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30 Dec 2019

How to pay your self-assessment tax bill in 2020

Submit your self-assessment tax return by midnight tonight (30 December) for the option to pay by PAYE

If you have a self-assessment tax bill to pay for the 2018-19 financial year, you'll need to pay HMRC by 31 January 2020. But there's more than one way to pay, if you're organised.

While the official self-assessment deadline isn't until 31 January, if you want the option to pay your bill via PAYE you only have until midnight tonight (30 December) to submit your return.

Missing any payment deadlines can mean huge charges on top of the tax you already owe.

Here, we explain all the ways you can pay your tax bill, including , and . We also explain what to do if you expect to be .

How can I pay my self-assessment tax bill?

Many people associate self-assessment tax with self-employed workers, but there are many people who must submit a tax return each year.

They include those who earn more than £100,000 as an employee or a pensioner, anyone who owes capital gains tax from selling assets, those who receive taxable income from abroad and anyone who's earned £2,500 or more in untaxed income.

Depending on your circumstances, this may be due in a lump sum on 31 January, or your payments may be broken up throughout the year.

Pay tax each month via PAYE

'Pay as you earn', aka PAYE, refers to income tax that's deducted from your salary and pension income before you receive it. But if you have additional tax to pay via self-assessment, you may be able to add it to your PAYE payments.

What you pay is calculated depending on what you earn and whether you're eligible for the personal allowance (this was £11,850 in 2018-19, and rose to £12,500 in 2019-20).

However, you can only pay self-assessment tax through PAYE in quite specific circumstances:

  • your self-assessment tax bill must be less than £3,000
  • you must already pay tax through PAYE, for example if you're an employee or you get a company pension
  • you must have submitted your paper tax return by 31 October, or complete your online tax return by midnight 30 December.

All of these must apply. If they do, HMRC will normally collect what you owe through PAYE automatically. So if you don't want to pay your tax this way you'll have to ask them not to on your tax return.

Pay a lump sum by 31 January

There are lots of options for paying your tax bill, but some take longer than others. As HMRC must have received the money by midnight on 31 January, you'll need to factor in this transaction time when choosing your payment method.

Same day or next day:

  • Online or telephone banking
  • Chaps
  • Debit card online
  • At your bank or building society

Three working days:

  • Bacs
  • Direct debit (if you've already set one up with HMRC)
  • Cheque through the post

Five working days:

  • Direct debit (if you haven't set one up with HMRC before)

Note that you can no longer pay HMRC via credit card or at the Post Office.

Payment on account

If you're self-employed, you may have to pay your self-assessment tax bill in two advance chunks, known as payment on account.

These payments are due on 31 January and 31 July. What you pay is an estimate based on the tax you had to pay in the previous year.

Of course, once you submit your tax return it may turn out that you paid too much or too little tax, you'll either get a tax refund or you'll have to make an additional 'balancing payment', which will be due on 31 January the following year.

This can be quite difficult to budget for the first time you start paying tax in this way, as not only will you have to pay the previous year's tax by 31 January, but you'll also have to pay half of your estimated tax for the following year on the same date.

How payment on account works in practice

For instance, if you're due to pay tax by payment on account for the first time for your 2019-20 tax bill, note that on 31 January 2020 you'll have to pay your 2018-19 tax bill, as well as making the first 2019-20 payment on account.

Say your 2018-19 tax bill is £800, you'd have to pay that by 31 January 2020, plus £400 to cover half of your estimated tax for 2019-20. On 31 July, you'd have to pay the remaining £400, and on 31 January 2021, you may have to make a balancing payment.

Payments on account don't include any tax owed for capital gains or student loans. Tax owed for either of these will be added to your balancing payment due on 31 January.

Alternative payment arrangements

If you can't afford to pay your self-assessment tax bill, you'll need to contact HMRC as soon as possible - ideally before the tax is due. If you're likely to be in this position, you could come unstuck if you leave your tax return until the last minute and submit it close to the deadline.

HMRC might agree to make a 'Time to Pay' arrangement with you, so that you can spread the payments of tax due.

If you're in this situation, you should call HMRC's Business Payment Support Service (even if you're not a business) on 0300 200 3835.

You'll need to be able to show that you don't have the funds to cover your bill, or if it would be difficult to raise the funds - for example, if you have a poor credit score and are unlikely to be granted a personal loan.

What if you're late paying your tax bill?

If you miss the 31 January payment deadline, you'll be charged interest from that date.

The current interest rate is 3.25%.

If your payment is more than 30 days late (ie you don't pay until the beginning of March 2020), you could face additional penalties:

  • after 30 days: a charge equal to 5% of the tax outstanding
  • after six months (31 July): a further 5%
  • after 12 months (31 January the following year): an additional 5%.

If you're also late in submitting your tax return, there could be a lot more additional charges to pay.

Use the Which? tax calculator

Whether you're new to self-assessment, or a seasoned pro, the Which? tax calculator could make the whole process much easier.

The tool can tot up you expenses, work out your bill and submit it directly to HMRC.