Direct Debit for PAYE

HMRC have advised that employers will soon be able to pay their PAYE by direct debit.  This functionality should have been available from 19th September 2022 but has been delayed until October.

The direct debit option means that HMRC will be able to take payment on the due date of the amount submitted to them on the monthly PAYE return.  Employers will be able to set up a direct debit through their government gateway account once the facility is made available by HMRC.

The direct debit option may be useful for some businesses but there could, of course, be potential for HMRC to take an incorrect amount, particularly if your payroll has had to be re-run and a re-submission has been made later in the month.  Re-submissions following changes to an already submitted payroll do not have to be done as changes can be identified in the subsequent payroll but if you haven't done a re-submission then HMRC will take the original amount.  This could result in an overpayment or underpayment.  An underpayment could incur an interest charge as it may be seen as a late payment.

We don't yet know how well this will work and will advise the employers we work with not to set this up until 6-12 months after it is available so that we can see how others have found it.

Generally, though, we recommend that you set up your PAYE payment for the due date (22nd of the following month or earlier if that date falls on a weekend) at the same time as you set up the payments for staff.  That way you never forget to pay it and it is with HMRC on time.  If you do this, setting up a direct debit is not really necessary.

If you pay by card, setting up a direct debit will save you the card fee.

It will be interesting to see how well the direct debit option works.  It works well for VAT as they only take the amount on the VAT return, but if you are behind with payments you may find more than one PAYE payment is taken.