The Budget Reaches the Payment Rails

The Budget Reaches the Payment Rails

The UK Budget puts Direct Debit, banking taxation and financial data-sharing firmly on the agenda. Meanwhile, Confirmation of Payee secures its regulatory future and Brite Payments tackles the friction of repeat Pay by Bank purchases.

Five stories, one question: who is really shaping the future of payments?

1. Direct Debit becomes the government’s tax-payment safety net

The government has announced plans to require businesses to establish Direct Debit instructions for VAT and PAYE liabilities from April 2029.

The proposed arrangements would begin on 1 April 2029 for VAT and 6 April for PAYE.

Importantly, businesses would still be able to pay using other methods before a specified deadline. Direct Debit would collect any outstanding balance.

The Budget separately proposes allowing HMRC to recover certain lower-value tax debts directly from bank accounts from July 2029, subject to safeguards and further legislation.

Why it matters: This is potentially a significant development for one of Britain’s most established payment methods. Direct Debit would become the default collection mechanism for unpaid VAT and PAYE liabilities.

It also raises questions about customer control, cash-flow management, failed collections and the operational requirements of implementing such a system.

Source: HM Treasury — Budget 2026, published 28 October. GOV.UK

2. The Budget doubles the banking surcharge — temporarily

The government has announced that the Bank Corporation Tax Surcharge will increase from 3% to 6% for 15 months, beginning on 1 January 2027.

It will return to 3% on 1 April 2028.

The surcharge applies to relevant banking profits above the existing £100 million allowance.

The government estimates the measure will raise approximately £1.5 billion to help fund household support.

Legislation is still required to implement the increase.

Why it matters: Banks face a temporary increase in their tax burden at a time when the government is also seeking investment, innovation and greater competition across financial services.

The debate concerns whether the additional contribution is justified by banking profitability or risks discouraging lending and investment.

Source: HMRC — Banking surcharge changes, 28 October. GOV.UK

3. HMRC data could become part of the open-finance ecosystem

The Budget contains a potentially important commitment to explore the use of HMRC data within open finance.

The government intends to work with regulators and industry participants to test the feasibility of making relevant information available while protecting the integrity of the tax system.

This is exploratory work, not authorisation for financial institutions to access taxpayers’ records.

Separately, the Budget confirms plans to require structured electronic VAT invoices from April 2029. The detailed technical design is expected by April 2028.

Why it matters: Combining reliable business information with open-finance services could eventually support better credit assessments, faster lending decisions, improved reconciliation and less repetitive administration.

However, the practical challenges around consent, data protection, standards and interoperability remain substantial.

Source: HM Treasury — Budget 2026. GOV.UK

4. Confirmation of Payee secures its regulatory future

The Payment Systems Regulator has confirmed that the regulatory requirement supporting Confirmation of Payee will no longer expire on 1 November 2026.

Specific Direction 17 will remain in force unless amended or revoked.

According to the regulator, more than 320 organisations provide Confirmation of Payee, with over two million checks completed daily.

The PSR intends to review the requirement in five years and continues to consider whether coverage should be expanded.

Why it matters: This preserves the regulatory foundation of an important fraud-prevention and payment-verification service across Faster Payments and CHAPS.

Although announced last week, the decision is particularly relevant now because the original expiry date is just days away.

Source: PSR — Policy statement PS26/2. PSR

5. Brite Pass tackles the repeat-purchase problem for Pay by Bank

Brite Payments has launched Brite Pass, designed to make repeat Pay by Bank purchases quicker and easier.

After a customer completes an initial payment and opts in, the service can recognise them when they return to participating merchants.

Their preferred bank account is automatically preselected, reducing the steps required to complete another payment.

Brite claims the service can reduce checkout completion time by 50% and recognise more than 90% of returning sessions.

These are company-reported figures rather than independently verified outcomes.

The company also plans to introduce one-touch payments using biometrics or passkeys. That functionality is not yet part of the launch.

Why it matters: Pay by Bank’s competition with cards will increasingly depend on the customer experience, particularly for repeat transactions.

This is a European announcement; UK-specific availability of Brite Pass has not been established.

Source: Brite Payments — Official announcement.

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