Paying your tax bill should be easy, but its really not for many people. HMRC no longer send payslips for many taxes, as it wants the majority of taxpayers to pay online.
Even if the taxpayer is comfortable with online banking, they have to login to their online bank account, and manually completing a bank transfer payment for the correct amount. For this they need to find the payment code for the particular tax they are paying and accurately type it in as the payment reference.
For self-assessment the payment code is the taxpayer’s UTR number with ‘K’ added to the end, but the taxpayer somehow needs to know that.
Paying PAYE is far more complicated as the payment for each tax month requires a different set of 4 digits to be added to the end of the 13-digit accounts office reference. Corporation tax payments also need a 17-digit payment reference, and the last two digits change each year.
Some online bank accounts do not accept a payment reference as long as 17 digits, but the only advice HMRC can offer is to change bank accounts.
However, an alternative payment method is now possible for at least some individual taxpayers. They need to log on to their personal tax account and click on ‘make a payment’, after entering the amount to pay they will be taken to a screen with three options:
- Pay by bank account (new)
- Direct debit (one-off payment)
- Debit card or corporate credit card
If they chose “pay by bank account” the next screen gives a list of banks to choose from. When the taxpayer choses their bank the payment details will be set up already with the correct reference number. By clicking on “approve this payment” the taxpayer is taken through to their bank’s website to log in and approve the payment.
Not all banks are linked into this new facility, and if the bank isn’t listed the taxpayer will need to go to their normal online banking website and set up the payment manually.
HMRC plan to roll out this “pay by bank account” function to payments of PAYE, VAT and corporation tax in the next few years, which will hopefully reduce the number of tax payments which end up in the wrong account.
Written by the Tax Advice Network