HMRC's Tough New Powers: Criminal Offence for Reckless Tax Claims and Direct Bank Deductions

HMRC is preparing some of its sharpest compliance powers in years, after its own figures showed the UK tax gap has widened to 6.4%, up from 5.3% the year before, even as HMRC collected £865.2 billion in 2024/25 — 93.6% of everything owed.

What's changing

As part of its "simplification, modernisation and fairness" package published in July 2026, the government has set out plans to introduce a new criminal offence for making reckless or untrue statements or declarations in relation to direct tax. This goes further than existing penalties for careless or deliberate errors — it targets people who make claims without properly checking whether they're accurate, not just those who deliberately lie.

Alongside this, HMRC is extending its powers to collect lower-value tax debts directly from a taxpayer's bank or building society account on a monthly basis, rather than relying solely on court action or debt collection agencies. HMRC has held "direct recovery of debts" powers for larger amounts since 2015, but this extension brings smaller, everyday tax debts into scope.

Small businesses are a particular focus: they account for 62% of the total tax gap, according to HMRC's analysis, driven mainly by error and failure to take reasonable care rather than deliberate fraud.

Why it matters

If you're self-employed, run a limited company, or claim reliefs like R&D credits or expenses, the bar for "reasonable care" is rising. Claims that were previously waved through as honest mistakes could now attract closer scrutiny — and in serious cases, criminal liability — if HMRC decides they were made recklessly.

The direct bank deduction extension also removes a layer of friction that previously gave taxpayers time to negotiate a payment plan before money left their account. Time to Pay arrangements remain available and HMRC has said it will continue offering them, but the safest position is to contact HMRC before a debt becomes overdue, not after.

International comparison

The UK isn't alone in tightening the net. In the US, the IRS already has statutory authority to levy bank accounts for unpaid tax after notice and a right to a hearing, and imposes accuracy-related penalties of 20% for negligent or substantially understated returns. Australia's tax office can issue garnishee notices against bank accounts for unpaid debts without needing a fresh court order each time, a power HMRC's reform edges closer to. Across the EU, member states increasingly share third-party financial data under DAC7-style rules to narrow the same kind of tax gap HMRC is now targeting.

What to do now

• Review any claims for expenses, reliefs or allowances you've made in the last two years and keep evidence for how you calculated them.
• If you're behind on a tax bill, contact HMRC's payment support service proactively rather than waiting for a demand.
• Self-employed people and directors should have an accountant or bookkeeper check reasonable-care processes, especially around VAT, PAYE and expense claims.
• Keep contact and bank details up to date with HMRC so any recovery notices reach you promptly, giving you time to respond.

Key Numbers

• 6.4% — the UK tax gap in the latest measured year, up from 5.3%
• £865.2 billion — total tax HMRC collected in 2024/25
• 62% — small businesses' share of the total tax gap

Sources

• Tax update 2026: simplification, modernisation and fairness — GOV.UK
• Difficulties paying HMRC — GOV.UK
• IRS levy powers — IRS.gov

Educational content only — not financial advice.