How to Pay Taxes in the UK

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1Personal Taxes

2Sales Taxes and Duties

3Business Taxes

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If you live in the UK, you must pay taxes to the government on your income, as well as council taxes if you are over the age of 18 and own or rent your home. The UK government also assesses taxes on goods and services sold. If you run a business, you'll also be responsible for business taxes. Most taxes in the UK can be paid online.

Steps

Method 1

Method 1 of 3:

Personal Taxes

1. 
   1
   Apply for a National Insurance (NI) number. You cannot pay taxes in the UK unless you have a National Insurance number. You can apply over the phone by calling 0800 141 2075. The service is available Monday through Friday from 8 a.m. until 6 p.m.

   • If you have the right to work or study in the UK, you can get a National Insurance number. You can only apply for a number once you get to the UK.
2. 
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   Confirm payments through the Pay As You Earn (PAYE) system. If you're employed, your income taxes are automatically deducted from your paychecks. Your payslip includes a breakdown that shows how much income tax is being paid.

   • You will also receive a P60 certificate at the end of each year. This certificate confirms your gross income and the amount of taxes that have been paid.
   • If you have a change in circumstances, such as a new source of income, during the tax year, you must notify HM Revenue & Customs (HMRC) in writing as soon as possible.
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3. 
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   Go online to pay your council tax bill. The easiest way to pay your council tax bill is to go to https://www.gov.uk/pay-council-tax and enter your postcode. The website will match your post code to the appropriate city and provide you a link to their website.

   • This particular system is only available for UK residents in England and Wales. If you live elsewhere in the UK, check your council tax bill to find out what payment methods are available.
   • You typically can also pay your council tax bill at post offices, banks, and convenience stores.
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   Fill in a self-assessment return if you work for yourself. When you're self-employed, income taxes aren't taken out automatically. Instead, you must report your income to the government on a self-assessment return.

   • Keep receipts and records of your business expenses, so you can deduct them from your income to reduce your tax liability.
   • You also use a self-assessment return if you are a UK resident and you've earned income working abroad.
   • You have to add UK state benefits like annuities, pensions, Jobseeker's allowance, and taxable Incapacity Benefit to the returns also.
5. 
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   Pay your self-assessment taxes twice a year. Self-assessment taxes are due on January 31 and July 31 of each year. If you don't pay by the deadline, the government will assess interest on the amount owed. You also may have to pay additional penalties.

   • You can pay online by debit or credit card by visiting https://www.tax.service.gov.uk/pay-online/self-assessment. You'll be charged a processing fee. Your payment will post the same day.
   • Your payment will also post the same day if you pay at your bank or building society. If you send payment through the mail, allow 3 to 5 business days for HMRC to receive your payment.
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   Use a budget payment plan to make advance tax payments. Depending on your cash flow, lump-sum tax payments twice a year may be difficult to manage. It may be easier for you to make smaller payments on a weekly or monthly basis.

   • To create a budget payment plan, log onto your HMRC online account at https://www.tax.service.gov.uk/gg/sign-in?continue=%2Fself-assessment%2F. If you don't have an account yet, you can create one at https://www.tax.service.gov.uk/government-gateway-registration-frontend/choose-your-account?continue=%2Fself-assessment%2F&origin=unknown.
   • From your account home page, navigate to the Direct Debit section. Fill out the Direct Debit form and choose the budget payment option.
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   Pay capital gains taxes if you sell UK assets for a profit. If you are a UK resident and sell something of value, whether it is a business or personal asset, you may owe taxes on any profit you made. Capital gains taxes are assessed on the sale of any property valued at more than £6,000.

   • For non-residents, this tax only applies to UK assets. If you are a UK resident, you may also owe capital gains taxes even if you sell assets you own outside the country. For example, you may owe capital gains taxes if you are a UK resident and sell your vacation home in Spain.
   • The rate at which capital gains taxes are assessed depends on your overall income. For example, if your total income is less than £43,000, you'll pay capital gains taxes of 10 percent.
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   Visit the government website to pay your car and road tax. If you drive a car in the UK, you'll pay car and road taxes each year. The amount you pay is based on the size of your car's engine and the type of fuel it uses.

   • You can calculate and pay your vehicle taxes by going to https://www.gov.uk/vehicle-tax. You'll need the reference number from your vehicle log book.
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Method 2

Method 2 of 3:

Sales Taxes and Duties

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   Review tax rates for goods and services. The British government assesses sales tax (called the VAT, short for Value-Added Tax) on most goods and services sold in the country. Merchants are responsible for collecting these taxes from the consumer and paying them to the government.

   • These taxes are automatically assessed on goods and services purchased in the UK. If you're a consumer, you'll be assessed different taxes on some purchases, such as fuel, insurance, or alcohol and tobacco.
   • Most goods and services are taxed at 20 percent. Some items, such as children's clothes and most food, is exempt from taxation. Other items, such as children's car seats, are taxed at a reduced rate of 5 percent.
2. 
   2
   Register for VAT if your business's turnover is greater than £85,000. If you own a business that sells goods and services, you must register your business. You'll receive a VAT certificate that includes your VAT number and how to submit returns and payments.

   • You can register for VAT online at https://online.hmrc.gov.uk/registration/newbusiness/business-allowed.
   • Once you register, you're responsible for charging the right amount of VAT and keeping VAT records.
3. 
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   Submit a VAT Return once every 3 months if you're registered. Business owners registered for VAT are responsible for sending a return each accounting period and paying the VAT owed to the government based on sales for that period.

   • Your VAT Return lists your total sales for the accounting period and the amount of VAT you owe.
   • Once registered, you must submit a VAT Return each accounting period even if you don't owe any VAT.
4. 
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   Declare to customs goods over your duty-free allowance. If you travel outside the UK, there are limits on items you can bring back with you. Generally, you can bring in goods worth up to £390. There are additional limits for alcohol and tobacco.

   • When you arrive at customs, use the red channel to declare your goods. You will be asked to either pay the tax or duty or give up the goods.
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Method 3

Method 3 of 3:

Business Taxes

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   Register your business with the Companies House. If you want to set up your business as a limited company that is legally separate from you and other owners, you must complete the registration process to incorporate your business.

   • To register with the Companies House, you'll need a unique business name, a business address, at least one director, and at least one shareholder. You'll also need to find the code that identifies the type of business you have.
   • There are several legal documents you'll need to register your business. You'll also have to pay registration fees. For more details on how to do this, visit the government website at https://www.gov.uk/limited-company-formation.
   • You can also register your business with the Companies House online at https://ewf.companieshouse.gov.uk//seclogin?tc=1
2. 
   2
   Register for Corporation Tax. You must register for Corporation Tax with HMRC within 3 months after you register with the Companies House and start conducting business.

   • Within a few days after you register with the Companies House, you'll receive a letter from the HMRC with your business's Unique Taxpayer Reference (UTR), a 10-digit number. As soon as you get this number, you can register for Corporation Tax.
   • You can register for Corporation Tax online by visiting https://online.hmrc.gov.uk/registration/newbusiness/introduction.
3. 
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   Set up an employer account with the PAYE system. If you have employees, you are required to deduct income taxes from their paychecks and deliver that money to the government by the 22nd of every month. You will be assessed penalties if you miss this deadline.

   • Report your employees to the HMRC when you hire them, and maintain records of their pay using the payroll software of your choice.
   • You can register by visiting https://www.gov.uk/register-employer. You'll get a user ID so you can log into the online system, file your reports, and pay your taxes.
4. 
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   Maintain accounting records. You must keep financial records for your business, as well as records about the company itself, such as organizational documents. HMRC may check your records periodically.

   • You can hire a financial advisor or accountant to help keep your records and file your taxes. You can also do it yourself with the help of accounting software, such as QuickBooks.
   • Make sure Companies House has the address where your business and accounting records are located, if you keep them at a different address than the one you gave for your business when you registered.
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   Prepare your business tax return. You will get a notice from HMRC to send in your Corporation Tax Return. Your return reports the business's profit or loss for tax purposes and the amount of tax you owe on any profits.

   • You must prepare your returns even if you operated at a loss and do not owe any taxes.
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   Pay taxes on your business's profits. Corporation taxes are due 9 months and 1 day after the end of your accounting period (typically your financial year). You can pay online, or at your bank or building society. The HMRC does not accept corporate taxation payments through the mail.

   • If you're paying at your bank or building society, allow at least 3 business days before the deadline for your payment to process.
   • If you have taxable profits of more than £1.5 million a year, you must pay your corporation taxes in installments. The number of installments depends on the length of your accounting period, but typically you'll pay in quarterly installments.
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   File your return by the deadline. You must file your tax return within 12 months of the end of the accounting period covered in the return. This deadline is different from your deadline to pay your corporation taxes.

   • You can hire an accountant to prepare and file your tax returns for you, or you can do it yourself. You can also file your accounts with Companies House at the same time you file your returns.
   • In most cases you'll file online at https://www.gov.uk/file-your-company-accounts-and-tax-return. There is a paper form, but you can only use that method if you want to file in Welsh, or if you have a reasonable excuse why you can't file online. For example, you may have been unable to file online due to a serious or life-threatening illness, or a natural disaster.
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