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What are the Most Efficient Ways to Pay Your VAT in the UK for your E-commerce Business?

Dec 8, 2021 | USA Accounting

This blog can show you the most efficient ways to pay your VAT in the UK so be sure to read more and not miss anything.

VAT Payments: What are the Most Efficient Ways to Pay Your VAT in the UK for your E-commerce Business?

Every business’s time is valuable; squander it, and you may impact your revenues. That’s why, when it comes to your finances, it’s critical to make things as simple as possible. VAT payment is something that many businesses must do, but there’s no reason why it should take up too much of your time. 

You may be due returns or may have to make a payment to HMRC once you have submitted your VAT return. Setting up a Direct Debit is one of the most convenient ways to pay your VAT.

Then all you have to do is submit your VAT return, and everything else will be taken care of for you, whether you owe money or need to make a payment.

Unless a company is in debt to HMRC or gets frequent payments, it is customary to file quarterly VAT returns. VAT returns and the payment require electronic submission.

HMRC must receive payments seven days after the end of the month at the VAT period.

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What is a VAT account?

A VAT account keeps track of how much VAT you charge and how much VAT you pay on your transactions. Your VAT return is based on the difference between the VAT you charge and what you pay for goods and services.

The following items are included in VAT accounts:

  • VAT sales and purchases total
  • The amount of VAT you owe
  • You are entitled to a VAT refund
  • VAT on purchases or sales in the EU
  • Your Flat Rate % and its associated turnover, if applicable

How to pay your VAT bill

In order to pay effectively, it is important to have a VAT account. You might be required to go through a two-step verification process to access your account. Your account has your VAT number, and you can directly pay your VAT bill from your account. 

You can pay for your VAT bill directly by clicking here. Before paying, ensure the deadline has not passed as different deadlines are used for the Accounting Scheme and payments on accounts. You can pay online or through telephone banking for faster payments.

You can equally use your online bank account or CHAPS. These systems have the benefit of getting your payments to HMRC on the same day and will prevent you from incurring any late fees. 

Businesses using the Annual Accounting Scheme should use the standing orders, which take three days to clear. Ask to pay by standing order on your HMRC application form.

After receiving a letter from HMRC, you can pay using this form or other means such as online and telephone banking.  

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Alternative ways to pay your VAT bill

There are a few alternative payment options, but you’ll have to do everything manually. Because all VAT payments must clear in HMRC’s account by the payment deadline, you’ll need to be aware of the processing times.

Payments can be made the same day or the next day – online or via phone banking (faster payments). Direct Debit, BACS, debit or credit card payments, and bank or building society payments all require three working days to clear.

If the payment deadline comes on a weekend or a public holiday, ensure VAT payments reach HMRC on the last working day before the deadline.

Making VAT payments

Direct Debit, Faster Payments through internet/telephone banking, CHAPs, BACS Direct Credit, Online debit or credit card utilising BillPay, and Bank Giro Credit are all options for electronic payments.

Setting up a Direct Debit is the best approach to ensure that payments are made on time.

Payments are deducted automatically from your account, and all you have to do is make sure your VAT return is filed on time.

The other VAT payment methods need your involvement and awareness of payment processing times, which could lead to late payments.

Key Deadlines for filing your VAT returns

Unless a company is in debt to HMRC or gets regular payments, it will usually file its VAT returns quarterly or annually.

Quarterly — File your VAT returns with HMRC online if you submit them quarterly. Ensure your dues are paid by midnight one calendar month and seven days at the end of the quarter.

That means that if you’re filing a VAT return for the quarter ending March 31, 2021, the deadline to pay your bill is May 7, 2021.

Annually — For VAT purposes, some businesses adopt the Annual Accounting Scheme. In that situation, you must file your VAT return once a year and make advance payments toward your next year’s VAT bill depending on your previous return.

Pay Your Vat
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Payments on account are what they’re called. If you use the Annual Accounting Scheme, you must file and pay your VAT return two months following the end of the accounting period.

HMRC may ask you to file and pay your VAT return every month if you have had trouble making payments in the past or if you routinely exceed the quarterly payment threshold.

You must file your return and make your payment one month and seven days after the term ends in this scenario. So, if your period expires on December 31, 2021, you must submit your return and payment by February 7, 2022.

Frequently Asked Questions

  • Can I pay VAT monthly?

    If your turnover is less than £1,350,000, use the Annual accounting scheme. This allows you to pay HMRC monthly instalments based on your VAT liability from the previous year. Instead of the usual one month, the return must be submitted two months after the end of the period.

  • What happens if I cannot pay on time?

    If you can’t make a payment on time, contact HMRC’s business payment support service and explain your situation. You should be able to set up a payment schedule and avoid late payment penalties.

  • What are the penalties for paying my VAT late?

    HMRC can take enforcement action by collecting your debt through earnings or pensions, debt collection agencies, or sell the things you own to recover a tax bill. They can equally take money directly from your bank account or take you to court.

Conclusion

The fastest and most efficient way to pay for VAT is to sign in to your government Gateway account. Direct debits are equally effective as they ensure that you do not miss any payments.

It is important to pay before deadlines to prevent any late penalty surcharge or fine.  To help you with your VAT needs, check out Sterlinx Global.

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