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I have some money saved up to pay taxes in my personal tax return but I want to do something with it that stops me from spending it on other things.

Can I pay the taxes early?

Can I put it in some kind of bank that will release it on a particular day?

Little Johnny
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    I think simply moving it to another account is already a good first step. Most banks will allow you to create a secondary account. Just ensure it's not linked to any cards, and that is probably enough. – Gregory Currie Jan 16 '23 at 01:41
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    Do you not have to pay taxes periodically throughout the year? – Dave Jan 16 '23 at 08:53
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    @Dave there's a balancing process, similar to the US, where some taxpayers will have to "self assess" at the end of the year, which could result in either a refund or more to pay. There are various reasons you might owe money, including being self-employed. – GS - Apologise to Monica Jan 16 '23 at 11:38
  • At least for Canada, I can tell you that if you're self-employed, you need to make quarterly income tax payments - rather than one time at the end of the year. The shorter the time between earning the money and paying taxes, the less tempted you will be to spend it. – Nayuki Jan 16 '23 at 21:06

3 Answers3

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You can pay taxes early. Go to your Self Asessment home page and choose "Make a payment" (direct link once logged in).

Then pay whatever you want to. It'll initially just end up sitting on your tax account not allocated to any particular liability. Once you submit your tax return, it'll be deducted from whatever you owe. And you can request a refund at any point, either because you do want the money back after all, or because you turn out to have overpaid after you submit.

Source: personal experience of making a small payment in September to see what would happen - it got taken off the bill when I submitted my return in December. I haven't tested the refund bit but it looks pretty clear it should be possible.

GS - Apologise to Monica
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  • Does it accrue interest? – Jonathan Jan 16 '23 at 15:21
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    @Jonathan I'm unclear on that. I've had "repayment interest" in the past that was a bit confusing. Supposedly it does apply to early payments. I'll try to remember to check if anything gets credited on 31st Jan (the self-assessment deadline). – GS - Apologise to Monica Jan 16 '23 at 16:57
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    @Jonathan, yes they will give you interest on a positive balance, but the rate is nothing to shout about (Sorry I can't remember the exact rate last time I checked). They are paid regularly (don't remember the exact frequency neither), it's not just a yearly payment. – Hoki Jan 16 '23 at 17:41
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    @Hoki the interest payments I see in my account coincide with the dates payments were due, but they don't seem to appear consistently. 2.50% as it currently is an ok rate, particularly as it's tax-free. – GS - Apologise to Monica Jan 16 '23 at 17:45
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    @GS-ApologisetoMonica, you're right about the rate not being so bad now (and tax free). I calculated it only once the first time I noticed (a couple of years back) and it was at the time interest rate everywhere where rock bottom, that's why it was so low ... but I do remember that it was still in par with what some basic saving bank account would give you at the time. It's nice to see that it tracks the BoE rate somehow. – Hoki Jan 16 '23 at 17:50
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In the UK you can create a ladder of fixed-term savings accounts (which in the US would be called CDs, or certificates of deposit).

Just over 9 months before you need to pay taxes create a 9-month account with whatever you can contribute towards your tax liability. Do the same 3 months later (with a 6-month account) and 3 months after that.

The bank or building society may even pay you a per. cent or two of interest over the life of deposit.

Badger
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It’s quite likely that your bank lets you open a second account for free. I use Barclays, and I can move money between my accounts. Don’t get a debit card for that account, and it’s a lot easier not to spend the money.

gnasher729
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