HM Revenue and Customs could be given expanded powers to take money directly from taxpayers’ bank accounts to recover even small unpaid debts, under new government proposals designed to improve debt collection and reduce the volume of outstanding tax owed across the UK system.
Expansion Of Direct Recovery Powers
The proposals would extend HMRC’s existing ability to recover unpaid tax directly from bank and building society accounts without requiring a court order. At present, enforcement action includes safeguards such as ensuring individuals are left with at least £5,000 across their accounts and carrying out additional checks before funds are removed.
Under the new plans, these protections could be reduced or removed in cases involving smaller debts, allowing HMRC to recover funds more quickly from individuals who have not engaged with repayment requests. The Direct Recovery of Debts system was first introduced in 2015 but was paused during the Covid-19 pandemic before being reactivated in late 2025.
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Focus On Low-Value And Persistent Debts
The government says the existing framework is not well suited to recovering large numbers of low-value debts from individuals who repeatedly fail to respond to HMRC contact. Officials argue this creates gaps in enforcement and contributes to billions of pounds in unpaid tax each year.
HMRC estimates that around one in ten taxpayers fail to pay their taxes in full and on time, with total unpaid tax reaching around £100 billion. More than 750,000 low-value debts, worth over £2 billion collectively, are returned annually to HMRC after unsuccessful recovery attempts through external debt collection agencies.
Safeguards And Notification Process
Under the proposals, taxpayers would still receive multiple warnings before any direct recovery action is taken. HMRC says individuals would be contacted at least ten times regarding outstanding debts before any funds are taken directly from their accounts.
The system is intended to target those who are able to pay but choose not to engage with repayment processes. However, concerns have been raised that reducing existing safeguards could increase the risk of incorrect deductions or administrative errors.
Wider Enforcement Framework
The proposals form part of the Public Authorities (Fraud, Error and Recovery) Act 2025, which expands government powers to recover unpaid debts and fraudulent payments. From October, similar powers will also apply to benefit fraud cases, allowing authorities to recover funds directly from bank accounts where individuals refuse to repay money owed.
The government estimates that around £14 billion is lost annually to fraud and error across public services.
Government Position
A Treasury minister said the changes are intended to ensure fairness across the tax system by improving recovery from those who can pay but do not. Officials also said that support arrangements will remain in place for taxpayers who are struggling, while enforcement will focus on persistent non-payment cases.
