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Direct schemes · Closing a scheme

What happens to a DPNI when the employee leaves

9 October 2026 · For overseas employers and their UK staff

Most of the planning around a DPNI goes into opening it. Very little goes into closing it. Then the employee hands in their notice, the last salary is paid, and the scheme is left sitting there. HMRC still think it's open, and a scheme they think is open is a scheme they expect to hear from.

Here is what a clean ending looks like, and what happens when there isn't one.

First, check it really is a DPNI

HMRC's DPNI guidance lists employees of a foreign employer with no UK address from which pay is sent. A DPNI carries the employee's National Insurance, not the employer's. Everything below is about a DPNI, where the employer owes no UK National Insurance.

An employer based in the EU, Gibraltar, the Isle of Man, Switzerland, Norway, Iceland or Liechtenstein can owe it too, where the employee works in the UK and UK National Insurance is due. If your company does owe it, this page doesn't describe your position, and the scheme itself may be a different one.

Whose job it is

A DPNI is set up by the employee, who pays both income tax and employee National Insurance to HMRC under one PAYE reference.

The ending follows the same logic. HMRC's manual has the return filed by the taxpayer, up to cessation if the payments have stopped. So the final submission belongs to the employee, or to whoever runs the scheme for them. The scheme reports through Real Time Information, and the regulations treat the employee as if they were the employer for that purpose.

The overseas employer's part is smaller but it matters. On a DPNI the employer pays the gross salary and doesn't withhold UK tax or National Insurance, and the last payslip works the same way. What the employer owes the process is information: the last working day and every final figure, as early as possible.

Close it with the last pay run

The tidiest way to end a scheme is in the same submission as the final pay. HMRC's guidance on closing a payroll scheme asks for a final Full Payment Submission or Employer Payment Summary, with the box ticked to say it's the final submission because the scheme has ceased, and the date it ceased. That date can't be in the future. The employee's leaving date goes on their record too.

Once a cessation date arrives on a submission, HMRC's systems use it to find schemes that can be closed and close them automatically where they can.

One of the things that stops it is a payment for a pay period after the date you gave. So settle anything still owed after the last day before choosing the date. If the scheme can't be closed automatically, it goes on a list for HMRC staff to deal with by hand instead.

The same GOV.UK page also lists expenses and benefits returns, and a P45 for each employee on their last day. It's written for employers, so check with whoever runs the scheme how those apply to a DPNI.

The last payment to HMRC

Closing the scheme doesn't close the bill. Tax and National Insurance on a DPNI are paid to HMRC every quarter, within 14 days after the tax quarter ends.

The quarter the employee leaves in is no exception. On a DPNI the employee is the one who pays HMRC, so the final quarter is theirs to settle. We've written more about who HMRC pursue on a DPNI.

HMRC's manual lists what its staff record when a direct payment scheme closes: the taxpayer's name, the Accounts Office reference, the scheme's PAYE reference and the date of cessation. Have both references to hand before you start.

If nobody closes it

This is the expensive version. A DPNI holder files as if they were an employer, and HMRC's published guidance on payroll reports that don't arrive is written for employers. It says they can charge a penalty when the expected number of submissions doesn't come in, £100 a month where there are one to nine employees. It also says they can raise a charge based on an estimate of what they think is owed.

The estimate is the part people underestimate. Sending a later submission with updated year to date figures doesn't remove it. Only the missing submissions do.

Next to that, a final submission with the right date on it is a short job.

When the job carries on but the scheme doesn't

Occasionally a scheme ends while the employment continues, because the employee no longer wants to run it or hasn't run it properly. HMRC's manual covers that too. Its draft letters say the direct payment arrangements have been ended and a Self Assessment return will follow after 5 April. Where the person is responsible for their own National Insurance, the letter adds that they still have to work it out and pay it every quarter.

That is a messier position than the one they started in. Our page on Self Assessment and direct payment schemes explains the return side.

An illustration

A furniture maker abroad, with no UK address and no UK employer's National Insurance to pay, employs a showroom manager in Norwich, and her tax runs through a DPNI. She resigns. The employer tells her payroll provider her last day and confirms her final salary, including a small commission still due, before the last payday.

The final submission goes in with that payday. It's marked as the last one, carries her leaving date, and has a cessation date that leaves no payment after it. Her tax and National Insurance for that quarter are paid within 14 days after the quarter ends.

None of that is difficult. It only becomes difficult when it's left until HMRC write.

Hiring a replacement?

A DPNI is set up by the employee, so a new hire in the same role would need a scheme of their own. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

Tell us where the company is registered, whether it has a UK branch or any other place of business here, where the new hire will live and roughly what you plan to pay, and we'll send a fixed quote within one UK business day.

Get a fixed quote

Common questions

Who closes a DPNI when the employee leaves?

The employee, or whoever runs the scheme for them. HMRC's manual has the return filed by the taxpayer, up to cessation if the payments have stopped. The employer's part is to give the last working day and the final pay figures in good time.

Does closing the scheme cancel the last tax payment?

No. Tax and National Insurance on a DPNI are paid to HMRC every quarter, within 14 days after the tax quarter ends, and that includes the quarter the employee leaves in.

What if the scheme is simply left open?

HMRC's guidance for missing payroll reports allows a penalty, £100 a month where there are one to nine employees, and a charge based on an estimate of what is owed. Only sending the missing submissions replaces those estimates.

What if the employee comes back?

HMRC's manual says a ceased record can only be restarted in the tax year it was ceased or the year after.

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General information, not tax or legal advice. It reflects HMRC guidance as published in October 2026, which can change. Please check your own position before acting.