If you’re self-employed, you’re responsible for filing your taxes and paying the tax bill. Failure to pay can lead to penalties and fees, so it’s important that you file your return as soon as you can so you can generate your tax bill.

How will I know how much tax to pay?

Once you’ve completed your Self Assessment, you’ll be issued a tax bill that either has a single balancing payment or also includes a ‘payments on account’ charge. 

What is a payment on account?

If your tax bill is for more than £1000, you may need to make ‘payments on account’ to cover next year’s tax bill. This system can be a surprise for those new to self-employment, so we’ve covered it further down in this guide. 

What is a single balancing payment?

This is the amount of tax still owed for the previous year, after deducting any payments on account.

When do I need to pay it by?

If you've received a single balancing payment then this will need to be paid by the January 31st deadline. There are ways to split this payment if you do it early enough including through your PAYE or setting up weekly or monthly payments towards your bill. We'll explain this a little more later on in the article.

We'd recommend paying your bill promptly as it helps avoid penalties and is important for streamlined bookkeeping and business growth. You don’t want to forget to pay and be hit with a sudden cash flow issue when you remember to, or incur the fees associated with late payments. 

To pay quickly, you’ll need to choose the most suitable payment method – some of them are faster than others and if you’re near the deadline, payment speeds matter. Here’s a quick overview of the best ways to pay your tax bill. 

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Payment options when paying in full 

When you receive your tax bill, you can either pay it in full or arrange alternative agreements with HMRC. To pay in full and settle your bill, you’ll need to choose a payment system from one of the options below. Be aware of processing times and potential delays, as these may affect you when you pay near the deadline. 

It’s also important to stay up-to-date on which payment methods are even accepted – HMRC stopped accepting payments made through Royal Mail and by tax bill payments made by personal credit card.

Payments that go through the same or next day

• Payment through your bank account, debit card, or corporate credit card - a direct payment from your bank to HMRC offers fast payment, which resolves either the same or the next day. 
• Payment at a bank or building society - this is similarly effective but requires a paying-in slip from HMRC. 
• Online/telephone banking and CHAPS - both ‘Faster Payments’ and CHAPS can be issued and paid the same or the next day. 

Payments that may take up to 3 working days

• Bacs payments, whilst similar in concept to CHAPS and Faster Payments, take longer to process. 
• Direct debits may be one of the most common ways to pay for subscriptions and other ongoing costs, but they’re slower to process for HMRC. If you’ve already paid HMRC via Direct Debit, it will process in around 3 days. If you’ve never set one up before, it’ll take even longer. 
• Posted cheques are still accepted, but you’ll need to account for the posting time AND processing. 

Payments that may take up to 5 working days

• A new direct debit to HMRC can take up to 5 working days to process. 

Payment service problems

If you’re paying near the deadline, be aware that, like all digital platforms, HMRC’s system can occasionally struggle with unforeseen problems. Use this page on their website to check service availability before trying to pay. 

Self Assessment via the HMRC app

HMRC offers its own Android and iOS app that promises to streamline Self Assessment. It’s free to download and helps you not only complete the Self Assessment process but securely manage payments to ensure they reach HMRC on time. 

Some digital tools made by public institutions are plagued by technical issues or bad reviews - but the HMRC app is a success. HMRC itself reported that over 50,000 taxpayers have used the app to pay since 2022, and it has strong reviews on both Google Play and the App Store.  

Considering how convenient and accessible the app is, we’d suggest that most self-employed people should pay through this system. 

Alternatives payment methods and considerations

Self Assessment tax through PAYE 

If you’re an employee with taxable side income, you can request that HMRC takes payments from your salary through PAYE. The payments are taken in equal instalments across 12 months.

For some people who operate a small side business, paying through PAYE provides a hassle-free way to take care of tax spread across 12 months. However, one of our expert accountants did offer this warning: 

“If you don’t want your employer to know about your side business, which you have no obligation to tell them about, avoid using PAYE. Instead, pay your tax directly to HMRC and keep your side investment private.” 

Staged payments with ‘Time to Pay’

If you think you’ll struggle to repay your tax bill in one go, you’ll need to request a ‘Time to Pay’ arrangement with HMRC, which allows you to spread the cost across the year. 

You can follow this link to set up Time to Pay, but you’ll need to arrange it within 60 days of the payment deadline, owe less than £30,000 and have no other debts with HMRC. 

Understanding payments on account

One of the biggest hurdles in understanding Self Assessment tax and how to quickly pay off your balance comes through ‘payments on account.’ 

Payments on account are essentially an advance charge, where you pay towards next year’s tax bill. When the next tax year rolls around, these payments will be deducted from it, and anything remaining will be your balancing payment. 

For those new to self-employment, it can come as a shock as you’ll likely have just generated your tax bill, only to find that you’ve got to pay more than you thought. If you’re new to the Self Assessment system, you won’t have any payments on account to deduct from your first bill, so, you’ll have to pay your full tax bill in its entirety and then 50% of next year’s bill as your first payment on account. 

This charge shows why calculating and paying your tax return as early as possible is important, as it gives you the insight needed to make the right decisions about cashf low, or to request payment measures like Time to Pay. 

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Late payment penalties

There are two types of penalties associated with Self Assessment, one with late filing of your tax return and the other with late payments. 

Late filing: if you miss the deadline and don’t have a ‘reasonable excuse’, you’ll be given a £100 initial penalty for the first three months of delay, increasing to £10 per day for returns more than three months late. If your return goes uncompleted for six or 12 months, penalties grow even more severe. 

Late payments: failure to repay on time can become costly, as HMRC imposes late payment charges for each late day after the deadline. These charges are calculated at the Bank of England’s base rate plus 2.5%. 

If you think you’ll have any issues filing or paying on time, contact HMRC or get help from professional accountants like the team here at Crunch. What’s the fastest way to pay Self Assessment tax?

When it’s time to pay your bill, it's better to pay quickly. The fastest way to make a payment to HMRC is via the official app, where you simply select your bank from a list, approve the payment in your own banking app and then complete the transaction. This process can take as little as 60 seconds and offers the fastest payment processing time of any other method.  

However, whilst paying quickly is vital, we’d also stress that you should never really leave your tax bill so late that you need to rush the payment through – it’s always better to calculate your bill as early as possible to help you spread the repayments and handle any payments on account. 

Crunch’s Speedy Self Assessment Software

To make paying your taxes as easy as possible, you need to make sure your filing process is simple too. Once you've made use of our helpful tax calculators to confirm the amount payable, you'll want the next step to be as hassle-free as possible - cue our trusted self assessment service. Until the 31st July, you can access it for £99.50+ VAT, and we will take care of filing and submitting the return on your behalf.