structuring your finances to optimize your tax position. This includes advising on tax allowances, reliefs, and expenses that can be claimed to reduce your tax liability.
2. Accurate and Compliant Tax Return Preparation
Error Reduction: Filling out tax returns can be error-prone, potentially leading to penalties. An accountant ensures accuracy in reporting, reducing the risk of errors and the subsequent hassle of dealing with HMRC inquiries.
Compliance Assurance: Tax accountants stay updated on tax laws and regulations. Their expertise ensures your tax return complies with current laws, thereby avoiding penalties for non-compliance.
3. Efficient Tax Return Processing
Time-Saving: Tax accountants streamline the process, saving you valuable time. They can handle the preparation, completion, and submission of your tax returns, allowing you to focus on other important aspects of your life or business.
Deadline Management: Accountants keep track of all relevant deadlines, ensuring your tax returns are filed timely, thus avoiding late submission penalties.
4. Dealing with HMRC on Your Behalf
Representation: A tax accountant can act as your representative in dealings with HMRC. This includes responding to inquiries, negotiating payment plans, and handling any disputes that may arise.
Communication Facilitation: They can simplify communication with HMRC, translating tax jargon into understandable terms and ensuring that you are fully informed about your tax affairs.
5. Identifying Tax Saving Opportunities
Tax Efficiency: Accountants can identify legal ways to minimize tax liabilities. This includes making use of tax-efficient savings options, pension contributions, and charitable giving.
Future Planning: They provide advice on long-term tax planning, helping you make decisions that can benefit your future tax position.
6. Assistance with Payment on Account
Calculating Payments: Tax accountants help in calculating your 'Payments on Account' – advance payments towards your next tax bill, based on your previous year's tax.
Budgeting Advice: They offer guidance on budgeting for these payments, ensuring you're not caught off guard when these payments are due.
7. Advice on Record Keeping
Organizing Financial Records: An accountant can guide you on efficient record-keeping practices, which are essential for accurate tax return preparation.
Audit Support: In case of an HMRC audit, a well-organized record system prepared by an accountant can significantly simplify the process.
8. Support for Complex Situations
Handling Complexity: If your tax situation involves elements like foreign income, capital gains, or rental income, an accountant can provide specialised advice.
Business Support: For business owners, accountants offer comprehensive support, encompassing aspects of business tax beyond just self-assessment.
9. Continuous Tax Advice
Year-Round Assistance: A good tax accountant offers support not just during tax season but throughout the year. They can advise on tax implications of various financial decisions.
Adapting to Changes: As your financial situation evolves, an accountant can adjust strategies accordingly, ensuring ongoing tax efficiency.
In summary, a tax accountant is an invaluable asset in navigating the UK's self-assessment tax system. From ensuring compliance and accuracy to identifying tax-saving opportunities and providing year-round support, their role is integral to effective tax management. Engaging a tax accountant can lead to significant benefits, not only in terms of saving time and reducing stress but also in potentially reducing your overall tax liability.
20 Most Important FAQs about "How to Pay Self-Assessment Tax"
1. Q: Can I make payments towards my self-assessment tax bill in advance?
A: Yes, you can make advance payments towards your self-assessment tax bill. This can be useful for budgeting and managing cash flow.
2. Q: What should I do if I make a mistake in my self-assessment tax payment?
A: If you make a mistake in your payment, contact HMRC as soon as possible. They can provide guidance on how to correct the error.
3. Q: Are there any digital tools available to help calculate my self-assessment tax?
A: Yes, there are various digital tools and software available that can help you calculate your self-assessment tax, ensuring accuracy and compliance.
4. Q: How can I verify that my payment has been received by HMRC?
A: You can log into your HMRC online account to check if your payment has been received. HMRC also sends confirmation once the payment is processed.
5. Q: Is there any relief available if I am unable to pay my self-assessment tax due to financial hardship?
A: If you're facing financial hardship, contact HMRC to discuss possible arrangements, such as a payment plan.
6. Q: Can I pay my self-assessment tax with a foreign bank account?
A: Yes, you can use a foreign bank account to pay your self-assessment tax. However, be aware of potential charges and exchange rate differences.
7. Q: What are the consequences of underpaying self-assessment tax?
A: Underpaying your tax can result in penalties and interest charges from HMRC.
8. Q: Can I amend my tax return after I've submitted it?
A: Yes, you can amend your tax return after submission. There's usually a deadline for amendments, so check the HMRC guidelines.
9. Q: What should I do if I disagree with the tax calculation provided by HMRC?
A: If you disagree with HMRC's calculation, contact them for clarification. If necessary, you can formally appeal their decision.
10. Q: How can I confirm the exact amount I owe in self-assessment tax?
A: Log into your HMRC online account to view the exact amount of tax you owe. This is calculated based on your self-assessment tax return.
11. Q: Is it possible to set up a direct debit for self-assessment tax payments?
A: Yes, you can set up a direct debit for self-assessment tax payments, which can help ensure timely payments and avoid penalties.
12. Q: What are the options for paying self-assessment tax in installments?
A: You can arrange to pay your self-assessment tax in installments, but you'll need to agree on this with HMRC in advance.
13. Q: How can I check if I am eligible for any deductions or allowances on my self-assessment tax?
A: Review the HMRC guidelines on deductions and allowances, or consult a tax advisor to understand your eligibility.
14. Q: What happens if I miss the self-assessment tax deadline?
A: Missing the deadline can result in penalties and interest charges. Contact HMRC as soon as possible to discuss your situation.
15. Q: Can I reclaim overpaid tax through my self-assessment?
A: Yes, if you've overpaid tax, you can claim a refund through your self-assessment tax return.
16. Q: Are there specific guidelines for self-employed individuals regarding self-assessment tax?
A: Yes, self-employed individuals have specific guidelines for self-assessment, including allowable expenses and payment on account.
17. Q: What records should I keep for self-assessment tax purposes?
A: Keep detailed records of all income and expenses related to your self-assessment tax. HMRC provides guidance on the required documentation.
18. Q: How do changes in income affect my self-assessment tax?
A: Changes in income can affect the amount of tax you owe. Keep HMRC informed about significant changes in your income.
19. Q: Can I submit my self-assessment tax return through an accountant?
A: Yes, you can authorize an accountant to prepare and submit your self-assessment tax return on your behalf.
20. Q: What is the process for resolving disputes with HMRC regarding self-assessment tax?
A: If you have a dispute with HMRC, you can seek resolution through their internal review process or, if necessary, appeal to the tax tribunal.