Government lays BNPL legislation and commits to reviewing approach to domestic premises suppliers

The statutory instrument bringing interest-free buy now pay later (BNPL) products into regulation was laid on 19 May 2025, with the government committing to review its approach to domestic premises suppliers alongside industry and the Financial Conduct Authority¹. The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 passed on 14 July 2025, setting the provisions for regulation¹. From 15 July 2026, interest-free BNPL products will be subject to a new regime overseen by the FCA¹.

Under that regime, most merchants offering BNPL from BNPL firms as a payment option will be exempt from credit broking regulation, but the exemption does not extend to domestic premises suppliers: businesses that sell goods and services in people's homes, such as plumbers, double glazing companies and mobile hairdressers or beauticians¹. As it stands, when the regime goes live in July 2026, these businesses will need regulatory approval for credit broking already, or to have entered the transitional regime, to keep offering BNPL to customers¹. They will still need regulatory approval to offer other forms of regulated credit¹.

The government had originally excluded these suppliers from the merchant exemption because of historical concerns about pressure selling in customers' homes, which it says have generally related to high-value, long-term credit agreements¹. The FCA has estimated an average agreement value of £88 for BNPL agreements, which typically run for two months and by law cannot run for more than 12¹. Shortly before the 2025 Order was introduced in Parliament, BNPL firms raised concerns with the FCA that the approach was disproportionate and could discourage businesses from offering BNPL for essential, low-value services such as plumbing repairs¹. The government said the concerns came too late to alter the legislation without delaying consumer protections, and that insufficient evidence was provided at the time¹.

On 16 June, the government announced plans to amend the 2025 Order to remove the credit broking regulatory requirements for domestic premises suppliers when they offer BNPL products¹. Evidence from Klarna, PayPal and Clearpay, with trade body Innovate Finance, indicated these suppliers present low consumer risk, principally supplying low sums of credit often for essential and emergency expenditure¹. The government estimates at least 620 domestic premises suppliers were offering BNPL through these firms as of May or June 2025¹. One BNPL firm reported nearly 5,000 transactions through about 139 domestic premises suppliers in the 12 months to June 2025, averaging circa £200 per purchase¹. Data from the BNPL firms surveyed showed issues reported with only five of the 620 businesses, or 0.8%¹.

Source: HM Treasury impact assessment¹. The transitional regime entry fee is to be set by the FCA and is not included¹.

Why it matters for households

People who pay for work in their homes, such as plumbing repairs or mobile hairdressing, by instalments through a BNPL provider are affected by how these rules treat the business at the door. The exemption means those suppliers will not need FCA authorisation as credit brokers to keep offering BNPL as a payment option¹. The government says that without the exemption many merchants would withdraw BNPL as a payment option because of new compliance costs, and that customers of domestic premises suppliers might otherwise lose interest-free ways of spreading the cost of purchases¹. The impact assessment notes that customers who could not use BNPL might instead use debit cards, bank transfers or interest-bearing credit cards, and that debit cards and bank transfers settle immediately so do not let consumers spread costs¹. It says it cannot give a precise estimate of consumer savings because comparable data from other BNPL providers is not available and credit card interest rates vary¹. The deferred payment credit rules set out how BNPL is being brought into regulation, and the FCA will oversee the regime.

What happens next

The measure comes into force on 3 December 2025¹. The BNPL regime itself starts on 15 July 2026¹. Reviews must take place every five years, with the first review report due in July 2030¹.