How do I pay my tax bill?
How much tax you owe depends on the income tax band you're in. HMRC works this out using the information you give in your Self Assessment form.
Tax bands change from year to year. There’s a level at which you pay no tax, because your earnings are below the ‘Personal Allowance’ (that is, the amount the Government says you’re allowed to earn before it starts taxing you). Then there’s a basic rate of (currently) 20% which you pay on income above the Personal Allowance threshold. Two further bandings of 40% and 45% exist for higher income earners.
Here's a full guide to the current self-employed tax rates.
You’ll also need to pay NI as part of your final tax bill. Freelancers will usually pay two rates:
- Class 2 for profits of £6,725 or more a year
- Class 4 for profits of £9,881 or more a year
The deadline for paying your tax is 31st January following the end of the last tax year (the same date as the deadline for submitting your online tax return). So, for the tax year April 2021 – April 2022, the deadline for submitting your return will be 31st January 2023.
There are lots of ways to pay your tax bill, including debit card, telephone banking, direct debit (allow 3-5 working days for the direct debit to be processed), at your bank using the Clearing House Automated Payment System (CHAPS), BACS Direct Credit, or cheque.
Some methods take longer than others, so you'll have to account for this to ensure you don't miss the deadline.
Paying Self Assessment online
The big advantage of paying the tax you owe through your online bank account is that payments reach HMRC instantly (or near-instantly). If the deadline is fast approaching, paying online is a way to ensure you meet it.
You can pay your Self Assessment tax online here. You can use any debit card but you won’t be able to use a personal credit card.
Paying Self Assessment by cheque
It’s possible to pay your tax bill by cheque, although we wouldn’t really recommend it. There’s always the risk that the cheque will go missing or simply won’t get processed—issues you don’t face when you pay online.
If you do want to pay by cheque, take it to your bank, building society or post office. Alternatively, you can post it to HMRC at HMRC, Direct, BX5 5BD.
Make the cheque payable to ‘HM Revenue & Customs only’ and write your UTR on the back. Although your UTR is a 10-digit number, some payment methods require an 11-digit reference, which is your UTR followed by the letter ‘K’. Add the K to your reference when paying by cheque, BACS, CHAPS or direct debit.
You’ll also need to include a printed version of your self-assessment payment slip. You can get one here.
Allow three working days for your payment to reach HMRC.