Almost 9 in 10 British adults have at least one direct debit commitment, and direct debits are one of the easiest ways to simplify payments for both you and your customers. With direct debits, you can automatically collect recurring payments from your customer’s bank account on a set schedule without the hassle of manual follow-ups or late payments. If you’re managing memberships, subscriptions, or regular invoices, direct debits give your business a dependable, predictable influx of cash, saving you time you’d otherwise spend tracking down and processing individual payments.

Below, we’ll explain how to set up direct debits for your customers, from activating direct debits in your account to automating notifications and handling payment failures.

What’s in this article?

• What are the steps to set up direct debits in the UK?
  
• What are the requirements for direct debits?
  
• What information do you need from customers?
  
• How can you automate direct debit setup and payments?
  

What are the steps to set up direct debits in the UK?

Whether you’re using a provider like Stripe or managing the process yourself, setting up direct debits in the UK is a relatively simple process. Here are the steps for setting up direct debits.

Choose how you’ll handle direct debits

First, decide whether you’ll handle direct debits in-house or use a third-party provider. Using a provider is the easiest route for most businesses. Providers handle the heavy lifting, such as compliance, processing payments, and submitting requests to the Bacs clearing system. Stripe lets you add direct debits alongside other payment methods, which you can easily integrate into your website or app. But larger companies might consider becoming a Bacs-approved organization to handle the process directly. This requires applying through your bank, investing in software, and staying on top of compliance yourself.

Get a Service User Number (SUN)

A Service User Number (SUN) identifies your business within the direct debit system. If you’re working with a provider such as Stripe, your direct debit submissions will use their SUN, so you can skip this step. If you’re not going to use a provider, you’ll need to apply for a SUN through your bank. Be prepared to show that your business is financially stable and has solid processes in place for managing payments.

Set up your mandate process

The mandate, also known as a Direct Debit Instruction (DDI), is the agreement your customer signs to allow you to take payments from their account. Platforms such as Stripe make this step easy by providing digital forms that comply with the necessary rules. Customers fill these out online, and the mandate is stored securely in their system. If you’re managing the process yourself, you’ll need to create a compliant mandate form that’s either digital or paper-based (keep in mind that online mandates are faster, easier to track, and more convenient for customers). The mandate must include a statement explaining customers’ rights under the Direct Debit Guarantee.

Collect customer information

Once you have your mandate ready, start gathering your customers’ details. This includes:

• Name and contact information

• Bank account number and sort code

• Confirmation of the payment schedule and amount (or that it might vary)

Notify customers before payments start

Businesses must notify customers before taking their first payment. This is called an advance notice and should include:

• The amount and date of the first payment

• Any details about future payments

• A point of contact for questions

Stripe and other platforms often handle this automatically, but if you’re managing things manually, it’s your responsibility to send this notice before the first payment.

Start collecting payments

Once mandates are set up and customers have been notified, you’re ready to begin accepting payments. If you’re using Stripe, you’ll manage payments through the Dashboard. For those managing direct debits themselves, you’ll submit payment requests to Bacs (usually three days before the collection date).

Monitor payments and handle issues

Not every payment will be successful. Customers might have insufficient funds, or they could cancel their mandate through their bank. Set up processes to retry failed payments (Stripe does this automatically), and notify customers about any payment issues. Stripe’s reporting tools make it easy to see what’s happening with your transactions, so you can resolve problems quickly.

Stay compliant

Whether you’re using a provider or managing direct debits directly, you’re responsible for following the rules of the Direct Debit Guarantee. This means:

• Sending notifications for any changes to payment amounts or schedules

• Responding quickly to refund requests

• Allowing customers to cancel a direct debit at any time

Stripe and other providers simplify compliance by handling much of this for you, but you need to stay informed and ensure your business meets its responsibilities.

Review and improve

Once your direct debit system is live, evaluate how it’s working. Are customers finding it easy to set up payments? Are failed payments being resolved quickly? Platforms such as Stripe have analytics tools that can give you insights into your payment performance and help you refine the process as you grow.

What are the requirements for direct debits?

Setting up and managing direct debits in the UK comes with rules that protect you and your customers. Here’s what you should know.

Direct Debit Guarantee

This is the safety net for your customers. It gives them the right to:

• Get a full refund if a payment is taken in error

• Be notified ahead of time about any changes to the amount, payment date, or frequency

• Cancel their direct debit anytime through their bank or by contacting you

Businesses are required to honor this guarantee. You also need to include it wherever you’re asking customers to sign up, such as on the mandate form. Its purpose is to reassure your customers that their money is safe, even if mistakes happen.

Direct debit mandate

The mandate is the customer’s written permission for you to collect money from their account. It needs to:

• Show your business name, so they know who’s taking the payment

• Include a reference to the Direct Debit Guarantee

• Be signed by the customer, either digitally or on paper

Without a valid mandate, you have no legal basis to take payments. If you’re using a provider such as Stripe, they will handle most of this for you.

Advance notice

You must give your customers notice before you take the first payment or enact any changes, such as increasing the amount or changing the date of payment. This notice needs to be clear and include:

• Your business name

• How much you’re taking

• When the payment will come out

Service User Number (SUN)

To collect direct debits, your business needs a unique identifier called a SUN. If you’re working with a provider such as Stripe, you will use the provider’s SUN, so you don’t have to worry about this step. But if you’re managing the process yourself, you’ll need to apply for a SUN through your bank. To obtain a SUN, you’ll need to prove that your business is financially stable and has the right processes in place to handle payments responsibly.

Security and compliance

Direct debits are processed through Bacs, the UK’s direct debit clearing system. If you’re handling direct debits yourself, you’ll need to:

• Submit payment requests correctly and on time

• Keep customer bank details secure

• Follow strict rules about how data is stored and used

If you’re using a provider, they’ll take care of the technical side, but you’re still responsible for making sure customer data is handled safely. This means encrypting data, limiting access to sensitive information, and complying with GDPR rules.

What information do you need from customers?

To set up a direct debit, you need certain information from your customers to ensure that payments are collected correctly and in line with Bacs requirements. Here’s what you’ll need for the direct debit mandate:

• The full name of the account holder as it appears on their bank account

• Contact information, such as an email address or phone number

• Their bank account number and sort code

You’ll include this customer information in the direct debit mandate. Customers will need to confirm by signing the mandate, either electronically or physically.

If you’re managing multiple customers, assigning a unique reference number to each direct debit can help keep things organized.

How can you automate direct debit setup and payments?

You can use Stripe to set up and automate direct debit payments. This saves time, minimizes errors, and creates a better experience for your customers. Here’s how to get started.

Turn on direct debit

To begin, enable direct debits in your Stripe account. Stripe supports different systems depending on your region, including Bacs Direct Debit in the UK. Log in to your Stripe Dashboard, go to the Payments settings, and enable Bacs Direct Debit. Once activated, Stripe takes care of the technical setup and ensures compliance with Bacs requirements.

Collect mandates

Direct debits require a mandate—your customer’s approval to debit their account. With Stripe, you can use Stripe Checkout or an embedded payment form to collect bank details (e.g., account number, sort code). Stripe automatically generates and stores a Bacs-compliant digital mandate.

Automate recurring payments

To automate a recurring payment, create a subscription in the Stripe Dashboard for your recurring service (e.g., monthly memberships). Link the customer to the subscription and define the payment details, such as amount, frequency, and start date. You can also configure variable billing amounts if needed. Once this is set, Stripe will automatically process payments according to the schedule.

Notify customers

Keeping customers informed is both a requirement for direct debits and a best practice. Stripe can help by automatically sending payment confirmation emails and reminders and notifying customers about changes to payment amounts or schedules. You can use Stripe’s email templates for these messages or integrate with platforms such as Mailchimp for more customization.

Handle payment failures

Sometimes payments fail—for example, if a customer’s account is low on funds. If a payment fails, Stripe will attempt to process the failed payment again based on a set schedule and notify the customer and your team about the failed payment. You can also use Stripe’s API to set up specific actions, such as pausing services until payment issues are resolved.

Connect Stripe to your other software

To get the most out of your automated payments, integrate Stripe with accounting software such as QuickBooks or Xero for automated reconciliation, use customer relationship management (CRM) systems such as HubSpot or Salesforce to track subscriptions and payments, or build custom workflows with Zapier, such as tagging customers in your CRM when a payment is successful.