How to pay your VAT bill
HMRC have set up a variety of ways that you can pay your VAT bill so you can select the most convenient for you and your business.
Each method takes a different length of time and this can impact on whether you meet the deadline for VAT bill payment.
Avoiding late payment of your VAT bill is important to avoid late submission and payment penalties from HMRC.
We have summarised the details you need to hand in order to pay VAT and the basic information you need about the various payment types made available by HMRC.
Different ways to pay VAT to HMRC
The different ways to pay HMRC can be basically sorted into 2 categories; methods that take around 3 working days to arrive with HMRC and ‘same’ or ‘next day’ payments.
The main reason we have separated payment methods by timescale is because making payment to HMRC on time is important to avoid penalties.
Online payment of VAT is often the easiest and most secure way to make payment to HMRC and is an available option in most cases.
Pay VAT on the same day or next working day:
- Faster Payments by phone or online banking. Different limits apply to online and in branch faster payments which can vary depending on your bank or building society.
- CHAPS payments are guaranteed by your bank to arrive on the same day and is a good option if you need to transfer a sum of money that exceeds the Faster Payments limit. The banking charge for a CHAPS is typically between £20 to £30 per transaction.
Extra tip: It is a good idea to confirm how long it actually takes your own bank or building society to put through a payment and if they have a maximum limit on how much can be processed during one transaction either online or in branch.
Paying VAT methods that take around 3 working days:
- BACS by online or phone banking.
- Direct debit – through your online VAT account. This takes your bill from your account 3 working days after the deadline on your VAT return.
- Debit or credit card payments online using a corporate or personal card. Using a personal credit card is not allowed.
You have the option to pay VAT by card using any of the following:
A corporate credit card with a fee payable.
A corporate debit card with a fee payable.
A personal debit card with no fee.
- Standing order – only for annual account scheme or payments on account. You need to allow time to apply for Standing Order payments. Once you have been accepted, you can use phone or online banking, or HMRC Form VAT622 to set it up.
- By cheque or cash by physically going to your bank or building society branch. You must be organised enough to have ordered the necessary Paying in slip from HMRC at least 6 weeks before you try and pay.
Details needed to pay VAT
Aside from your banking details you will need your nine digit VAT registration number in order to pay your VAT bill.
You can find this in your online HMRC VAT account or on your VAT registration certificate.
HMRC warns that mistakes in your details can hold up your payment and result in missing the VAT payment deadline.
Checking your VAT bill has been paid
Remember that if it turns out that even if your VAT deadline is at the weekend or a bank holiday, you are still obliged to make sure that HMRC receive your payment on the last working day prior to that date.
After 48 hours your payment should be visible in your online VAT account.
How you can’t pay your VAT bill
In person with HMRC.
- By cheque unless it’s in person at your bank or building society branch.
- By calling HMRC.
- With a personal credit card.
When is my VAT payment deadline?
Your deadline for bill payment will show on your VAT Return with deadline dates varying depending on the type of scheme your business has signed up for.
The standard VAT accounting scheme is the most common and there is a handy calculator in HMRC’s section of GOV.UK which can help you figure your deadline date (as long as you don’t make payments on account or use the annual accounting scheme).
The online VAT payment deadline calculator can help you confirm when the VAT payment deadline is for your accounting period but it’s always worth double checking with your accountant or HMRC online VAT account.
VAT payment deadline for monthly returns:
If you choose to make your VAT returns on a monthly basis, the deadline for submitting your VAT return will fall within one month and seven days from the conclusion of the return period.
To illustrate if you have already filed the return for the period spanning from the 1st to the 31st of March, then payment for that particular period will be required by the 7th of May.
VAT payment deadline for quarterly returns:
For individuals who submit their VAT returns on a quarterly basis, the process remains unchanged.
The deadline for submitting and paying your VAT return to HMRC is within one month and seven days after the end of the specified period.
If for example you have submitted the return for the period spanning from 1st March to 31st May, the payment for that period must be received in HMRC’s account no later than 7th July.
Is your VAT due date on a weekend or public holiday?
If your due date happens to fall on a day when transfers may not be processed due to factors like festive periods, bank holidays, or weekends, it is important to note that HMRC still expects your payment to be made on time.
Even if there are holidays your payment being delayed can still result in HMRC VAT surcharges and/or penalties for your business.
If you’re having problems paying your VAT bill
If you are facing financial difficulties and cannot afford to pay your VAT bill there is a possibility to negotiate with HMRC to reorganise your payments into manageable instalments.
HMRC can set up a time to pay arrangement for you which spreads the cost of your VAT bill over an agreed period of time making the payments more affordable.
The key is to let HMRC know as soon as you can either online or by phone on 0300 200 3831 between Monday to Friday 8am to 6pm.
If you find yourself in a situation where you have missed the deadline to pay your VAT bill, owe £50,000 or less, and plan to pay off your debt within the next 12 months, you have the option to set up a VAT payment plan online.
This applies specifically to debts for accounting periods that began in 2023 or later, provided you do not have any other existing payment plans or debts with HMRC and have filed all of your tax returns.
It’s important to note that if you are enrolled in the cash accounting scheme, annual accounting scheme, or make payments on account you will not be able to establish a VAT payment plan online.
VAT late payment penalties
HMRC imposes penalties referred to as default surcharges for delayed VAT payments. If you fail to file or pay your VAT on time, a series of increasing penalties will be applied.
If your payment is 16 or more days overdue, you will receive a penalty for late payment. For a VAT payment that remains unpaid for 31 or more days, the initial late payment penalty will increase, and you will incur a second late payment penalty.
If you find yourself running behind schedule and have a valid explanation there is a possibility to avoid penalties by submitting an application to HMRC with a reasonable excuse.
Reasonable excuses may include:
- Sudden and severe illness.
- Technical difficulties with hardware or software.
- Unforeseen natural disasters such as fires or floods.
- Delays that are beyond your control.
HMRC will normally need you to provide evidence for these excuses and they will be subject to scrutiny by HMRC.
It’s worth noting that delays resulting from failed payments, errors, or user mistakes will not usually be considered a reasonable excuse.
How to pay a VAT penalty or surcharge
When making a payment it is important to utilize the 14-character payment reference number that begins with the letter X.
This reference number can be found on the letter sent to you by HMRC regarding your surcharge or penalty.
HMRC warns that using the incorrect reference number may result in a delay in processing your payment.
VAT return software and making VAT digital
To ensure compliance with HMRC’s VAT regulations it’s essential to only use suitable software for maintaining your VAT records and submitting VAT Returns.
In order to achieve this you have two options:
- Use a making tax digital compatible software package that enables you to keep digital records and submit VAT Returns.
- Employ bridging software to connect non-compatible software such as Microsoft spreadsheets to HMRC systems.
You can find VAT return software for your business by using the HMRC directory for software providers that provide compatible products.
