Facing the tax deadline can be a daunting task for many individuals. However, understanding the various methods available to spread out your personal tax bill can provide much-needed relief. In this blog post, we will explore different ways to pay your tax. By utilising these approaches, you can ensure that your final tax bill remains manageable while avoiding penalties and late payment charges.
Different Ways To Pay Tax
Budget Payment Plan
One of the most versatile ways to spread out your tax bill is by setting up a budget payment plan. This method allows you to choose between weekly or monthly payments and decide the exact amount you wish to contribute regularly. Moreover, you have the flexibility to pause payments for up to 6 months, giving you breathing space when needed. To initiate a budget payment plan, ensure you are up to date with any outstanding self-assessment tax return bills. Log into your HMRC online account and select the option to set up a direct debit. Follow the instructions, using your 11-character payment reference, and set up the direct debit easily.
Paying through your PAYE tax code
Another straightforward approach to breaking up your tax bill payment is through your PAYE tax code. This method allows for automatic deductions, making it highly convenient. However, compared to a budget payment plan, it offers less flexibility. With PAYE tax code deductions, HMRC automatically splits your tax bill into 12 monthly payments. While you cannot control the amount or pause the payments, this method ensures a steady and consistent approach to managing your tax payments.
If you prefer a hassle-free approach to tax payment, the PAYE tax code method might be your best bet. By opting for this method, your total tax bill is divided into smaller, more manageable amounts and automatically deducted from your income. Whether you receive a salary from your employer or a pension from a provider, the PAYE system ensures that your tax obligations are taken care of without any hassle. No more worrying about tax deadlines!
Payments on account scheme
For those with tax bills exceeding £3,000, the payments on account scheme offers a convenient way to spread out your payments. Under this scheme, HMRC estimates your tax bill based on the previous year’s amount and divides it into two advance payments due in January and July. It’s important to note that these payments are not automatic, and you must ensure timely payment by the deadlines. If your tax bill exceeds the estimate come January, you will need to pay any outstanding amount by the tax deadline as well.
Time to Pay (TTP) arrangement
Sometimes, circumstances arise where you are unable to pay your tax bill in full on time. In such cases, a Time to Pay (TTP) arrangement can be a lifesaver. By contacting HMRC and explaining your situation, you can negotiate a flexible payment plan tailored to your financial circumstances. This arrangement not only covers the tax owed but also takes into account any late penalties and interest. The best part? There is no standard payment arrangement, and you have complete flexibility in repaying the tax debt within a timeframe that suits you.
When it comes to paying your tax bill, it’s crucial to explore different strategies that suit your financial situation. By utilising options such as budget payment plans and PAYE tax code deductions, you can effectively manage your tax payments while avoiding unnecessary stress. Whether it’s the simplicity of the PAYE tax code method, the split payments offered by the payments on account scheme, or the flexibility of a Time to Pay arrangement, there is a solution that can alleviate the stress of tax payments. Remember, staying on top of your tax obligations is crucial, and seeking professional help from expert chartered accountants is always a wise choice to ensure you’re making the most of eligible deductions.
By adopting these smart strategies, you can confidently approach the tax deadline, knowing that your tax payments are well-managed and under control.
Here To Help
If any of these changes affect your business, we are happy to talk you through what you need to do to stay on top of your tax. Feel free to get in touch,
You can call us on 01257 241 111
Or email us at info@studholme-bell.com
