How to Pay HMRC in 2024: A Comprehensive Guide to Avoid Penalties and Optimize Payments

Introduction

Paying HMRC on time and accurately is critical for every business, whether you’re a small company or managing a larger workforce. In 2024, there are more ways to pay HMRC than ever which are quick and securely, but choosing the wrong payment method or making mistakes can lead to delays, misdirected payments, and costly penalties.

In this guide, we’ll walk you through the current payment methods available to ensure that your payments are processed smoothly and on time. Plus, we’ll discuss how to avoid common pitfalls that could result in late payments, penalties, or interest charges.

Why Using the Correct Payment Method Matters

The consequences of paying HMRC late can be severe. Misdirected or delayed payments, often due to using incorrect information, or outdated payment methods, can result in penalties, surcharges, and even direct recovery of debts by HMRC.

There are lots of ways to pay HMRC with a range of digital payment options, but businesses must ensure they use the right methods to avoid unnecessary risks.

Common Mistakes:

• Submitting payments using outdated banking details or unofficial methods. Please be aware of scam websites. If you are not sure, always, always call HMRC to check their details.
• Delaying payments because of slow or manual payment methods.

Ways to Pay HMRC

1. Online Payments via GOV.UK

One of the fastest and most secure ways to pay HMRC is through their online payment system. You can make payments using your debit or corporate credit card via the GOV.UK website. The process is straightforward:

• Go to gov.uk/pay-tax.
• Select the type of tax you’re paying.
• Follow the prompts to complete the transaction.

2. Direct Debit

Setting up a Direct Debit ensures that your payments are made automatically and on time. This method is particularly useful for businesses with regular payments, such as VAT or PAYE.

• Log in to your HMRC online account.
• Select “Set up a Direct Debit” and follow the instructions. Here’s the official guide.
• Direct Debit payments take around three working days to clear, so plan ahead.

3. Mobile Banking

Most major banks offer mobile banking apps that allow you to make secure payments directly to HMRC. This method provides flexibility and can be done anywhere, at any time.

• Use the banking app’s “Make a Payment” option.
• Enter HMRC’s banking details, ensuring accuracy to avoid delays.

Here are the HMRC bank account details, correct as of 14th October 2024:

You can check the details here on the HMRC payments page

4. Faster Payments/BACS Transfers

For businesses that need to make larger payments or prefer traditional bank transfers, Faster Payments or BACS transfers are reliable options. Here’s more information on Faster Payments.

• Ensure you have the correct HMRC account details.
• Payments made through Faster Payments usually clear within hours, while BACS can take up to three days.

Checkout this handy video to find out when and how to pay HMRC

Penalties for Late or Misdirected Payments

Using the wrong payment method or missing deadlines can result in hefty penalties. Here are some common penalties for late payments to HMRC:

1. Late Payment Penalties:

   • 5% of unpaid tax for payments made late, with additional penalties at 6 and 12 months. Find more details on HMRC’s late payment penalties here.

2. Daily Interest:

   • HMRC charges daily interest on overdue payments, which currently stands at 6.25% (subject to change).

3. Direct Recovery of Debts:

   • In extreme cases, HMRC can recover unpaid debts directly from your business bank account, making it crucial to pay on time.

How much you pay

Late monthly and quarterly PAYE payments

The first failure to pay on time does not count as a default.

Additional penalties

You’ll be charged a late payment penalty if you pay less than is actually due.

If you’ve still not paid a monthly or quarterly payment in full after 6 months, you’ll be charged an additional penalty of 5% of the amounts unpaid.

A further penalty of 5% will be charged if you’ve not paid after 12 months.

These additional penalties apply even where only one payment in the tax year is late.

Best Practices to Ensure Timely and Accurate Payments

To stay compliant and avoid penalties, here are a few best practices you should adopt:

• Use Official Payment Methods: Always use official HMRC digital methods from their website to avoid misdirected payments.
• Set Up Alerts: Ensure you never miss a payment deadline by setting up reminders or using software that tracks due dates.
• Double-Check Banking Details: When making payments manually, verify that you’re using the correct HMRC account details to avoid errors.
• Plan for Processing Times: Some payment methods, like BACS and Direct Debit, take longer to clear, so always plan ahead to meet deadlines.

Conclusion

Paying HMRC accurately and on time doesn’t have to be complicated. By choosing the right payment method and avoiding common mistakes, you can ensure your payments are processed smoothly and avoid the risk of costly penalties. Whether you’re setting up a Direct Debit or using Faster Payments, make sure you stay compliant and streamline your tax payments.

For payroll advice or help navigating HMRC compliance, contact us at Crystal HR & Payroll Ltd, we’re here to help you manage your payroll and stay on top of all your obligations.

Need Help:

Need assistance with payroll or staying compliant with HMRC? Contact us today for help.

Why not checkout some of our other articles:

• Paying Penalty Charge Notice and How to Avoid a PAYE Penalty
• How to Appeal a Late Payment Penalty from HMRC