DPNI vs DCNI: which direct scheme applies, and how it is settled

If you've started researching how an overseas company pays a UK employee, you'll have run into two acronyms that look almost identical: DPNI and DCNI. They're both HMRC "direct payment" schemes, both used when there's no UK entity to operate normal payroll, but they cover different things and they are not alternatives you pick between. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts. There is also the NI-only scheme, for employers who owe UK employer's National Insurance, and a tax-only scheme, DPGEN, that can sit beside it. Here's how they differ.

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The one-line difference

The distinction is simply which deductions the scheme covers:

• DPNI, Direct Payment, National Insurance and Income Tax. The scheme accounts for both PAYE Income Tax and the employee's National Insurance.
• DCNI, Direct Collection, National Insurance only. The scheme collects the employee's own National Insurance, quarterly, and Income Tax goes through Self Assessment. HMRC use it only in specific cases.

Both are documented in HMRC's PAYE Manual, DPNI at PAYE20100 and DCNI at PAYE20090, so you can check the source directly on GOV.UK.

Are you the UK employee? If you're the one being paid by an overseas company and trying to work out what you owe, our guide to working in the UK for an overseas employer explains it from your side.

When DPNI is the right scheme

A DPNI scheme is HMRC's usual scheme for the classic case. HMRC's manual lists employees of "a foreign employer who has no address in the United Kingdom from which earnings are paid" under DPNI (PAYE20100). The classic case is an overseas company with no UK presence, and no UK employer's National Insurance to pay, directly employing someone who lives and works in the UK and is liable to UK Income Tax. Because the employee owes UK tax and there's no UK entity to run normal PAYE, the DPNI scheme is set up so that both Income Tax and National Insurance are calculated and deducted each pay period, and paid over to HMRC quarterly. This is HMRC's usual scheme for an overseas employer with no UK address.

When HMRC use DCNI

A DCNI scheme collects the employee's own National Insurance only, quarterly, with any Income Tax paid through Self Assessment. HMRC's manual (PAYE20090) lists the people it is for, and they are specific: employees "who have no employer for PAYE purposes and cannot be dealt with under the Direct Payment (DP) arrangements", employees who normally work in more than one EEA country and have to pay UK National Insurance on their foreign earnings but have no employer in the UK, former direct payment cases where the tax arrangement has had to be cancelled, groups such as certain dock and market workers, reserve forces members and some pensioners, and employers running National Insurance on a modified basis under specific HMRC arrangements.

So DCNI is not a route you choose because you would rather pay tax through Self Assessment. Wanting that does not make it available. For an employee of an overseas employer with no UK address, HMRC's usual scheme is DPNI. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

Side by side

What both schemes have in common

Whichever applies, the mechanics rhyme:

• Neither can be set up through the standard online employer registration. GOV.UK says to register by phone or post, and HMRC open these manually, so the application has to be prepared correctly to avoid weeks of back-and-forth.
• Both are in HMRC's Real Time Information system, normally reported with a Full Payment Submission on or before each payday, though HMRC's manual says direct payment schemes can elect to submit quarterly paper returns instead. Payment to HMRC is quarterly on both, whatever the amounts. See our guide to RTI, FPS and EPS.
• National Insurance still has to be accounted for. A DCNI collects the employee's own (primary) National Insurance through the scheme, with Income Tax dealt with separately, usually through Self Assessment. It does not mean contributions are skipped. If the employer's (secondary) National Insurance is also due, a DCNI is not the right scheme: HMRC's manual says the employer then sets up "an NI only scheme rather than a DCNI scheme". That is a separate scheme in its own right, PAYE20120, and unlike a DPNI it is set up by the employer and stands in the employer's name.
• Auto-enrolment pension duties can still apply to the UK worker under either scheme. See auto-enrolment for overseas employers.

How is it settled?

It turns on the facts. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts. The facts that matter most are these. First, is UK National Insurance due at all? Someone who normally works abroad and is sent here for a time by an employer based in a country with no social security agreement with the UK is usually exempt from UK NI for their first 52 weeks, and a certificate of coverage can take an employee out of UK NI. Then only tax is collected, through a tax-only DPGEN scheme. Second, is the employer's (secondary) National Insurance due? If it is, typically for an employer in the EU, the EEA or Switzerland, the scheme is an NI-only scheme (PAYE20120), opened by the employer and held in the employer's name, with the employee's tax paid through Self Assessment or a DPGEN. An employer with a UK residence, presence or place of business also owes employer's NI, and runs a normal PAYE scheme. Third, does the employee work for a UK business, such as a UK client that directs the work? That business can be treated as the employer for NI and required to operate PAYE for tax. Fourth, if none of that applies, does the employer have a UK address from which earnings are paid? If it does not, HMRC's usual scheme is DPNI, which covers Income Tax and the employee's own National Insurance. DCNI is used for the short list of cases HMRC's manual sets out, which includes employees who have no employer for PAYE purposes and cannot be dealt with under the direct payment arrangements, and former direct payment cases where those arrangements had to be cancelled. Because the answer turns on the employer's position and the individual's circumstances, it is settled with HMRC when the scheme is set up, not assumed in advance.

Frequently asked questions

Is DCNI cheaper to run than DPNI?
It is not a choice. The scheme type follows the facts, so cost does not come into it. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

Can a scheme change from one to the other?
Yes. HMRC's manual has a process for changing a direct payment scheme to a DCNI, for example where the direct payment arrangement for tax has had to be cancelled: HMRC amend the scheme type and write to confirm the change and the reason. The correct scheme follows the facts, so if circumstances change, raise it with HMRC rather than quietly switching.

Can I ask for a DCNI?
You can explain your circumstances, and we put them to HMRC. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

Related guides

• What a DPNI scheme is, the plain-English explainer for overseas employers.
• What an NI-only scheme is, for employers who owe UK employer's National Insurance.
• Hiring in the UK from overseas, PAYE vs DPNI vs EOR compared.
• How much an Employer of Record costs in the UK, the pricier alternative to a DPNI scheme.
• What a UK employee really costs, the on-costs on top of salary for 2026/27.

This guide is general information, not tax or legal advice, and reflects our understanding of the rules as at September 2026. Your circumstances may differ, please get specific advice before acting.