In life, there are two things that are unavoidable, death and taxes. Despite the fact that everyone has to go through with it, the process of paying your tax can be a confusing ordeal. If for some reason you end up owing tax, you may be in for quite a headache trying to pay it back. That’s why we have compiled this guide to help out and reduce the headache from the process.
What Taxes Might You Owe
There are many different forms of tax that you potentially owe the HM Revenue and Customs (HMRC). Not all of these apply to everyone and all can arise from different circumstances. These can include:
- Income tax. Due to various circumstances and changes, you may find yourself in a position where you have underpaid your income tax. In these circumstances, you will owe the difference and have to pay it back.
- VAT (Value Added Tax). This will need to pay if you run a business. You usually need to submit a VAT return once every 3 months. This will include things like your total sales and purchases, the VAT amount that you owe, and what your VAT refund from HMRC is. Even if you have no VAT to pay or reclaim you must still submit a VAT return.
- Self Assessment if you are self-employed. Self Assessment can also apply to you if you have taxable income from overseas, earn over £100,000 a year as an employee or pensioner if you or your partner claimed child benefits while you had an income of over £50,000, etc.
- Corporation tax. This will vary based on your companies profits for the tax year.
- Stamp duty land tax. This will apply if you purchase a property or a piece of land over a certain price. If the property is residential then the threshold is £125,000. For non-residential properties, the threshold is £150,000.
What Is The HMRC
The HMRC is Her Majesty’s Revenue and Customs. They are the UK’s tax office. They handle taxes, customs, and other transactions. Any and all taxes or money that you owe the government has to go through them. Their ultimate goal helps make the process of paying your taxes, customs duties, and other payments as straightforward as possible.
They offer a number of tools on their website that will help you pay the correct amount. If at any point you are unsure of how to fill in a form and have questions, feel free to contact them and they’ll help you.
How To Pay Tax Online
Since there are many different forms of tax, there are many different ways that they need to be paid back. Thankfully, you can now pay your taxes online. In order to do this, you will need to go to the HMRC website and use their online payment system. But some forms of tax you will have to pay differently than others.
There are a few steps that you will need to take to ensure that you pay the correct amount of tax for self-employed income.
- First of all, you will need to ensure that your chosen area of work qualifies as self-employment. To figure this out you can use the Employment Status Indicator offered by HMRC.
- If your area of work qualifies as self-employed by the HMRC then you will need to register as self-employed. You’ll need to create a Government Gateway account on their website.
- Once you’ve created your login details you will be sent them in the post. You will need to sign in within the first 90 days. After using your details to log in for the first time you will have completed your registration and need to fill in some details about yourself and your business.
- Next, you will need to calculate your taxable profits from your business. Once you have found this out you will need to report this income to HMRC via a form under their self-assessment system. Make sure you are keeping them up to date with your taxable profits.
- A short while after the end of the tax year HMRC will contact you and inform you to fill in a tax return for the recently concluded year. The government announced in 2015 their intentions to change this system, but that won’t happen for a couple more years.
- Make sure that you don’t miss your deadline for your payments or else you will be automatically charged a penalty for late submissions.
The time period that you have to repay your corporation tax changes based on how much profit your business gets. For instance, if you are earning less than £1.5 million then you have 9 months and 1 day after the end of your accounting period to repay what you owe. If you earn more you need to repay in installments every 3 months. Here are the steps that you need to take to repay your corporation tax.
- First, you need to register your business with HMRC through Government Gateway.
- After your business is registered you will find a 17 digit tax reference number. Go into your HMRC account and look in the view account section. You will need this code to pay your corporation tax.
- Once you have this code there are a few ways that HMRC offers to let you pay your tax. You can pay through a one-time direct debit payment. You can get HMRC’s banking details in order to perform a direct bank transfer between accounts. The process may take a few days in this case, if your bill does not tell you what account to pay into (it normally should) then pay into HMRC Cumbernauld. Lastly, you can use a corporate credit/debit card for your payment. This method is not advised as it is the only one out of the three options with an additional fee attached to it.
- The GOV.UK site has direct links to these methods of payment so you don’t have to worry too much about finding your desired information. This link on the Gov.UK site will allow you to choose what method you want to use to pay your taxes.