Tax Glossary

Direct Debit

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Last updated on:
March 17, 2024

Direct Debit (DD) payments offer a convenient and automated way to handle regular financial transactions between individuals and businesses. For UK taxpayers, Direct Debit also provides a streamlined method to manage Self Assessment tax payments directly through an HMRC Online account.

Setting Up Direct Debit for Tax Payments

  • For Single Tax Bill Payments: Taxpayers can log into their HMRC Online account and establish a Direct Debit to cover specific tax bill payments due by 31st January.
  • For Payment on Account: Another Direct Debit can be arranged before the 31st July deadline to cover these types of payments. Remember, each payment requires a separate Direct Debit instruction due to varying amounts.

Key Considerations When Using Direct Debit

  • Payment Reference: It's crucial to use the correct payment reference, typically your 10-digit Unique Taxpayer Reference (UTR) number followed by the letter "K", to ensure your payment is accurately processed.
  • Processing Time: The initial Direct Debit setup takes up to five working days to process, while subsequent payments require three working days. Planning is essential to avoid missed deadlines.
  • Cancellation Process: To cancel a Direct Debit, it should be done at least three working days before the scheduled debit date. This cancellation needs to be communicated both to your bank and the business (in this case, HMRC) to ensure no further payments are taken.

How to Set Up a Direct Debit with HMRC

To initiate a Direct Debit for your tax payments:

  1. Visit the HMRC online portal and log into your account.
  2. Navigate to the payment section and select the option to set up a Direct Debit.
  3. Follow the instructions to enter your bank details and authorize HMRC to collect the specified tax payment.

This method not only simplifies the payment process but also ensures that your tax obligations are met on time, reducing the risk of late payment penalties. Direct Debit is an efficient tool for managing your tax payments, offering both reliability and peace of mind.

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