How to Set Up a Direct Debit for Your UK Business

Two scenarios: paying versus collecting

There are two distinct situations where a business engages with Direct Debit. In the first, you are the payer — agreeing to let a supplier, landlord, or HMRC collect money from your business bank account on a recurring basis. In the second, you are the creditor — collecting subscription fees, loan repayments, or service charges from your own customers. The steps and requirements differ significantly between the two.

Setting up a Direct Debit mandate as a payer

When a supplier asks you to pay by Direct Debit, you will be asked to complete a Direct Debit Instruction (DDI), also called a mandate. This authorises the supplier to collect specified amounts from your account. You should receive an advance notice (usually at least two working days before the first collection) stating the amount, frequency, and collection date. Check this carefully against your contract terms before the mandate is live.

All Direct Debits in the UK are covered by the Direct Debit Guarantee, which means your bank must refund you immediately and without question if the wrong amount is collected, or if collection occurs without adequate notice. Keep copies of all mandate authorisations in your financial records.

Becoming a Direct Debit originator as a collecting business

If you want to collect recurring payments from customers by Direct Debit, you need a Service User Number (SUN) issued by Bacs. There are two routes: apply for your own SUN through your bank (which typically requires at least one year of trading, a business bank account, and satisfactory credit checks), or use a bureau service or payment platform such as GoCardless, which operates under its own SUN and allows businesses to originate Direct Debits without a direct Bacs relationship.

• Bureau/platform route: fastest to set up, typically 1–5 working days, fee per transaction
• Own SUN route: more control and branding, but slower to obtain and requires ongoing Bacs compliance obligations
• Either route requires you to store customer authorisations securely and provide compliant advance notice before every collection

The Bacs rulebook and your bank's terms govern what you can and cannot collect. Non-compliance can result in your SUN being revoked.

Record-keeping and compliance for collecting businesses

Every Direct Debit mandate you hold from a customer must be stored securely and be retrievable on demand — either digitally or in paper form. If a customer invokes the Direct Debit Guarantee and requests a refund through their bank, their bank will claim the funds back from you via the Bacs indemnity process. You should maintain adequate reconciliation processes and reserves to cover any indemnity claims, and review active mandates periodically to cancel those that are no longer required.

If you use a payment platform, the platform will handle most compliance obligations, but you remain responsible for ensuring mandates are validly obtained and that advance notices are sent correctly. Review your platform's terms carefully.