OBJECTIVES: Payment by Results represents a complete change to NHS funding, the core of which will be a national tariff price based on healthcare resource groupings [HRG]. The renal tariff is expected to improve financial management so it is important that the tariff level is set to reflect actual costs of treatment. The objective of this study was to obtain detailed costings for automated PD (APD), continuous ambulatory PD (CAPD), hospital-based haemodialysis (HD) and satellite-centre-based HD (SHD) and to identify potential cost differences and cost drivers. METHODS: Five renal centres were investigated. All resources used during the process of dialysis treatment were identified during semi-structured interviews; published costs were applied. Overhead costs were apportioned using standard cost accounting. RESULTS: Annual costs of HD in main units ranged from £33,516 to £45,029 (£30,508 to £46,459 in satellite units). A key differential factor between the units was the overhead costs. HD costs without overheads ranged from £30,055 to £35,138 (£23,110 to £35,227 in satellite units). Annual costs of PD were £14,859 to £17,022 and £22,196 to £24,358 for CAPD and APD, respectively. The key differential cost drivers between HD and PD other than overheads were disposables (averaging £10,117 for HD, £9,349 for CAPD and £16,223 for APD), nursing (£9,921 for HD; £2,775 for PD), anaemia therapy (£7,005 for HD; £2,410 for PD) and transport (£2,352 for HD; £130 for PD). CONCLUSION: Within individual renal centres, the costs of delivering APD range from 32% to 50% lower than HD and for CAPD costs are from 53% to 66% lower than HD. Increased use of PD could result in more efficient use of resources from the perspective of purchasers and the government. Moreover, this type of treatment aligns with the UK government's strategy of patient choice and self-care in a home environment.