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Can I Set Up a Direct Debit with HMRC for PAYE?

How HMRC’s PAYE Direct Debit works and why we recommend manual payments.

Yes — HMRC allows employers to pay PAYE by Direct Debit through their online account.
However, Intelligent Payroll strongly recommends making manual monthly payments using the full 17-digit reference number we provide.
This ensures payments are allocated to the correct tax month and prevents HMRC overpayments or delays in refunds.

💳 How HMRC’s PAYE Direct Debit Works

Employers can set up a Direct Debit to allow HMRC to automatically collect PAYE based on submitted payroll returns.

Key Points:

  • Set up via your HMRC Business Tax Account

  • Use your 13-character Accounts Office Reference when prompted

  • Must be set up at least 4 working days before the due date

  • HMRC collects payment:

    • Shortly after the 22nd of each month, or

    • 4 working days after filing (if submitted after the 19th)

Payments appear on your statement as HMRC SDDS.

Some situations cannot use Direct Debit, such as:

  • Payments over £20 million

  • Overseas bank accounts

  • Certain CIS-only businesses

  • Insolvency scenarios

More details:
https://www.gov.uk/pay-paye-tax/direct-debit

⚠️ Why We Recommend Manual Payments Instead

We advise clients to pay PAYE manually each month using the 17-digit reference we issue in your payroll reports.

This approach:

  • Ensures correct tax-period allocation

  • Prevents HMRC collecting incorrect or higher amounts

  • Avoids the lengthy refund process (refunds can take several months)

  • Gives employers full visibility and control over each payment

We have seen multiple cases where HMRC’s Direct Debit collected:

  • More than was due, or

  • Allocated payments incorrectly against the wrong period

Manual payments eliminate these issues.

🧾 How to Pay Manually (Recommended Method)

Use the 17-digit reference we generate each month.
This reference is unique to the specific tax period and ensures correct allocation.

This will be on the email that we send on the 6th of each month (if opted in)
If you have not opted in, more information on which reference to use can be found here: https://support.intelligentpayroll.co.uk/what-payment-reference-should-i-use-when-paying-paye-to-hmrc

Payment deadlines:

  • 22nd of the month for electronic payments

  • 19th of the month for cheque payments

The reference must be entered exactly as shown (no spaces).

💡 Best Practice

  • Always use our 17-digit reference for each month

  • Save your payment confirmations for audit and compliance

  • Contact us before making any adjustments if an HMRC balance looks incorrect

  • Check your HMRC account periodically to ensure your payments are allocated correctly

We can also assist in reconciling any discrepancies between HMRC records and your payroll reports.

💬 Contact Us

If you need help setting up payments or confirming the correct reference,
Contact us here