Each year, millions of UK businesses pay VAT to HMRC, but how do they do it?
Learn everything you need to know about how to pay VAT for your business correctly and on time in this guide. Find out:
- What you’ll need before you pay
- How to pay VAT via bank transfer
- How to pay VAT via debit or corporate credit card
- How to pay VAT at your bank or building society
- How to make paying VAT easier with Countingup
Take the stress out of financial admin and learn how to stay tax compliant when running your business. Read on to find out how Countingup can help you further.
What you’ll need before you pay
When paying your VAT bill, you’ll need to check the following:
Do you have your VAT registration number?
Depending on your preferred payment method, you may need to quote your nine-digit VAT registration number so HMRC knows which payment is yours. You can find this on your VAT online account or registration certificate.
Do you know the deadline for your VAT payment?
As you’re looking to pay your VAT bill, do you know your deadline to pay?
If your payment is late, you may have to pay a surcharge or interest on top of what you already owe; therefore, it’s important you have your bill settled before this date.
You can find out your payment deadline for your VAT return in your VAT online account. This is the date your payment must be in HMRC’s account by, and it may impact what payment method you use. Find out more in the next section.
Is your deadline on a weekend or bank holiday?
If your deadline falls on a day that the transfer may not go through for some reason (festive period, bank holiday, weekend, etc.), HMRC still requires your payment on time. Your payment may still be treated as late if it doesn’t arrive on time, regardless of any holidays. This may cost your business further, so make sure you are organised and plan ahead.
Do you have the right VAT sum?
Depending on your industry, some businesses are allowed to charge different rates of VAT to customers or have some items VAT exempt entirely. As you’re getting ready to pay your VAT bill, make sure you pay the right amount.
HMRC will refund you if you have overpaid but may require you to pay back unpaid VAT in full with interest. Avoid the hassle and make sure you have the right VAT figure with accurate accounting records and double-check with your accountant before you pay.
How to pay VAT via a bank transfer
You can pay VAT to HMRC via bank transfer using one of the following services:
- Your online HMRC account
- Online bank account
- Mobile banking app
- Over the phone with your bank or building society
When setting up a bank transfer, use the following details to pay HMRC, as well as your 9-digit VAT registration number:
Bank transfers can take place either as BACS, CHAPS or Faster Payments. Using Faster Payments and CHAPS transfers will mean your payment should arrive on the same or the next day. However, BACS payments can take up to three days to transfer.
Make sure you use a suitable payment method to avoid penalties for late VAT payments.
Direct debits and standing orders
You can set up a direct debit or standing order to pay VAT to HMRC using the same details. These methods are useful because they automate the actual payment transfer, which means you can authorise it ahead of time and know it’s taken care of.
However, make sure the transfer is properly scheduled ahead of time to avoid late penalties as direct debits and standing orders can take up to 3 days to set up.
How to pay VAT via debit or corporate credit card
HMRC also allows you to pay your VAT bill from your personal debit, corporate debit or corporate credit card using your HMRC account.
There is a fee for corporate cards (both debit and credit) but not for personal debit cards. If you’re a sole trader, you won’t be allowed to use a personal or business credit card as HMRC classifies these separately and won’t accept them.
When paying using one of the cards mentioned above, you’ll also need to quote your nine-digit VAT registration number. Payments from cards can take up to three working days to transfer, so make sure your payment reaches HMRC in time.
How to pay VAT at your bank or building society
If you prefer to pay at your local branch with cash or cheques the old fashioned way, you’ll need to order paying-in slips online or by phone from HMRC beforehand.
Pay-in slips can take up to six weeks to arrive at your business’ address and therefore may require a lot of planning to pay your VAT bill on time. If you plan to use cheques, make sure to specify ‘HM Revenue and Customs only’ and the exact sum when writing them out.
Once you’ve received your pay-in slip and you’ve deposited your VAT sum to your bank, plan for a further three days for your payment to reach HMRC.
Save time on tax admin with a simple app
Tracking VAT rates across all your business’ accounts can be time-consuming and frustrating. Instead, use Countingup to save on the time and stress of your financial admin.
Countingup is your business current account and accounting software in one app and provides a digital tax filing service. With it, you can automate VAT calculations associated with each of your business transactions and make paying your VAT bill easier. Countingup also makes sharing your business’ finances and VAT records with your accountant as easy as a touch of a button.
The Countingup app also offers real-time profit and loss statements, automated invoicing tools and expense reminders, complete with a receipt capture system.
Gain more insight into your business’ performance and stay tax compliant while trading.
Find out more about Countingup here and sign up for free today.