The most common bank transfer way in the UK is bacs payment. But what is bacs payment? what are the types of bacs payment? Here is a discussion based on the most frequently asked questions about bacs payment. When salary hits your account or a bill is automatically taken, there is a strong chance those funds moved via the Bacs system.
This guide will cover everything you need to know about Bacs payment, such as:
- What is a Bacs Payment
- How to Set Up a Bacs Payment
- How to make a Bacs Payment
- And Much More…
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What is a Bacs payment?
Bacs is the abbreviation of Bankers Automated Clearing Services. Bacs payment scheme limited is what keeps the process channelised. This organisation consists of the sixteen leading banks in the UK. According to the record, in 2020, 2 billion payments were made by using direct credit payments and 4.5 billion by the use of direct debit.
A Bacs payment is a secure, electronic bank-to-bank transfer used in the UK for high volume and non urgent transactions. It is used for things like paying salaries, settling invoices, and collecting bills.
What Does Bacs Stand For?
Bacs stands for the Bankers Automated Clearing Services. It’s been around since 1968, long before you could even imagine paying for things with your phone. The system is managed by Pay UK
Two Main Types of Bacs Payment
The two types of Bacs payments are Direct Debit and Direct Credit. The key difference is whether money is being “pulled” out of an account or “pushed” into one.
1. Direct Credit: Money Going In (The Push)
This is the most common way money is paid into your account in the UK.
- What is it used for? Salary and wages, pensions, state benefits and tax credits, insurance payouts, dividends & supplier payments.
- How does it work? The organisation making the payment (like your employer) sends a file to Bacs, instructing the money to be ‘pushed’ from their account into yours. They are in charge of initiating the transfer.
2. Direct Debit: Money Coming Out (The Pull)
This is how companies collect money out of your account, with your prior permission.
- What is it used for? Regular bills like electricity, gas, water, phone contracts, internet, gym memberships, subscriptions, and even regular charitable donations.
- How does it work? You first sign a mandate (a form or online agreement) giving a company permission to collect payments. The company then sends a file to Bacs instructing the money to be ‘pulled’ from your account. The company receiving the money is in charge of initiating the collection.
Direct Debit is backed by the incredibly valuable Direct Debit Guarantee. This protects you by ensuring that if an error is made, you’re entitled to an immediate refund from your bank. You can also cancel a Direct Debit at any time.
How Bacs Payments Work?
This is perhaps the most important thing to know about Bacs. Bacs payments are not instant. They operate on a three-day cycle.
| Day | What Happens | Description |
| Day 1 | Submission | The business (or ‘Service User’) submits the payment file to the Bacs system, usually before a cut-off time (often between 3:00 PM and 5:00 PM, depending on the bank or bureau). |
| Day 2 | Processing | Bacs and the relevant banks process the file. This is when the banks get ready for the transfer. |
| Day 3 | Settlement | The payment is cleared. The sender’s account is debited, and the recipient’s account is credited. Funds are usually available by 7:00 AM on this day. |
How To Set Up a Bacs Payment (To Send Money)?
If you’re a business, here’s how you set up a Bacs payment:
- Start with your bank. First you need to contact your business bank and apply to use their Bacs service. They’ll need to approve your business. And they’ll provide a Service User Number (SUN), which is a unique ID for your company. This can take a while and may involve some fees.
- Pick your access route. You have two main options for getting your payment instructions to the Bacs system:
- Go direct: For big companies with high payment volumes, you can invest in your own Bacs-approved software. This gives you full control. But it also comes with more setup and admin work.
- Use a bureau: For smaller companies or those that prefer an easier route, a Bacs-approved bureau can handle the submissions on your behalf. They manage the technical stuff for you. But you’ll have to pay a fee.
- Gather your payment info. For each person you’re paying, you’ll need their full name, account number, and sort code.
- Create and submit the file. Once you have all the details, your software or bureau will create a single payment file. You then submit this to Bacs, making sure it’s before the cut-off time (which is usually a couple of working days before the money is due to land).
- Let the three-day cycle happen. The payment will be processed on day two and arrive in the recipient’s account on day three. Typically in the morning.
How To Set Up A Bacs Payment (To Receive Money)
This process is known as Direct Debit and is usually set up by the company you’re paying. As a customer, your job is simply to give them permission to take the money.
For a customer to pay a company
- Fill out a mandate. The company will give you a Direct Debit mandate to fill in. This is basically your permission slip. And it can be a paper form, an online form or something you do over the phone.
- Supply your details. On the mandate, you’ll need to provide your full name, address, bank name, account number, and sort code.
- Agree on the dates. You and the company will agree on the payment schedule.
- Wait for the first payment notice. The company should then send you a heads-up before taking the first payment, letting you know the date and amount. After that, payments will be taken automatically.
For a business to collect money from customers
- Get a Service User Number (SUN). Just like when sending payments, you need a SUN from your bank to collect Direct Debits. Your bank will check your financial stability and internal processes first.
- Get a Bacs solution. Decide if you’ll go direct with your own Bacs software or use a bureau.
- Get a Direct Debit mandate. You need to give your customer a mandate to complete. The format must be approved by Bacs.
- Process the mandate. Once the customer has signed the mandate, you submit it to the Bacs system. This officially sets up the Direct Debit instruction with their bank.
- Send an advance notice. Before you take any money, you must send an advance notice to the customer, telling them how much you’re taking and when. This is a crucial rule of the Direct Debit scheme.
- Submit the payment file. You then submit the payment file to Bacs. The funds will be collected on the agreed upon date.
Benefits of Bacs Payments
Bacs payments come with a bunch of advantages, especially for businesses:
- Cost-effective: Cheaper than CHAPS or card payments for bulk transactions.
- Reliable: It’s been around for decades and rarely fails.
- Automated: Great for recurring payments like payroll or subscriptions.
- Secure: Comes with built in protections like the Direct Debit Guarantee.
- Widely accepted: Almost every UK bank supports it.
It’s not the fastest. But for regular payments, it’s definitely hard to beat.
Drawbacks of Bacs Payments
- Not instant: Takes three working days to clear.
- UK only: Can’t be used for overseas transfers.
- No weekend processing: Payments submitted before Friday arrive the following week.
Despite a few drawbacks, Bacs remains the most practical choice for businesses that value reliability and low cost over instant speed.
Which Banks Use Bacs?
Almost every major UK bank and building society uses and supports the Bacs payment system.
Well known banks that use Bacs include:
- Barclays
- HSBC
- NatWest
- Lloyds Bank
- Santander
- Bank of Scotland
- Nationwide Building Society
- The Co-operative Bank
- Virgin Money
- Starling Bank
- Monzo Bank
How Can Accountants Secure Bacs Payments and Avoid Mistakes?
If you’re an accountant handling Bacs payments, keeping things secure is a must. Because you’re dealing with vast sums of money and sensitive data.
Here’s how to do it right:
- Strong System Access Controls: This is essential. Only designated, senior personnel should have the ability to authorise and submit Bacs files. This usually involves multi-factor authentication (MFA) and strictly defined user roles within the Bacs software or bureau portal.
- The Four-Eyes Principle: Never allow one person to process and approve a Bacs run on their own. The “maker-checker” rule means one team member creates the payment file, and a separate, authorised manager rigorously checks and approves it before submission.
- Use a Bacs Approved Bureau: For many accounting firms, using a Bacs Approved Bureau or a specialist payroll provider is the most secure route. These providers handle the direct, highly technical connection to the Bacs system, managing the security and compliance burden on your behalf.
- Verify Bank Details: Incorrect sort codes or account numbers are a common and costly error. Always cross-reference new supplier or employee bank details against official records.
- Secure Payment File Transmission: Bacs relies on the secure, encrypted BACSTEL-IP connection or highly secure modern software. Ensure any data uploaded or downloaded is done via these secure, audited channels, never via unencrypted email.
Can Bacs Payments Go In Any Time Of Day?
Not exactly. Bacs payments don’t go in at random times throughout the day. They’re processed on a fixed schedule. Most Bacs payments land in the recipient’s account early in the morning on the third working day after submission, often between 1 am and 7 am.
So if your employer says they’ve paid you by Bacs on Monday, the money should land in your account first thing on Wednesday morning.
Remember, weekends and bank holidays don’t count as working days. So those can delay when the payment actually arrives.
How To Make a Bacs Payment?
There are two main ways to make a Bacs payment, depending on whether you’re an individual or a business.
1. For individuals
You can’t log into online banking and pick “Bacs” directly. Your bank automatically decides the payment route. Most personal bank transfers now go through Faster Payments. If you’re receiving a Bacs payment (for example, wages or a refund), you don’t need to do anything. Just share your sort code and account number with the payer.
2. For businesses
If you need to send multiple payments (like payroll or supplier runs), here’s the usual process:
- Check access: Make sure your business banking account or payroll software supports Bacs submissions.
- Collect details: You’ll need each recipient’s account name, sort code, and account number.
- Create the payment file: Your accounting or payroll system will generate a Bacs file.
- Submit the file: Either upload it to your bank’s Bacs portal or send it through an approved Bacs bureau.
- Authorise and schedule: Approve the payment before your bank’s submission cut-off (usually by early afternoon two working days before payday).
- Funds arrive: Recipients see the money on the morning of the third working day.
It’s always worth testing with a small payment first to make sure everything lines up correctly.
How Much Does A Bacs Transfer Cost?
For most individuals receiving money, such as salaries, refunds or pensions, Bacs payments are free. You don’t pay anything to receive them into your account.
For businesses sending payments, costs vary by bank or payroll provider. Typically:
- A small processing fee per transaction (often between 5p and 50p).
- A monthly service fee if you use the bank’s Bacs system directly.
- Some providers charge extra for bureau or managed services.
Even with those fees, Bacs is still one of the cheapest ways to make bulk payments in the UK. For large companies running payroll or paying suppliers, it’s far more cost-effective than CHAPS or card payments.
Always check your bank’s pricing guide or your accounting software’s payment add-on for exact costs.
Is Bacs the Same as a Bank Transfer?
No, Bacs is a type of bank transfer. Bank transfer is a generic term for moving money from one account to another. In the UK, there are three primary systems for electronic bank transfers, of which Bacs is just one.
How Does Bacs Compare To Other UK Payment Methods?
| Payment System | Purpose & Speed | When It’s Used |
| Bacs (Bankers’ Automated Clearing Services) | For high-volume, scheduled payments. 3 working days to clear. | Salaries, pensions, Direct Debits, regular government payments. |
| Faster Payments Service (FPS) | For immediate or one-off transfers. Clears in seconds (up to 2 hours). | Standard retail online banking payments, paying a friend, quick supplier invoice payment. |
| CHAPS (Clearing House Automated Payment System) | For high-value, guaranteed same-day transfers. Same working day (if submitted by the cut-off time). | Property purchases, large business settlements, very large tax payments. |
When Should You Choose A Bacs Payment?
Here are some suggestions when Bacs is a good fit:
- When you are making regular scheduled payments (e.g. monthly payroll) and you can plan ahead.
- When cost is a priority and you are paying many payments in one batch.
- When urgency is not the main factor and three-working-day lead time is acceptable.
- When collecting recurring payments via Direct Debit from many customers.
And when you might choose something else:
- If you need the payment to arrive immediately or on the same day. Then prefer Faster Payments or CHAPS depending on value.
- If you are making a one-off high-value payment that must settle today, CHAPS may be better.
- If you are transferring internationally (outside the UK), Bacs won’t be appropriate.
How Long Does A Bacs Payment Take?
As stated above, Bacs payments are not instant. They usually take three working days to clear. Here’s what generally happens:
Day 1: The payment file is submitted by the payer (or their bank) into the Bacs system.
Day 2: Processing takes place within the system.
Day 3: The funds arrive in the recipient’s account (provided everything is in order).
This is why you might see a delay between your employer saying they’ve paid you and the money actually showing up.
The Bacs cycle only operates on business days (Monday to Friday). If Day 1 falls on a Friday, Day 3 will be the following Tuesday, as the weekend and bank holidays don’t count as processing days.
How Safe Is Making Payments Using Bacs?
Bacs payments are very safe. The system has been around for decades and is tightly regulated. Every transaction goes through secure channels, and businesses using Bacs must follow strict protocols. Plus, Direct Debits come with a guarantee.
If money is taken in error, you’re entitled to a full refund. As long as you’re using Bacs-approved software and double-checking payment details, it’s a secure way to move money.
For extra safety:
- Never share your online banking details with anyone.
- Always confirm bank details directly with the person or company before sending money.
- Keep your banking software and antivirus protection up to date.
Overall, Bacs is extremely secure. Fraud or payment errors are very rare when everything is set up properly.
Can I make a Bacs Payment with my Credit Card?
No, you can’t. Bacs payments only work between UK bank accounts. Credit cards aren’t part of the Bacs system. If you want to pay someone using a credit card, you’ll need to use the card payment system, like paying online or over the phone. You can’t just use your credit card to fund a Bacs transfer directly.
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The Bottom Line
Understanding what a Bacs payment is gives you confidence when you see it on your bank statement or when your business is setting up payments. It offers a reliable, cost-efficient way to move money in the UK between banks on a scheduled basis.
For many regular payments it is ideal. But it does require some lead-time and isn’t design for instant needs.
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Disclaimer: This article intends to provide general information based on What Is A Bacs Payment? A Complete Guide To Bacs Payments.