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VAT and PAYE by DD

ended 03. July 2026

The government is consulting on making Direct Debit the required method of paying VAT and PAYE, subject to any necessary exceptions. It may even levy penalties where a payment is not made by Direct Debit (and the payer is not excepted). A penalty could apply even if the payment is otherwise made in full and on time (yes, you read that correctly). What are your thoughts? Good, bad or ugly?

3 responses from the Newspage community

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Editor
Harvey Dhillon
Founder & CEO at Zmartly
When did paying your tax in full and on time become something HMRC could fine you for? That is the oddity in this consultation, open until 16 August. Moving most VAT and PAYE payments to Direct Debit is, for once, a sensible fix. The late-payment penalties I see are rarely from firms that cannot pay, but from a wrong reference or the right money hitting the wrong period, and Direct Debit quietly ends that. That part is genuinely good.

The ugly is a penalty for the method. A charge that can land even when the tax is paid in full and on time, purely because it went by bank transfer, is a fine for using the wrong envelope. The one caught is the careful business that always pays, not the debtor this is meant to chase. So before 16 August, set up the Direct Debit, but tell the consultation that method is not the same as payment.
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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
Has there ever been a less business-friendly government, one that talks endlessly about growth yet treats the business community as a cash cow for its pet projects? The consultation on requiring VAT and PAYE payment by Direct Debit has shocked the accounting world. HMRC frames it as efficiency, cutting the "tax gap" caused by manual errors. But businesses use Faster Payments and CHAPS deliberately for cash flow control. Mandatory DD hands HMRC a preferred creditor's schedule, not yours. Miss the timing and you face failed payments, penalties, and interest at Base plus 4%. For multinationals and complex treasury structures, setting up DD across entities is an operational nightmare. Worse, HMRC is consulting on penalising businesses that pay in full and on time, simply for using the "wrong" channel. That flips compliance on its head. You're punished not for failing to pay, but for failing to use their preferred technology. It treats SMEs like errant children.
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Rob Burgess
Founder / Editor at Head for Points
This is, of course, very handy for HMRC and very inconvenient for those of us who don’t want the trouble of ensuring the right sum is in the right bank account on a specific day. Bad payers of course, still won’t pay.

Another tranche of people it will affect are those who choose to earn rewards points and other benefits on card payments, plus those using certain credit cards also enjoy a period of interest free credit.

Whilst opportunities are limited, you can earn points with cards such as Capital on Tap Visa (Limited companies only and charges apply) or the business version of the Currensea Hilton, Mariott or United Airlines Debit Card. You can also use personal debit cards to earn elite bonus nights on hotel chains with Currensea’s branded hotel cards.

If you are currently earning points from paying VAT or PAYE via a card, you should complete the consultation questionnaire with good reasons why Direct Debit is not suitable for you and similar businesses.