As a contractor, you may or may not have tax to pay by 31 January. Do you know the ways to pay your tax? Make sure you know the best way to pay your tax bill so you don’t miss the deadline and incur any charges or interest.
Many contractors manage their limited company by taking the maximum dividends beneath the threshold for tax and the maximum salary to absorb the personal allowance. This mix often leaves contractors with no tax to pay come the usual 31 January deadline. However, profits from land and property, capital gains and income from other sources are a few other reasons why tax could be due.
Deadlines and penalties
The 31 January is the deadline to pay your self-assessment tax liabilities. Self-assessment is the summary of all your personal income. This could be from:
- Untaxed employment income
- Dividends above the tax threshold
- Land & Property, such a rental profits
- Capital Gains, for example, on the sale of a rental property
- All other untaxed income
It is also the deadline to pay your first “payment on account”, should this be relevant.
Failure to pay can result in penalties and charges as well as interest on the taxable sum. It is therefore always advisable to make the payment of tax due, in full, by the deadline, to avoid further costs.
If payment by the deadline isn’t possible, speak to your accountant or to HMRC to discuss the next steps.
Ways to pay your January tax bill
HMRC make it easy to pay your tax with many options available. Be careful of timeframes for funds to clear in the HMRC account though as this will impact any penalties and interest calculations.
Same day or next day
- Pay online – from your own bank account – more details
- Pay by telephone
- Pay by CHAPS
- Pay by Debit or Credit card – more details
- In your bank or post office – you need a paper payslip to be able to use this service
3 working days
- Pay by BACS – more details
- Pay by pre-setup Direct Debit – set this up using your online account
- Allow 5 working days for a new Direct Debit
- By cheque in the post – to address HMRC, Direct, BX5 5BD
With less than a week to organise your tax payment, this should be your priority task for this week.