HMRC has consulted on a proposal to make Direct Debit the required method of paying VAT and PAYE return liabilities for most businesses and employers. The consultation ran from 23 June to 16 August 2026, and HMRC estimates the change would affect around 2.4 million businesses and employers. Under the proposal, HMRC would collect the amount due from your bank account after each return is submitted. The consultation also considers where exceptions may be needed, and how to encourage compliance, including penalties for paying by another method or limiting the current extended payment deadlines to Direct Debit payers.
No decision has been announced and no implementation date has been set. Any change would require legislation, and the government’s response to the consultation has not yet been published.
For owner-managers, the practical issue is control over timing. Many businesses time their VAT and PAYE payments to manage cash flow across the month or quarter. Fixed collection dates would remove that flexibility, and would make the accuracy of each return, and of HMRC’s own records, more important, since any error would be collected automatically.
Professional bodies have responded with caution. The ICAEW doubts the proposal would reduce late payment and tax debt, and warns that automatic collection could amplify existing errors on VAT and PAYE accounts, such as misallocated payments. The Chartered Institute of Taxation has said the measure should not be introduced at this time.
The government’s response will confirm whether the proposal goes ahead and on what timetable.