If your business is VAT registered and your VAT return shows an amount due, you must pay VAT to HM Revenue & Customs (HMRC) by the applicable deadline. You can pay HMRC through Direct Debit, online banking, Faster Payments, CHAPS, Bacs, a debit or corporate credit card, or certain other approved methods.
Before making an HMRC VAT payment, check the amount shown on your VAT return, your payment deadline and the correct payment reference. Most businesses must submit VAT returns using Making Tax Digital compatible software, and paying the VAT due does not replace the separate requirement to submit the return.
Missing deadlines or paying incorrectly can result in penalties, interest charges, and compliance VAT investigations. Let’s guide you on the payment rules in the sections below.
Who Needs to Pay VAT to HMRC?
Businesses registered for VAT must account for VAT on their taxable supplies and pay HMRC any net VAT due for the relevant accounting period.
The VAT registration threshold remains £90,000 in 2026. A business generally needs to register if its taxable turnover for the previous 12 months goes over £90,000, or if it expects taxable turnover to exceed £90,000 within the next 30 days. Small businesses can voluntarily register for VAT below the threshold.
Taxable turnover should therefore be monitored on an ongoing basis rather than only at the end of a tax year. Standard-rated, reduced-rated and zero-rated supplies can count towards taxable turnover.
Businesses making only VAT-exempt or out-of-scope supplies generally do not need to register for VAT. A business cannot charge VAT on exempt supplies and generally cannot reclaim VAT on costs relating to those exempt supplies. Different rules can apply where a business makes a mixture of taxable and exempt supplies.
There are also specific rules for Northern Ireland. For example, certain acquisitions of goods from EU VAT-registered suppliers can create VAT registration obligations when the applicable threshold is exceeded. For explanation of registration rather than payment, see our VAT registration guide.
How to Pay VAT to HMRC: Step By Step Process
The process for making payment of VAT can be broken down into eight practical steps.
1. Check Your VAT Records and Return
Make sure your sales, purchases and VAT records for the accounting period are accurate.
VAT-registered businesses generally need to keep the required records digitally and use Making Tax Digital compatible software to submit VAT returns, unless an exemption applies. VAT records normally need to be retained for at least six years.
When issuing VAT invoices, businesses must include the information required by the VAT rules. This includes details such as the supplier’s VAT registration number and the tax point, as well as the other information required for the relevant type of invoice.
You must also apply the correct VAT treatment to your goods or services. In 2026, the main UK rates remain:
- 20% standard rate
- 5% reduced rate
- 0% zero rate
Some supplies are exempt from VAT. The rate that applies depends on the goods or services supplied.
2. Confirm How Much VAT You Owe
For businesses using standard VAT accounting, the VAT payment is broadly based on the output VAT due on sales minus eligible input VAT that can be reclaimed on business purchases.
For example, if your return shows:
- Output VAT on sales: £6,000
- Recoverable input VAT: £1,500
- Net VAT due to HMRC: £4,500
you would normally pay £4,500.
VAT can be reclaimed on eligible business expenses where the relevant conditions are met, normally including holding appropriate VAT evidence such as a valid VAT invoice. Different calculation rules can apply under schemes such as the Cash Accounting Scheme and Flat Rate Scheme.
3. Submit Your VAT Return
Most businesses must submit their VAT return electronically using compatible software.
For the normal VAT payment process, submit the return first so that the liability for the period has been reported correctly. This is particularly important for Direct Debit because HMRC collects the amount after the return has been submitted.
However, submitting the return and making the payment remain separate obligations. A bank or card payment does not itself count as filing a VAT return, and filing a VAT return does not itself pay the VAT due.
4. Check Your VAT Payment Deadline
For many businesses using standard quarterly accounting, the return and payment deadline is normally one calendar month and seven days after the end of the VAT accounting period. Your VAT online account shows the deadline applicable to your business.
5. Find the Correct VAT Payment Reference
For an ordinary VAT bill, you normally use your 9-digit VAT registration number without spaces as your payment reference. You can find it in:
- your VAT online account
- your VAT registration certificate
Do not assume the same reference applies to penalties. HMRC normally provides a separate 14-character reference beginning with X when paying a VAT penalty or surcharge.
6. Choose an HMRC Payment Method
Choose a method that gives the payment enough time to reach HMRC. Options include:
- Direct Debit
- online bank payment
- Faster Payments
- CHAPS
- Bacs
- personal or corporate debit card
- corporate credit card
- standing order in limited circumstances
- cash or cheque at your own bank or building society where HMRC’s requirements are met
7. Make the VAT Payment
Enter the payment information carefully and check the reference before confirming the transaction. For bank transfers, use the current HMRC bank details rather than relying on bank details copied from an old invoice, email or third-party website.
8. Keep Confirmation of Payment
Keep evidence of the transaction, such as:
- the HMRC payment confirmation
- bank transaction confirmation
- card receipt
- relevant VAT return
- supporting accounting records
Keeping clear records can help if HMRC later queries whether a payment was made or how it was allocated.
VAT Payment Methods: Which One Should You Choose?
There are the various methods way to pay HMRC VAT. You can choose any method from HMRC website according to your ease.
| Payment method | How it works | Typical timing | Important point |
| Direct Debit | HMRC collects the VAT automatically after the return is submitted | Normally collected 3 working days after the payment deadline | Set it up at least 3 working days before submitting the return |
| Online bank account payment | Approve an HMRC payment through your online banking provider | Usually immediate, although the transaction can take up to 2 hours to appear | Check that the payment has actually left your UK bank account |
| Faster Payments | Bank transfer from a UK account | Usually same or next day | Can usually reach HMRC at weekends and on bank holidays |
| CHAPS | Same-day bank transfer | Usually same working day | Must be sent within your bank’s processing time |
| Bacs | Bank transfer | Usually 3 working days | Do not leave the payment until the deadline |
| Debit card | Pay through HMRC’s online service | HMRC accepts the payment on the date it is made | Personal and corporate debit cards are accepted, although corporate card fees can apply |
| Corporate credit card | Pay online through HMRC | Accepted on the payment date | A fee applies and personal credit cards are not accepted |
| Standing order | Available for Annual Accounting Scheme payments and payments on account | Usually 3 working days | It is not a general payment option for every VAT return |
| Cash or cheque at your bank/building society | Pay using an HMRC paying-in slip | Depends on the permitted process | Paying-in slips must be obtained from HMRC in advance |
When Do You Need to Pay VAT?
Most VAT-registered small businesses submit a VAT return every three months. This three-month period is known as the VAT accounting period. For a standard VAT return, the filing deadline is normally one calendar month and seven days after the end of the accounting period. This is normally also the payment deadline.
HMRC must receive the payment within the applicable timeframe. If you are using a method that takes several working days, such as Bacs, you need to start the payment early enough for it to reach HMRC.
For card payments and certain online payment methods, specific HMRC rules determine the effective date of payment. Direct Debit also operates differently because HMRC normally collects an authorised VAT Direct Debit three working days after the standard payment deadline.
Example VAT Deadline
Suppose your quarterly VAT accounting period ends on 30 June. Your normal VAT return and payment deadline would generally be 7 August. If you use Bacs and it normally takes three working days, waiting until 7 August to initiate the transfer could make the payment late.
Check the deadline shown in your VAT online account because different rules apply to businesses using arrangements such as:
- Annual Accounting
- VAT payments on account
HMRC also provides an official VAT payment deadline calculator for standard cases.
Making Tax Digital and Your VAT Payment
Making Tax Digital for VAT is now the standard VAT reporting system in the UK. Businesses within MTD for VAT must:
- maintain the required VAT records digitally
- use compatible software
- submit VAT returns electronically through that software
All VAT-registered businesses should now be within Making Tax Digital unless they qualify for an exemption or another specific exception. MTD does not mean that submitting your VAT return automatically pays your VAT bill. Filing and payment are still distinct parts of the VAT process.
What Happens If You Cannot Pay Your VAT Bill?
If you know that you cannot pay your VAT bill by the deadline, contact HMRC as soon as possible. Do not simply leave the liability unpaid.
HMRC may be able to agree a Time to Pay arrangement, allowing eligible businesses to pay an outstanding tax liability by instalments based on their financial circumstances.
A Time to Pay arrangement can reduce or stop further late-payment penalties from building up from the relevant point if it is agreed and the arrangement is maintained. Late-payment interest can still apply to outstanding VAT while it remains unpaid.
VAT Late-Payment Penalties in 2026
The late-payment penalty system must not be confused with the points-based late-submission system. Penalty points apply to late VAT returns. Late VAT payments are dealt with under a separate percentage-based penalty regime.
For relevant VAT liabilities under the current regime:
- Up to 15 days overdue: no first or second late-payment penalty, although late-payment interest runs from the first day overdue.
- 16 to 30 days overdue: the first penalty is normally 3% of the VAT outstanding at day 15.
- 31 days or more overdue: the first penalty is normally 3% of the amount outstanding at day 15 plus another 3% of the amount still outstanding at day 30.
- From day 31, a second penalty can accrue daily at an annual rate equivalent to 10% on the outstanding balance until payment or the relevant stopping event.
Late-payment interest is charged separately from the penalties, starting on the first day the VAT is overdue and continuing until it is paid in full. The rate is linked to the Bank of England base rate, so businesses should check HMRC’s current interest rate rather than relying on an old fixed percentage.
How Time to Pay Can Affect Penalties
HMRC’s current guidance states that if a business pays in full or makes a Time to Pay proposal that is subsequently agreed within the first 15 days, the late-payment penalty may be avoided.
If the VAT remains unpaid for longer, arranging Time to Pay can still stop further penalties from increasing, depending on when the proposal is made and whether the agreement is maintained. If you miss a VAT payment deadline, contact HMRC promptly rather than waiting for a penalty notice.
Common VAT Payment Mistakes
1. Using the Wrong VAT Payment Reference
Entering the wrong VAT registration number can delay allocation or result in the payment being applied elsewhere.
Avoid it: Use your 9-digit VAT number without spaces for an ordinary VAT bill and check whether a separate reference applies to penalties.
2. Paying Too Late
Businesses sometimes make a payment on the due date without considering bank processing time.
Avoid it: Check the processing time before paying. Bacs normally takes three working days, while Faster Payments usually reaches HMRC on the same or following day.
3. Confusing Filing With Payment
Submitting a VAT return does not automatically settle the VAT bill unless an appropriate automatic payment arrangement, such as Direct Debit, is already in place.
Likewise, making a manual VAT payment does not remove the obligation to submit the VAT return.
Avoid it: Check both your filing status and payment status.
4. Setting Up Direct Debit Too Late
A new VAT Direct Debit needs to be established in time.
Avoid it: HMRC currently says to set it up at least three working days before submitting the return.
5. Paying the Wrong Amount
Incorrect VAT calculations can create either an underpayment or unnecessary overpayment.
Avoid it: Reconcile your sales, purchases and VAT records before submission, check any VAT reclaimed on business expenses and make sure the correct VAT rates have been applied.
6. Using Outdated HMRC Bank Details
Payment instructions copied from an old document or unverified third-party website may be incorrect.
Avoid it: Check the current bank details directly through GOV.UK when making your HMRC VAT payment.
7. Ignoring a Missed Payment
Waiting after the payment deadline can increase interest and eventually result in late-payment penalties.
Avoid it: Contact HMRC immediately if you cannot pay. A Time to Pay arrangement may be available and early action can limit penalties.
Need Help With a VAT Dispute, Penalty or HMRC Investigation?
Paying VAT correctly and on time can help businesses avoid unnecessary interest and penalties. If a missed payment, VAT assessment, disputed liability or compliance issue develops into an HMRC dispute or investigation, getting appropriate legal advice early can be important.
Axis Solicitors provides legal support for businesses facing tax disputes and investigations, HMRC enquiries about VAT. Our team can advise on HMRC correspondence, disputed assessments, penalties, investigations, reviews and appeals where legal representation is required.
Contact Axis Solicitors to discuss an HMRC VAT dispute or investigation.
Frequently Asked Questions
How do I pay my VAT bill?
Check your submitted VAT return for the amount due, confirm the deadline, use your 9-digit VAT registration number as the normal payment reference and select an HMRC-supported payment method.
When do I have to pay VAT?
For most standard VAT returns, payment is due one calendar month and seven days after the accounting period ends. The return normally has the same deadline. Check your VAT online account because Annual Accounting and payments on account use different deadlines.
How long does a VAT payment take to reach HMRC?
It depends on the payment method. Faster Payments usually reach HMRC on the same or next day, CHAPS normally arrives the same working day within bank processing times, and Bacs usually takes three working days. Standing orders also normally take three working days.
Can I reclaim VAT on business expenses?
VAT-registered businesses can generally reclaim VAT on eligible purchases used for the business, subject to the VAT recovery rules and appropriate evidence. Restrictions apply to some expenses and to businesses making exempt supplies.
Does the Cash Accounting Scheme change when I pay VAT?
Yes. Under the Cash Accounting Scheme, you generally account for VAT on sales when customers pay you and reclaim VAT on purchases when you pay your suppliers. You still submit returns and pay the resulting liability according to the applicable VAT deadlines.
At Axis Solicitors, we specialise in guiding UK small businesses through VAT compliance, from registration and filing to ensuring you pay VAT on time and avoid HMRC penalties. Whether you need advice on VAT schemes, payment deadlines, or resolving a dispute with HMRC, our expert solicitors are here to help.
Check our recent blog on the topic: Corporate Dispute Examples
