How to Pay VAT Online

Value Added Tax (VAT) is a tax that businesses in the UK apply to most of the goods and services they sell. If a business is registered for VAT, it’s responsible for collecting this tax from customers and passing it on to HMRC. VAT plays a crucial role in the UK tax system, as it helps fund essential public services like healthcare, education, and infrastructure.

For businesses, timely payment of VAT is essential to avoid penalties and maintain accurate financial records. In the past, companies had to pay VAT manually, which was quite time-consuming. Thankfully, online payment of VAT has made the process faster and easier. Now, businesses can complete transactions in just minutes, keep their records digital, and minimise errors. Whether they’re using a business bank account, Direct Debit, or another online payment method, managing VAT payments has never been more simpler.

‍Businesses Registered for VAT with HMRC

If your business is registered for VAT with HMRC, you’re required to collect VAT from your customers and pay it to the government. Most goods and services sold in the UK are subject to VAT, although there are some exceptions where items are either exempt or fall outside the VAT framework.

Once you’re registered, you’ll need to file VAT returns and ensure any VAT owed is paid by the deadlines set by HMRC.

The good news is that VAT-registered businesses can reclaim the VAT they’ve paid on their business expenses, which can really help in cutting down overall costs. Just remember, it’s essential to keep accurate records of all your VAT transactions and stick to HMRC’s guidelines to steer clear of any errors or penalties.

If a business's taxable turnover goes over £90,000 in a year (that's the VAT registration threshold for 2024/25), they need to register for VAT. This applies to all sales of goods and services that fall under VAT regulations. If a business thinks it will hit that limit within the next month, it should register right away.

Some businesses opt to register voluntarily, even if they haven't reached the threshold yet. This can be a smart move, as it lets them reclaim VAT on their purchases, which is especially helpful for startups or those with significant expenses.

Paying VAT online is actually pretty simple, making it easy for businesses to handle their tax responsibilities quickly and safely. Just follow below steps to make your VAT payment through the HMRC online portal.

1. Log in to Your HMRC Account

To pay VAT online, you need to login to the HMRC online services portal. If you don’t have a Government Gateway account, you must create one. Once registered, you can access VAT services and make payments online.

2. VAT Payment Section

After logging in, follow these steps to find the VAT payment section:

• Click on “Your VAT account.”
• Select "Make a VAT payment."
• Choose the VAT return period for which you are making the payment.

Check the amount due carefully. If you have already submitted your VAT return, the system will show the total VAT owed. If you haven’t submitted your return, you may need to enter the payment amount manually.

3. Choose a Way to Pay VAT

HMRC offers multiple payment options, allowing businesses to pick the most convenient method:

3.1 Pay the same or next day

• by bank transfer using Faster Payments or CHAPS - check with your bank
• through your online bank account
• online by debit or corporate credit card

3.2 Pay in 3 working days

• Direct Debit
• by bank transfer using Bacs
• standing order (only for businesses using the Annual Accounting Scheme or Payments on Account)
• at your bank or building society

4. Pay and Wait for the Confirmation

Once you make a payment through the online service, HMRC will send you a payment reference number right away.

There's no need to reach out to HMRC to confirm that your payment has been received.

You can expect to see it reflected in your VAT online account within 3 to 5 days.

To complete your VAT payment online, have the following details ready:

• Government Gateway ID and password (to log in to HMRC online services)
• VAT registration number (found on your VAT certificate)
• VAT return period (the quarter or month for which you're paying)
• Amount due (as shown on your VAT return)
• HMRC bank details (if paying via bank transfer)
• Business bank account details (for Direct Debit or online payments)
• Debit or credit card details
• Sort code, account number, and account name (for Faster Payments, CHAPS or BACS)
• HMRC’s banking address
• Account number (IBAN), bank identifier code (BIC), account name (If you’re paying from overseas)

Once you've submitted your VAT return, you must pay HMRC any VAT that you owe. Remember, payments are due at the same time you file your VAT return, which is one month and seven days after your VAT period wraps up. So, for instance, if your VAT quarter ends on June 30, you'll need to make that payment by August 7.

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There are two different penalties that come into play depending on how late you pay VAT. The first penalty is 2% of the unpaid VAT if it's not settled by day 15, and then another 2% kicks in on day 30. After day 31, a second penalty starts accumulating daily at an annual rate of 4% on the amount still owed.