diff --git a/packages/loot-core/src/server/accounts/rules.ts b/packages/loot-core/src/server/accounts/rules.ts
index 89cf1f86b6..280e84e655 100644
--- a/packages/loot-core/src/server/accounts/rules.ts
+++ b/packages/loot-core/src/server/accounts/rules.ts
@@ -625,6 +625,10 @@ export class Action {
         } else {
           object[this.field] = this.value;
         }
+
+        if (this.field === 'payee_name') {
+          object['payee'] = 'new';
+        }
         break;
       case 'set-split-amount':
         switch (this.options.method) {
diff --git a/packages/loot-core/src/server/accounts/transaction-rules.ts b/packages/loot-core/src/server/accounts/transaction-rules.ts
index 2d8bc7c542..5a98618618 100644
--- a/packages/loot-core/src/server/accounts/transaction-rules.ts
+++ b/packages/loot-core/src/server/accounts/transaction-rules.ts
@@ -792,15 +792,17 @@ export async function finalizeTransactionForRules(
   trans: TransactionEntity | TransactionForRules,
 ): Promise<TransactionEntity> {
   if ('payee_name' in trans) {
-    if (trans.payee_name) {
-      let payeeId = (await getPayeeByName(trans.payee_name))?.id;
-      payeeId ??= await insertPayee({
-        name: trans.payee_name,
-      });
+    if (trans.payee === 'new') {
+      if (trans.payee_name) {
+        let payeeId = (await getPayeeByName(trans.payee_name))?.id;
+        payeeId ??= await insertPayee({
+          name: trans.payee_name,
+        });
 
-      trans.payee = payeeId;
-    } else {
-      trans.payee = null;
+        trans.payee = payeeId;
+      } else {
+        trans.payee = null;
+      }
     }
 
     delete trans.payee_name;
diff --git a/upcoming-release-notes/3704.md b/upcoming-release-notes/3704.md
new file mode 100644
index 0000000000..bbe3f21ca2
--- /dev/null
+++ b/upcoming-release-notes/3704.md
@@ -0,0 +1,6 @@
+---
+category: Bugfix
+authors: [UnderKoen]
+---
+
+Fix not being able to change Payee by rules