Paying your Self Assessment tax bill through PAYE

Dec 12, 2023 | Tax Tuesday, Taxation

Did you know that there is an option to pay your Self Assessment tax bill through PAYE?

If you file your 2022/23 Self Assessment tax return by 30th December 2023, then you could choose to spread the payment of your bill across your 2024 PAYE obligations. 

How does it work?

Typically, you would be required to pay your Self Assessment tax bill by 31st January, or by making Payments on Account by then. However, if you receive sources of income that are taxed under PAYE income tax, then you can opt to change your tax code so that it also deducts payment for your 2022/23 Self Assessment tax bill each month. 

To pay your tax bill in this way, you must satisfy the following conditions:

  • You must file your 2022/23 tax return online by 30th December 2023
  • You must owe less than £3,000 in tax (before deducting any Payments on Account)
  • You must already pay tax through PAYE, for example through your salary or pension.

You cannot pay your tax bill through your tax code, if:

  • You do not have enough PAYE income for HMRC to collect it
  • It would mean that you end up paying more than 50% of your PAYE income in tax
  • You would end up paying more than twice as much tax as you normally do
  • You owe £3,000 or more but used a part payment to reduce the amount you owe.

Could you benefit?

Looking at this arrangement optimistically, you can see how it effectively allows you to spread your self assessment tax bill over 12 interest-free instalments, which is a rare and attractive opportunity for many in today’s climate. It is a useful way to ease worries about a large upfront tax bill, without needing a Time to Pay arrangement with HMRC. It is important to remember, however, that paying your Self Assessment tax bill this way will decrease your take home pay for the year.

If you submitted a paper Self Assessment tax return by 31st October, then you are also eligible to pay your bill through PAYE, providing you satisfy the conditions above. 

Time to Pay Arrangements

If you miss the deadline and will struggle to pay the bill in time, then don’t panic. If you cannot pay your tax bill in full, you may be eligible to set up a payment plan with HMRC known as a ‘Time to Pay’ arrangement.

Again, there are certain conditions that you must satisfy to be eligible for a Time to Pay arrangement for your Self Assessment tax bill:

  • You must have filed your latest tax return
  • You must owe £30,000 or less
  • You must be applying within 60 days of the payment deadline
  • You must not currently be involved in any other payment plans or debts with HMRC. 

Contacting HMRC

It is worth noting that, with just a few weeks to go until the deadline, HMRC have reduced the access to the self assessment helpline (effective 11th December – 31st January). During this time, callers will be redirected to online services instead to source their own answers. If you are an existing client and require assistance, we urge you to reach out to Helen, Claire or Kirsty with your queries at the earliest.