Guide

How to pay VAT online

Making VAT payments to HMRC is pretty simple. Learn what the options are and how paying VAT online is quick and easy.

Person in a workshop working on a laptop to pay their tax.

Online VAT payment methods

Choose from six methods for paying your VAT online.

Two of the methods (the first two outlined below) will get your payment there fast – either the same day or the next day. The other methods require three days processing time, so you need to leave yourself enough time before the due date.

Spoiler alert: The easiest way to pay VAT online is direct debit - HMRC does most of the work.

1. Online or telephone banking (using the Faster Payments service)

You make the payment through your bank’s online or telephone banking service. Payments done this way usually get to HMRC the same or the next day, even if it’s a weekend or bank holiday.

2. CHAPS

If your bank offers CHAPS (Clearing House Automated Payment System), you can use it to pay VAT online. The CHAPS system guarantees same-day payment as long as instructions are received by 2pm on a working day. It costs between £25 and £30 for each payment so it’s best suited to paying large amounts.

3. Direct debit

You can set up a free direct debit through your HMRC VAT online account. Payments are taken automatically from your bank account three working days after the due date on your VAT return, and then take three days to process. You just set it up and forget it. Well almost – you need to remember to check you have enough money in your bank account.

4. BACS

With a direct debit, HMRC pulls the VAT owed from your account automatically. With a BACS direct credit (or bank transfer) you push it to HMRC from your bank account each time. It’s a bit like a slower version of using online banking as it takes three days. You first need to sign up for BACS with your bank and have 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.

How to make online VAT payments

Here’s what you need to pay VAT online depending on the method you choose:

  • Online/telephone banking, CHAPS, and BACS: Make VAT payments through your bank (or a BACS-approved bureau). Have your 9-digit VAT registration number and HMRC sort code, account number, and account name handy.
  • Direct debit: Set up direct debits through your HMRC online account and have your bank details on hand. Make sure it’s done at least three days before you submit your first return online. Then let HMRC do the rest each payment period.
  • Card through BillPay: Have your 9-digit VAT registration number and card handy.
  • Standing order: Set up the standing order through your bank using online or telephone banking.

Steps for filing and paying VAT online

It’s not just paying your VAT that you can do online. You can also file your returns. And it’s just as simple.

1. File your return

When you’re ready to file your VAT return, you can do it through your VAT online account or you can register to use software like Xero through Making Tax Digital (MTD).

From 1 April 2022, all VAT-registered businesses must sign up to file returns using MTD-compliant software. If you’re currently using a direct debit to pay your VAT, HMRC will transfer it to the MTD system.

*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

Take a look at your VAT online account to see if your payment was received – it should update within 48 hours. Remember that some payment methods take three working days to clear.

Getting VAT repayments

If you’re owed a VAT repayment from HMRC, you’ll usually be paid within 30 days by direct deposit or cheque.

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 provided content.

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