PAYE paid by direct debit – interest charges 

“Once a recurring Direct Debit has been set up, the collection process can only commence and conclude on a bank working day.

The first step is that we will send a secure message to your client’s inbox within Business Tax Account showing the Direct Debit amount. This is called the Advance Notification and it will be issued on 20th or the next working day if 20th is not a working day.

Collection from the bank will happen on the 3rd bank working day after the Advance Notification is issued. This means the collection will always be after the 22nd of the month.

In October, collection took place on the 25th and interest charges were reversed late on the 25th.

As the due date for electronic payment is the 22nd of the month, the charges within the online account will show as overdue and accruing interest may be shown. Once the Direct Debit has been collected, our financial systems will update and reverse any interest for the short period between the 22nd and the date the payment was received. This happens because strictly the charges are overdue until the payment is received. The payment will be credited as though received on or before the Due Date. If the Direct Debit cannot be collected, such as because there were insufficient funds in the bank account, the interest calculated from 22nd will stand.

An example of this will be November 2022 –

• Advanced Notification will be issued on Monday 2 November
• Money will be collected on Thursday 24 November
• Interest for late payment will show between 22nd and 24th
• Interest will be removed late on 24 November when the payment is processed by our systems

Although the online account may show interest as due for small time period it will also show “Direct Debit will collect” against the charge. We hope this will alleviate Employer concerns. 

We are monitoring all feedback relating to this new service and will take this into consideration when making any future changes.”