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A complete guide to paying your VAT bill

May 23, 2022
Whether you’ve just surpassed the UK VAT threshold, or have recently registered for VAT voluntarily, you’ll find that there are a fair few benefits the come with being a VAT-registered business.

However, the benefits only apply if you actually pay your VAT, or ‘Value Added Tax’, bill on time. Failure to do so could land you with fines that go on to cause further problems with your cash flow, so your best bet is to be ready for when your first VAT tax bill lands in your lap.

In this guide, we’ll be going through everything you need to know about paying VAT online, from the different ways to pay your VAT bill, what and when you need to pay, and what to do if you can’t pay your tax bill on time.

How to pay your UK VAT bill online

There’s more than one way to pay VAT, but before you settle on one payment method be sure to weigh up any alternative payment options. Be sure to take into account how long the payment takes for HMRC to process, as well as if there are any additional payment fees you’ll need to cover.Pressed for time? Worry not — we’ve covered the different ways you can pay your VAT bill, how long it takes for each payment method to process and how much you can expect to pay in processing fees in the table below:
VAT payment typeTransfer time
Faster PaymentsOn the same or next day, including weekends and bank holidays
CHAPSSame day
Bacs3 working days
Direct debit3 working days
Debit or corporate credit3 working days
Standing order3 working days
At your bank or building society3 working days (allow up to 6 weeks for the paying-in slips needed to make your payment to arrive)
Faster Payments
Otherwise known as online or telephone banking, Faster Payments is a near-instantaneous way to pay your VAT bill, usually reaching HMRC’s bank account on the same or next day, even on weekends and bank holidays.If you’re close to the VAT deadline, paying your VAT bill online using Faster Payments is the best way to avoid risking any late payment penalties. However, some banks do have cut-off times for same-day transactions, so be sure to check if your bank has a processing deadline to avoid missing out.This method can be used for any payment up to £250,000, and payment processing fees vary depending on your bank provider.
To pay this way, you’ll need your 9-digit VAT registration number and the following information:
Sort codeAccount numberAccount name
08 32 0011963155HMRC VAT
When you’re ready to pay, simply start your VAT payment, select ‘pay by bank account’ and sign into your online or mobile bank account to approve your payment.Note: you’ll also need this information close to hand if you pay your VAT bill online using CHAPS or Bacs.
CHAPS
Standing for Clearing House Automated Payment System, CHAPS works like a regular bank transfer but is typically reserved for high-value payments. Having been managed by the Bank of England since 2017, there’s an extra layer of security that comes with paying your VAT bill this way.While there is no minimum or maximum payment required to use this payment method, you can typically expect to pay between £20 to £30 in processing fees.
Bacs
Bacs — otherwise known as the Bankers’ Automated Clearing System — is a bank-to-bank transfer made between banks in the UK made through either Direct Debit or Direct Credit.Bacs payments can be made any time between 7am and 10:30pm on working days, and typically takes 3 working days to process.If you choose to pay your VAT bill online using Bacs, the process will look like this:Day 1 → VAT payment is submitted to the Bacs systemDay 2 → Bank processes the VAT paymentDay 3 → Funds are transferred over to the bank and the VAT payment is settled
Stages of HMRC processing a Bacs payment
Most banks will charge a small fee to process your Bacs payment, but this isn’t any cause to worry about your cash flow. The total charged is never more than a few pennies, with Barclays charging a mere £0.20 per transaction.

Direct debit
Direct debit is an arrangement between you and your bank that gives a third party permission to collect an amount from your account, provided you’ve been given advance notice of payment dates and the total amount owed.To pay your VAT bill online this way, you can set up a free direct debit through HMRC. Be sure to do this at least 3 working days before you submit your online VAT return to avoid missing the payment deadline — we recommend doing this as soon as your VAT registration application has been confirmed.However, while direct debit is the most convenient payment method for a lot of business owners, unfortunately it’s not an option open to everyone. If you owe more than £2.3m in a 12 month period and send your VAT return on a quarterly basis, you’ll be repaying HMRC through ‘payments on account’ — a payment arrangement that can’t be settled by direct debit.
Debit or corporate credit card
If you’re looking to pay your VAT bill through debit or corporate credit card, you’ll need your 9-digit VAT registration number close to hand, which you can find in your VAT online account or on your VAT registration certificate.Paying through debit or corporate credit card can take up to 3 working days to process, but can take longer if you fill in your reference number incorrectly.If you pay using your corporate credit or corporate debit card, you’ll be charged a non-refundable fee by your bank. To get around paying any processing fees at all, you can pay your VAT bill online using your personal debit card — but you won’t be able pay with your personal credit card at all.
Standing order
If you’re using the Annual Accounting Scheme or are making payments on account, you can pay your VAT bill by standing order. Standing orders take 3 working days to reach HMRC’s bank account.
At your bank or building society
If you don’t want to pay your VAT online, you can go into your local bank or building society and pay your VAT bill there.You’ll need to order paying-in slips online or by phone from HMRC, which can take up to 6 weeks to arrive — so if you want to pay your VAT bill this way, you’ll need to order your slips early.With the paying in slip, you can pay your VAT bill at your bank or building society by cash or cheque. If paying by cheque, make it payable to ‘HM Revenue and Customs only.’ You’ll also need to write your 9-digit VAT registration number on the back of your check before paying in.Once submitted, allow up to 3 working days for your payment to go through.

When do I need to pay my VAT bill?

If you pay your VAT bill monthly or quarterly, you’ll have 1 calendar month and 7 days after the end of the VAT period to pay your VAT bill. However, if you use the Annual Accounting Scheme, you’ll need to make advance payments towards your bill based on your last return — or on the estimated total if you’re new to VAT — and make a final payment to settle any outstanding VAT due.

Mistakes to avoid when making a payment

If you make a mistake when paying your VAT bill, you risk missing deadlines and incurring late payment penalties. To prevent this from happening, make sure you check the following when paying your VAT bill:

    Your bank’s transaction limitsYou have enough to cover the amount of VAT owedYour VAT input numberHow long it takes for your payment to go throughIf your payment has gone through — you can check this by viewing your VAT online account

What if I don’t pay my VAT bill on time?

Whether you lost track of your cash flow or had an unexpectedly large bill this time around, you might find yourself unable to pay your VAT bill.
The first time you miss the VAT deadline you won’t be fined immediately, but you’ll be placed in a ‘surcharge period’. Any further defaults on your payment will result in penalties that increase with every missed deadline.

Defaults within 12 monthsSurcharge if annual turnover is less than £150,000Surcharge if annual turnover is £150,000 or more
2ndNo surcharge2% (no surcharge if this is less than £400)
3rd2% (no surcharge if this is less than £400)5% (no surcharge if this is less than £400)
4th5% (no surcharge if this is less than £400)10% or £30 (whichever is more)
5th10% or £30 (whichever is more)15% or £30 (whichever is more)
6 or more15% or £30 (whichever is more)15% or £30 (whichever is more)
Source: gov.uk

If you find yourself in this situation, we recommend getting in touch with HMRC as soon as possible by calling the HMRC Business Payment Support Service on 0300 200 3835. From there, you can arrange a repayment plan to help you cover the cost in full without completely disrupting your cash flow.Before you get in touch, be sure to have the following information ready:
    Why you can’t pay your VAT billWhat you’re doing to raise the funds to pay the amount of VAT dueHow long you expect it to take to settle your VAT payment balanceAny reference number from communications HMRC have sent to you

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