A common question us accountants get asked a lot is, ‘Can I pay my PAYE and National Insurance by Direct Debit?’
Until recently, the answer was a resounding ‘No’ because employers were only able to set up a single payment via direct debit, not a recurring one – frankly a chore and a headache.
Thankfully, someone was listening and as of the 3rd of October, PAYE can now be paid via a monthly or quarterly PAYE bill.
Well, it’s all been a bit behind the times… Paying PAYE has traditionally allowed for a single payment to be set up by direct debit which has frustrated many people and kept the HMRC back in the dark ages.
This modernisation is part of a wider project by HMRC that will create methods of consistent payment for all taxpayers, instead of the past limited service which varied depending on what type of tax was payable.
How is the DD setup?
The business tax account (BTA) and the employers’ liabilities and payments screens have now changed, with the introduction of a new link to ‘set up a direct debit’.
Once setup, users can then set up a DD instruction that permits HMRC to collect directly from their bank account, based on their return submission. Following authorisation, the link will change to ‘Manage your Direct Debit’ where employers can view, modify, or cancel the Direct Debit online.
Payments which will be covered by direct debit will show within employers’ liabilities and payment screens for both employers and agents.
Who sets up the DD for PAYE?
The short answer is, Employers. HMRC have stated that there is ‘no scope for agents to do it,’ meaning that as instructed by the banking rules, agents are still not able to set up direct debits on behalf of their clients.
What happens next?
Once signed up, HMRC will have the ability to collect any of the following liabilities, on receipt of the relevant returns/submissions:
- Full Payment Submission
- Employer Payment Summary
- Construction Industry Scheme
- Apprenticeship Levy
- Class 1A National Insurance
- Earlier Year Update
Reference upon setup of the Direct Debit, note the Accounts Office. This can be found on any PAYE correspondence received from HMRC. Failing that, the payroll provider will be able to provide this reference.
Following setup, payments from your bank will show as, ‘HMRC NDDS’.
Is there a set payment date?
Yes. Direct Debit payments will be taken as follows:
- 23rd of each month or next working day
- 23rd following the end of the quarter for quarterly payment
It’s a positive step
Previously, employers added 4 digits to the Accounts Office Reference, which showed the PAYE year and month that the payment related to.
With this new system by direct debit, the allocation is all taken care because it is based on the payroll / CIS returns/submissions.
A spokesperson from the Chartered Institute of Payroll Professionals (CIPP) said: ‘This is a great step forward and shows how HMRC is trying to be as flexible as possible to support employers, and to keep up with technological advancements. It will be interesting to see, in the coming months, how many employers make use of this functionality, and we hope HMRC will provide figures in this area.’
And yes, we do hope that this information has been both useful and informative.