How Do You Know How and When to Pay Your UK VAT? Easiest ways to know to file your VAT

Posted by: Jay Redman
Category: VAT Payment
UK VAT

Introduction

If you’re a business or self-employed contractor, you may have to pay HMRC a Value-Added Tax (VAT). It is important to know when and how to pay your VAT bill. This will prevent any fines or late payment charges from Her Majesty’s Revenues and Customs (HMRC). This article will look at how and when to pay your VAT tax bill. It equally explains how to register, the different options available to those looking to pay their VAT bill, and some frequently asked questions. 

What is the VAT rate?

A value-added tax (VAT) is a consumption tax applied on a product or service anytime value is added at each stage of the supply chain, from manufacture through the point of sale. The amount of VAT you pay is based on the cost of the product, minus any taxed costs of materials used in the product.

UK traders must register for VAT and charge it on supplies of goods or services if their sales (turnover) exceed the VAT threshold of £85,000. The trader collects the VAT and subsequently pays it to HM Revenue & Customs (HMRC), the government’s tax collection agency. Traders with sales below the VAT level are not required to register for VAT (though they can if they want to).

How do I register for VAT?

You can register for VAT online if you are a business or an entrepreneur. You equally need to complete the VAT1A form if you’re an EU business selling to Ireland. You may equally appoint an agent such as Sterlinx Global to deal with HMRC.

Once you receive your VAT number, you can sign up for a VAT online account. You may register by post using the VAT1A form if you sell to Northern Ireland, VAT1B if you import over £85,000 of goods to Northern Ireland, and VAT1C when you are disposing of assets where the 8th and 13th directive refunds have been reclaimed.

How to make VAT payments to HMRC

Before paying your VAT bill, make sure the deadline has not passed in order to avoid fines. The fastest way to pay for VAT is online or through telephone banking. You could equally make the payment through your online bank account. A third option is the Clearing House Automated System (CHAPS) that can be used for large payments. It requires your 9-digit VAT number. However, your payment may be delayed if you use the wrong number.

Remember that the CHAPS payment usually takes a day, while the Bacs payments take three working days to reach HMRC. Click here for the bank account details for CHAPS or Bacs. If you are paying from another country, you may use the IBAN and Bank Identifier Code (BIC) found here

If the deadline falls on a weekend, you should make your VAT payable on the last working day of the week. Furthermore, other options such as Direct Debit, Standing Orderdebit or corporate credit card, and bank transfers could take up to three working days. 

How to Pay for the EU VAT MOSS Scheme.

After Brexit, the UK VAT Mini One Stop Shop (VAT MOSS) scheme was closed. If you sell digital services to an EU country, you must register for VAT MOSS in an EU country or pay VAT in each country you supply. 

When to Pay for my VAT or make returns

The deadline for VAT payments is found on your VAT return. The different deadlines include the Annual Accounting Scheme and payments on account. Ensure that your payment reaches HMRC before the deadline. If you do not pay on time, you may be charged a late fee. You determine how much time to allow, utilise the VAT payment deadline calculator.

The majority of firms are required to file VAT returns every quarter. VAT returns must be completed and filed within one month and seven days after the relevant period’s end, with payment provided at the same time. To put this more simply, after the end of the period for which you are paying VAT, you have five weeks to ensure your payment reaches HMRC. 

Simplified VAT schemes

If your estimated VAT turnover for the coming twelve months is £1.35 million or less, you may use the Annual Accounting VAT scheme. Under this scheme, you can submit one VAT return annually, and you can also make advance payments to HMRC. 

However, this may not be a suitable scheme if you expect regular VAT payments. The Cash Accounting VAT scheme equally falls under the category, but VAT is calculated on actual cash receipts as opposed to the invoice date. Finally, if you are a business with a VAT turnover of £150,000 (excluding VAT) or less, you can use the VAT Flat Rate.

Conclusion

This article looks at when and how to pay your VAT. You can pay online, and direct debits are the easiest way to make payments. However, it is important to find what scheme will work best for your business to reduce your tax bill while choosing the most efficient way to pay.

FAQs

Are all Sales from my business liable to VAT?

They aren’t, no. Some traders are not VAT registered because their firms have a limited turnover (sales). Therefore they are unable to charge VAT on their sales (unless they voluntarily register). Additionally, some business activities are exempt from VAT.

When do I have to start charging VAT for sales?

You must begin charging VAT on sales once you register. This may occur as a result of either mandatory or voluntary registration. You must assess if you are legally required to register for VAT once your turnover surpasses the VAT registration level (this is compulsory registration).

What happens if I pay late? 

HMRC can take ‘enforcement action’ to reclaim any tax you owe if you do not pay your tax bill on time and cannot make an alternative payment arrangement. This includes legal action, cuts to your pension contribution and sales of your assets.

Author: Jay Redman