BACS Direct Credit Explained: How Businesses Pay Salaries and Suppliers

What Bacs Direct Credit Is (and Is Not)

Bacs Direct Credit is a push payment: your business initiates a transfer from your account and credits funds to one or many recipients. This makes it fundamentally different from a Direct Debit, which is a pull instruction allowing a third party to collect money from your account. Bacs Direct Credit puts you in control of when and how much goes out.

Common use cases span the length of a business: monthly payroll, weekly wages, supplier invoice settlement, expense reimbursements, pension contributions, insurance payouts and government benefit disbursements. The 80% of the UK workforce paid via Bacs Direct Credit figure, widely cited across industry sources including GoCardless and Pay.UK, reflects just how dominant the scheme is for payroll.

What Bacs is not is instant. It operates in batches on working days only. If speed is the priority and the amount is under £1 million, Faster Payments is usually the better choice. If the amount is very large and same-day settlement is required, CHAPS applies.

The Three-Day Processing Cycle

Bacs Direct Credit runs on a fixed three working-day cycle, governed by Pay.UK scheme rules. Each stage has a name and a function. Payment files can be submitted up to 30 days in advance of the intended payment date, which is exactly how payroll teams schedule month-end salary runs well ahead of a bank holiday.

The Bacs processing window runs Monday to Friday, excluding UK bank holidays. A file submitted on a Friday will not begin processing until the following Monday, which means payday planning must account for weekends and public holidays. Miss the working-day cut-off and your T+3 clock resets to the next working day.

Bacs Direct Credit vs Faster Payments vs CHAPS

UK businesses have three main interbank payment rails, each suited to different situations. Understanding the trade-offs helps finance teams route each payment correctly and avoid unnecessary costs.

CHAPS is operated by the Bank of England and is used for high-value, time-critical payments. The Bank of England charges direct participants 42.7 pence per CHAPS payment in 2025, but consumer-facing bank charges are typically £15 to £35 per transaction, making it expensive for routine use. In 2024, CHAPS processed 52.7 million transactions worth £87.5 trillion, representing 88% of total UK payment value despite just 0.1% of volume.

Faster Payments offers near-instant settlement, 24 hours a day, 7 days a week, including bank holidays. The scheme-level maximum is £1 million per transaction, though individual banks set their own limits. For time-sensitive payments below that threshold, Faster Payments is often the clearest choice. However, for bulk payroll involving hundreds or thousands of recipients, Bacs remains cheaper and operationally simpler because a single file submission covers the entire payroll run.

How a Business Gets Access to Bacs Direct Credit

There are three practical routes to making Bacs Direct Credit payments. The right one depends on your payment volumes, internal capability and willingness to manage the technical setup.

For most small and medium-sized businesses, the simplest route is through your business banking portal or payroll software. If you use Xero, Sage, QuickBooks or BrightPay, these platforms can generate Bacs-compatible payment files that your bank submits on your behalf. This requires no SUN and no separate approval process.

If you want to submit files directly to Bacs, or use a specialist payments provider, you will need a Service User Number.

Service User Numbers and Approved Bureaux

A Service User Number (SUN) is a unique six-digit number that identifies your organisation within the Bacs system. It appears on payment records and allows Bacs and recipient banks to trace every transaction back to the originating business. Without one, your business cannot submit payment files directly to Bacs.

SUNs are issued by sponsoring banks, not by Pay.UK or Bacs directly. You apply through your bank, which conducts due diligence covering your business integrity, financial standing, management expertise and administrative processes. The timeline is typically two to ten weeks. Banks generally expect applicants to be well-established, with solid financial reserves and the systems to handle submission errors and dispute resolution.

If direct SUN ownership is not yet practical for your business, two alternatives exist. First, a Bacs Approved Bureau: an accredited third party that holds its own SUN and submits payments on your behalf. Pay.UK maintains a public directory of approved bureaux. According to Pay.UK, more than half of all Bacs Direct Debit and Direct Credit submissions are made through approved bureaux rather than by direct submitters, reflecting how common this route is for businesses that want Bacs access without the full technical overhead. Second, a regulated payments provider or EMI: a fintech or payment institution that uses its own infrastructure and SUN to send payments for your business, charging a per-transaction or monthly fee.

File Formats, Costs and Practical Limitations

Bacs Direct Credit payments are transmitted as structured data files. The primary format is Standard 18, a fixed-width file specification that has been the backbone of Bacs since the scheme's early years. Each record in a Standard 18 file is 106 characters and must include the sort code, account number, account name, amount (expressed in pence), user reference and transaction code. For Direct Credit payments, the transaction code is 99. Bacs also supports ISO 20022 XML as a more modern alternative, and the scheme publishes a translation guide for organisations migrating from Standard 18.

Costs for Bacs Direct Credit are low relative to CHAPS. Sending payments through your online business banking portal is typically free or carries a nominal charge of a few pence. Using a bureau or payments platform usually costs between 20p and 40p per transaction, plus any monthly service fees. For a payroll run of 500 employees, that represents a total cost of £1 to £2 at most, making Bacs the most cost-effective option for bulk payments by a significant margin.

The key limitations to plan around are the three-day cycle, Monday-to-Friday operation only, and the inability to recall a payment once the processing window closes. Bacs also does not operate on UK bank holidays, which payroll teams must factor into every monthly calendar. Payments cannot be submitted to non-UK bank accounts: Bacs is a domestic UK scheme only, so international supplier payments require a different route such as SWIFT or a cross-border payments provider.

Conclusion

Bacs Direct Credit is mature, reliable and cost-effective for any UK business that needs to pay multiple recipients on a predictable schedule. Payroll is the dominant use case, but the scheme serves equally well for supplier payment runs, pension contributions, expense reimbursements and refunds. The three-day cycle is the main operational constraint, but it is entirely manageable with a clear payroll calendar and a submission reminder built into your finance processes.

For most businesses, the simplest starting point is your existing payroll software or business bank, which handles Bacs submissions without you needing a SUN. If your volumes grow, or if you want tighter control over timing and file management, applying for a SUN through your bank or partnering with a Bacs Approved Bureau gives you more capability. Reserve Faster Payments for urgent one-off transfers and CHAPS for high-value same-day settlement: each rail has a clear role, and using them correctly keeps costs low and payments reliable.

Frequently asked questions