DPNI vs DCNI: which direct-payment scheme applies to you?
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. Picking the wrong one means deducting the wrong amounts. Here's how to tell them apart.
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 National Insurance.
- DCNI — Direct Collection, National Insurance only. The scheme accounts for National Insurance only; Income Tax is dealt with another way.
Both are documented in HMRC's PAYE Manual — DPNI at PAYE20100 and DCNI at PAYE20091 — so you can check the source directly on GOV.UK.
In one sentence: DPNI handles tax and NI; DCNI handles NI only. The right one depends on whether UK Income Tax needs to be operated at source.
When DPNI is the right scheme
A DPNI scheme is the usual route for the classic case: an overseas company with no UK presence 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, deducted and paid over to HMRC each pay period. This is the most common scheme our overseas clients need.
When DCNI (NI-only) is the right scheme
A DCNI scheme handles National Insurance only. It's used where the employee is liable to UK National Insurance but the Income Tax position is handled separately — for example where the individual settles their UK Income Tax through Self Assessment rather than having it deducted at source. In those cases there's no need for the scheme to operate PAYE tax, so DCNI collects the National Insurance and leaves the tax to the other mechanism.
DCNI is less common than DPNI, and confirming it genuinely fits your situation — rather than assuming it from the name "NI-only" — matters, because getting it wrong can leave Income Tax unaccounted for.
Side by side
| DPNI | DCNI | |
|---|---|---|
| Covers Income Tax (PAYE) | Yes | No |
| Covers National Insurance | Yes (employee and employer, where due) | Yes (the focus of the scheme) |
| Typical use | UK employee liable to UK tax, no UK entity | NI due, but Income Tax handled separately |
| RTI reporting to HMRC | Yes, each pay period | Yes, each pay period |
| Registered online? | No — manual HMRC application | No — manual HMRC application |
What both schemes have in common
Whichever applies, the mechanics rhyme:
- Neither can be set up through the standard online employer registration. HMRC's specialist NIC & Employer Office opens these manually, so the application has to be prepared correctly to avoid weeks of back-and-forth.
- Both are reported to HMRC in real time — a Full Payment Submission on or before each payday, just like any UK payroll. See our guide to RTI, FPS and EPS.
- Employer National Insurance still applies where due. "NI-only" refers to the scheme not operating Income Tax at source — it does not mean contributions are skipped.
- Auto-enrolment pension duties can still apply to the UK worker under either scheme — see auto-enrolment for overseas employers.
Watch out: the names are the trap. "NI-only" (DCNI) sounds simpler and cheaper, so it's tempting to assume it applies — but if your UK employee's Income Tax should be operated at source, DPNI is the correct scheme. Confirm the tax position first, then choose.
How do you know which you need?
It comes down to one question: does UK Income Tax need to be operated at source on this employee's pay, or is it being dealt with another way? If at source, that points to DPNI. If the tax is genuinely handled separately and only National Insurance needs collecting, that points to DCNI. Because the answer depends on the individual's residence and tax position, it's worth confirming before any scheme is opened — a short conversation usually settles it.
Frequently asked questions
Is DCNI cheaper to run than DPNI?
Not meaningfully — the work is similar each period. The right choice is driven by the tax position, not cost. Choosing DCNI to save money when DPNI is correct simply creates a compliance problem.
Can a scheme change from one to the other?
The correct scheme follows the facts. If circumstances change, the position may need revisiting with HMRC rather than quietly switching.
Do both report through RTI?
Yes. Both are reported to HMRC in real time on or before payday.
Not sure which scheme you need?
We confirm whether DPNI, DCNI or standard PAYE is right for your situation, prepare the manual HMRC application, and run the payroll every period. Transparent pricing — see the DPNI setup service.
Get startedThis guide is general information, not tax or legal advice, and reflects our understanding of the rules as at June 2026. Your circumstances may differ — please get specific advice before acting.