HMRC Wants to Take Tax Debts Straight From Your Bank Account — Here's the Plan

HMRC is consulting on plans to let it recover smaller tax debts by taking money directly out of taxpayers' bank accounts — without going to court first. The consultation, published by HMRC, closes on 28 August 2026, and it could affect hundreds of thousands of people who fall behind on tax.

What's changing

HMRC already has a power called Direct Recovery of Debts (DRD), which lets it pull money from the bank or building society accounts of people who owe more than £1,000 in tax and have "persistently" ignored attempts to contact them. That power was paused during the pandemic and restarted in September 2025.

The new consultation proposes extending this so HMRC can also chase lower-value debts — up to £5,000 for individuals and £10,000 for businesses — through an automated process of "affordable monthly instalments" deducted straight from a bank account, rather than a one-off lump sum. According to ICAEW's summary, this is designed to catch people who never engage with HMRC at all, rather than those who are already in a payment plan.

The safeguards — and the concerns

HMRC says it will build in protections: advance notice before any money is taken, an exemption for people in genuine financial hardship, and the chance to contact HMRC to agree a different payment arrangement instead. However, the Low Incomes Tax Reform Group (LITRG) has raised concerns that an automated system risks catching vulnerable people who haven't engaged with HMRC not out of defiance, but because they're overwhelmed, unwell, or simply didn't see the letters.

Unlike a normal debt enforcement process, DRD doesn't require a court order — it's one of the few legal routes that let a creditor reach into your account directly, which is why any expansion of it draws scrutiny.

What to do if you have a tax debt

• Don't ignore HMRC letters. The single biggest driver of enforcement action is non-engagement. Even a short call to arrange a Time to Pay plan can take you out of the "persistently unresponsive" category the DRD proposals target.
• Check your total tax debt across all regimes — DRD looks at the combined total you owe, not just one bill.
• Ask about hardship protections early. If you're struggling, tell HMRC before a debt becomes enforcement-ready, not after.
• Get free help if you're unsure. TaxAid and Citizens Advice can help you negotiate directly with HMRC.
• Respond to the consultation if you have views — it's open until 28 August 2026 and businesses, advisers and individuals can all submit evidence.

How the UK compares

The US IRS has a broadly similar power — a bank levy — but it generally requires a formal notice and a 21-day waiting period before funds are seized, and taxpayers can request a Collection Due Process hearing first. Australia's ATO can issue a garnishee notice to a bank without court approval too, closer to the UK model. What makes the UK proposal notable is the shift toward automated, algorithm-driven recovery for smaller debts, rather than case-by-case decisions.

Key Numbers

• £1,000 — minimum total tax debt for existing DRD power to apply
• £5,000 / £10,000 — proposed new lower-value debt limits for individuals / businesses
• 28 August 2026 — consultation closing date

Sources

• Proposals to tackle lower value tax debts — GOV.UK
• HMRC targets lower value tax debt — ICAEW
• LITRG raises concerns over safeguards in HMRC's lower-value tax debt proposals — CIOT

Educational content only — not financial advice.