Cut-off time

What it means

Cut-off time is the hour by which a bank must receive a payment order to process it on the same business day. If the order is entered later, the bank sends it the next business day, which can make a tax or invoice payment late.

Every bank sets its own times, and they vary by payment type: domestic and SEPA transfers, priority payments, foreign-currency payments abroad and paper orders at a branch. Ordinary interbank payments are not processed at weekends or on public holidays.

Instant payments run around the clock and reach the payee within seconds, so cut-off time hardly matters for them. If the payee's bank does not support them or the amount exceeds the limit, though, the payment is sent the ordinary way.

How it works in practice

Taxes and contributions are best not sent on the afternoon of the last day before the due date. It is safer to enter the payment at least a day in advance or use an instant payment, because being even one day late can mean late-payment interest or a penalty.

Firms making many payments, such as payroll, submit the batch order so the bank processes it before cut-off and staff receive their pay on time. For workers paid abroad, a longer transfer time must be allowed for.

In supplier contracts it helps to know whether payment counts from the debit to the payer's account or the credit to the payee's account. If the credit date decides, an order entered after cut-off on the due date usually arrives late and may give rise to late payment interest.

What to watch out for

Many banks accept orders after cut-off and show them in online banking as sent, even though they process them only on the next business day. Check the execution date shown by the bank, not just the time you signed the order.

At year end, quarter end or before holidays, several non-business days may follow in a row. An expense paid on 31 December after cut-off leaves only in January, which can affect cash-based tax records of sole traders, where the payment date decides.