Payroll

How to Pay Employers PAYE with Direct Debit

1

How to pay paye with direct debit
Do you find the process of paying Employers’ PAYE with Direct Debit a bit confusing? You’re not alone, and this guide aims to make the process as straightforward as possible.

Overview

Employers Pay As You Earn (PAYE) is a significant responsibility that employers must undertake as part of their payroll process. Using Direct Debit to manage these payments can ease this burden significantly. This guide breaks down everything you need to know about paying Employers’ PAYE with Direct Debit through HM Revenue and Customs (HMRC).

Setting Up Direct Debit for Employers’ PAYE

Pay Your Bill Automatically

Setting up a Direct Debit to pay your PAYE bill automatically is quite convenient. With this option, HMRC will automatically collect the payment from your bank account, simplifying payroll management. To get started, you will need to set up the Direct Debit through your HMRC online account at least four working days before your payment due date.

Key Points to Remember:

  • Automatic Collection: HMRC will collect the payment based on the amount specified in your return, also known as the Full Payment Submission (FPS).
  • One-time Setup: Once the Direct Debit is set up, you won’t need to set it up again unless you have not used it for two years or more.
  • Quarterly Payments: If you pay quarterly, continue to submit a monthly return, and HMRC will collect the total payment every three months.
  • Notification: HMRC will inform you of the date and amount no later than three working days before the payment is collected.
  • Bank Statement Reference: Payments will appear on your bank statement as ‘HMRC SDDS’.

When You Can Use This Type of Direct Debit

You can use this automatic Direct Debit to pay specific charges, including:

  • Full Payment Submission (FPS)
  • Employer Payment Submission (EPS)
  • Construction Industry Scheme (CIS)
  • Apprenticeship Levy (AL)
  • Class 1A National Insurance
  • Earlier Year Update

However, it cannot be used for paying interest, penalties, or return payments exceeding £20 million. Alternative payment methods will be required in those cases.

Making a Single Payment

If you prefer making a single payment each time, you can also set up a Direct Debit for this purpose. This process requires setting up the payment through your HMRC online account. Be sure to set it up at least:

  • 5 working days before your return due date for the first time.
  • 3 working days before your return due date for subsequent payments using the same bank details.

Payments will show on your bank statement as ‘HMRC NDDS’.

Making an Online or Telephone Bank Transfer

For those preferring not to use Direct Debit, online or telephone bank transfers are viable alternatives. This method, while more manual, gives you control over each payment.

Steps for Online Bank Transfer:

  • Add Payee: In your online banking, add HMRC as a payee.
  • Payment Details: Enter the amount you wish to transfer and the required payment reference number. This number can be found in your HMRC online account or the letter sent when you registered as an employer.
  • Confirm: Authenticate and confirm the payment.

Paying By Debit or Corporate Credit Card Online

HMRC also accepts payments by debit or corporate credit card online. Although convenient, this method may incur additional processing fees, especially for credit card payments.

Steps for Card Payments:

  • Go to HMRC’s Payment Portal: Access the online payment service on the HMRC website.
  • Enter Details: Provide your card details, payment amount, and payment reference number.
  • Authenticate: Follow the steps to authenticate and complete your payment.

Sending a Cheque Through the Post

If you prefer traditional methods, sending a cheque through the post is also an option, though it’s less commonly used due to the slower processing times.

Steps to Send a Cheque:

  1. Write a Cheque: Make the cheque payable to ‘HMRC’.
  2. Include Reference: Write your 13-character accounts office reference number on the back of the cheque.
  3. Mail: Send the cheque to the address provided by HMRC for postal payments.

Reference Numbers for Payments

Ensuring you use the correct reference number when making payments is crucial to avoid delays.

Using the Correct Reference Number:

  • 13-character Reference: Your 13-character accounts office reference number is essential for all PAYE payments.
  • Adjustments for Timing: Add extra numbers for early or late payments:
    • Early Payment: Before the 6th of the tax month or quarter.
    • Late Payment: On or after the 5th of the tax month following the due date.

Incorrect reference numbers can lead to delayed processing of your payments.

Checking if Your Payment Has Been Received

After making a payment, it’s natural to want to confirm that it has been properly processed by HMRC.

How to Check:

  1. Log in to HMRC Online Account: Check your account summary.
  2. Bank Statements: Verify the deduction from your bank account.
  3. Contact: If uncertain, contact HMRC for confirmation.

Informing HMRC if No Payment is Due

If there are periods when no payment is required, inform HMRC to avoid unnecessary follow-ups and potential late payment notices.

Steps to Inform:

  • Access your HMRC online account.
  • Navigate to the payroll section.
  • Select the option to notify HMRC of no payment due.

Common Issues and Troubleshooting

Direct Debit Setup Issues

If you encounter problems while setting up Direct Debit, ensure that:

  • Your bank supports Direct Debit.
  • The account details entered are correct.
  • The setup is done well within the stipulated timelines.

Payment Not Seen in Account

Cross-check the reference number used and contact your bank and HMRC if the payment doesn’t reflect in your HMRC account or bank statement within the expected timeline.

Incorrect Payments

If an incorrect amount is debited, immediately contact HMRC and your bank to rectify the mistake.

Final Tips for Efficient PAYE Management

  • Stay Organized: Keep detailed records and ensure timely submissions of all returns.
  • Use Reminders: Set reminders for payment due dates to prevent late submissions.
  • Consult a Professional: If the process feels overwhelming, consider consulting a payroll specialist or accountant.

Understanding these payment methods and staying organized can significantly ease payroll management and ensure compliance with HMRC requirements.

Do you have any further questions or need clarification on specific points? This guide aims to provide a comprehensive overview to make your PAYE payments as seamless as possible.

Shelley Robertson is a highly skilled accountant and accomplished blog writer with 12 years of expertise in the realms of UK accounting, taxation, and finance. Over the course of her career, Emily has distinguished herself as a dedicated professional with a passion for empowering individuals and businesses to achieve financial success. Drawing upon her extensive experience and comprehensive understanding of accounting principles, Shelley has become a trusted advisor to clients seeking guidance on a wide range of financial matters. Her meticulous attention to detail and commitment to excellence have earned her a reputation for delivering exceptional service and results. As a prolific writer, Shelley is committed to making complex financial concepts accessible to a broad audience. Through her engaging and informative blog posts, she provides valuable insights and practical advice on topics such as tax planning, budgeting, and financial management. Her ability to distil complex information into clear and concise prose has made her a sought-after resource for readers seeking reliable information and guidance. In addition to her writing, Shelley is passionate about education and mentorship. She takes pride in sharing her knowledge and expertise with others, whether through one-on-one consultations, workshops, or speaking engagements. By empowering individuals with the tools and knowledge they need to navigate the world of finance, Shelley is helping to build a more financially literate society. Shelley's contributions to the field of accounting and finance extend beyond her professional work. She is an active member of the community, volunteering her time and expertise to support local businesses and non profit organizations. Her commitment to making a positive impact on the lives of others is reflected in everything she does. With her blend of experience, expertise, and passion for her work, Shelley Jones is a driving force in the world of accounting and finance. Through her writing and her professional endeavours, she continues to inspire and empower others to achieve their financial goals and build a brighter future.

Similar Post

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

Refresh