Pay VAT online: Simple methods for your small business to consider
Pay VAT online in minutes, reduce admin, and stay compliant with clear steps that fit your workflow.
Written by Jotika Teli—Certified Public Accountant with 24 years of experience. Read Jotika's full bio
Published Wednesday 26 November 2025
Table of contents
Key takeaways
• Set up direct debit through your HMRC VAT online account to automate payments completely, ensuring HMRC collects your VAT automatically three working days after your return due date without any action required from you.
• Use faster payments through online banking for same-day or next-day processing when you need to meet tight deadlines, as this method processes even on weekends and avoids late payment penalties.
• Ensure sufficient funds are available in your account before collection dates and allow at least three working days setup time for direct debit arrangements before submitting your first VAT return.
• Confirm your payment was received by checking your HMRC VAT online account within 48 hours, and contact HMRC immediately if payments don't appear after the expected processing timeframe to avoid penalties.
VAT payment deadlines
To avoid penalties, you need to pay your VAT bill by the deadline. For most businesses, VAT returns must be submitted within one month and seven days of the end of the relevant quarter, and the funds must be cleared in HMRC’s account by this date.
If you use the VAT Annual Accounting Scheme, your deadline is different. You’ll need to make advance payments towards your VAT bill throughout the year, with a final payment due two months after the end of your accounting year.
Online VAT payment methods
Online VAT payment methods give you six ways to pay HMRC digitally:
Fast options (same day/next day):
- Online banking: Same or next-day processing via Faster Payments
- CHAPS: Guaranteed same-day payment (costs £25-£30)
Standard options (3 working days):
- Direct debit: Fully automated - HMRC takes payment automatically
- BACS: Manual bank transfer you initiate each time
- Debit/credit card: Through HMRC BillPay service
- Standing order: Fixed amounts only (Annual Accounting Scheme)
1. Online or telephone banking (using the Faster Payments service)
Online banking offers same-day or next-day payment processing, even on weekends. Log into your bank’s online or telephone banking service and transfer funds using HMRC’s sort code and account details.
2. CHAPS
If your bank offers CHAPS (Clearing House Automated Payment System), you can use it to pay your VAT online. CHAPS guarantees same-day payment if you send instructions by 2 pm on a working day. Each payment costs £25–£30, so use it for large amounts.
3. Direct debit
Direct debit automates your VAT payments completely – HMRC collects the money without any action from you.
How it works:
- Set up once through your free HMRC VAT online account
- Payments taken automatically 3 working days after your return due date
- Processing takes 3 additional working days to complete
- Key requirement: Ensure sufficient funds in your account before collection date
4. BACS
With direct debit, HMRC collects your VAT automatically. With a BACS direct credit (bank transfer), you send the payment to HMRC each time. BACS takes three days to process. You need to sign up for BACS with your bank and get a BACS Service User Number.
5. Debit or corporate credit card using BillPay
You can pay your VAT online through the HMRC BillPay service with a personal or business debit card or a business credit card. Personal credit cards aren’t accepted. Business credit and debit cards are charged a small fee.
6. Standing order
Standing orders are only available to businesses using the Annual Accounting Scheme. When you apply for this scheme, you can ask to pay by standing order and get approval from HMRC. Standing orders are only suitable for fixed VAT payment amounts, not variable ones.
What you need to pay VAT online
Get your information ready before you pay. For all payment methods, you need your 9-digit VAT registration number. Depending on your payment method, you may also need:
- Your bank account details (sort code and account number)
- Access to your online or telephone banking service
- HMRC’s bank account details for bank transfers
- A valid corporate debit or credit card
How to make online VAT payments
Essential information for paying VAT online:
For all methods:
- 9-digit VAT registration number
- HMRC payment details: Sort code 08-32-10, Account number 12001020, Account name HMRC VAT
Method-specific requirements:
- Direct debit: Your bank account details + 3 days setup time before first return
- Card payments: Personal/business debit card or corporate credit card
- Bank transfers: Access to your online/telephone banking
- Standing orders: Fixed payment amount (Annual Accounting Scheme only)
Steps for filing and paying VAT online
You can file your VAT return online as well as pay it.
1. File your return
Filing your VAT return is now mandatory through Making Tax Digital (MTD) software since April 2022. This transition was part of a major overhaul that began in 2021, with HMRC moving the VAT records of traders to a new, modern database to support the MTD system.
Your options:
- MTD-compliant software like Xero (automatically handles filing and payment)
- HMRC VAT online account (basic option)
Important: Existing direct debit arrangements automatically transfer to MTD systems.
*If you’re already a Xero customer and looking for how to file your VAT online, help is available through Xero Central.
2. Make your VAT payment
Use your preferred payment method to pay your VAT online.
3. Check your payment was received
Confirm your payment through your HMRC VAT online account:
- Account updates: Within 48 hours of payment
- Processing time: Up to 3 working days for BACS, direct debit, and card payments
- Immediate confirmation: Same-day for online banking and CHAPS payments
Red flag: Contact HMRC if your payment doesn’t appear after the expected processing time.
Getting VAT repayments
VAT repayments occur when your VAT return shows you’ve paid more tax than you owe — typically when input VAT exceeds output VAT. In these situations, HMRC will also pay interest on overpaid tax, calculated at the Bank of England base rate less 1%.
Repayment process:
- Timeline: Within 30 days of return submission
- Payment method: Direct deposit to your business bank account or cheque
- Automatic processing: No additional action required from you
Using software to automate VAT payments
Accounting software makes paying VAT simpler. With Making Tax Digital-compliant software like Xero accounting software, you can prepare and file your VAT returns directly with HMRC. The software calculates what you owe, so you can avoid mistakes and feel confident in your numbers.
Connect your bank account to get a real-time view of your finances. This makes it easier to budget for your VAT bill. You spend less time on admin and more time running your business.
FAQs on paying VAT online
Find answers to common questions about paying your VAT bill online below.
What happens if I miss the VAT payment deadline?
If you file your VAT return late, you may get a penalty point. Once you reach a penalty point threshold (for example, 4 points for quarterly returns), you’ll receive a £200 penalty. A £200 penalty is charged when the total points equal these thresholds. You’ll get a further £200 penalty for each subsequent late filing while at that threshold. You may also be charged separate penalties and interest for paying late.
How much do different VAT payment methods cost?
Most methods, like faster payments and direct debit, are free. Your bank may charge for CHAPS. There is a small, non-refundable fee for paying with a corporate credit or debit card.
Can I change my VAT payment method?
Yes, you can change how you pay your VAT. You are not locked into one method. For example, if you want to switch from bank transfer to direct debit, set this up in your HMRC online account. Cancel any old payment arrangements to avoid paying twice.
What should I do if my VAT payment fails?
If a payment fails, make the payment again as soon as possible. Use a different method if needed, like faster payments, to meet the deadline. Check your HMRC online account to see if the payment has been received. Contact HMRC if you have concerns.
How far in advance should I set up direct debit for VAT?
Set up a direct debit at least three working days before you submit your VAT return. This makes sure it is active in time for HMRC to collect the payment. You only need to set it up once.
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
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