Hundreds of thousands of taxpayers could face tougher action from HMRC under plans to expand the tax authority’s debt recovery powers.
The proposals would allow HMRC to recover more smaller tax debts directly from bank accounts through automatic monthly deductions, although the plans are currently out for consultation.
The consultation proposes extending HMRC’s existing powers so they can be used to recover a much higher volume of lower-value debts from people who can afford to pay but repeatedly refuse to do so.
The plans would also remove the current rule requiring HMRC to leave at least £5,000 in a taxpayer’s bank account after money has been recovered.
At present, HMRC can only directly recover money from bank accounts where someone owes more than £1,000, and it must leave at least £5,000 in the account.
Those safeguards have been in place since the powers were introduced in 2015.
HMRC expects fewer than 250,000 individuals and businesses each year to be eligible for the proposed powers, with fewer than that ultimately placed on an automatic instalment plan.
The proposals have attracted criticism from tax experts, who say the measures could give HMRC too much power.
HMRC to expand bank account seizure powers
|
GETTYNimesh Shah, of tax firm Blick Rothenberg, said: “I have some sympathy for HMRC for having to expend significant time to chase smaller amounts and the associated time and cost can be higher than the amount involved.”
However, he warned: “My concern is that this could be used as a ‘sledgehammer’ by HMRC without the proper safeguards in place.”
He added: “There is also the issue of where HMRC have assessed the incorrect amount of tax and they then use this power to recover an amount which actually isn’t due.”
HMRC stated that more than 750,000 lower value debts totalling over £2billion remain uncollected annually despite at least 10 contact attempts
|
GETTYVictoria Todd, of the Low Incomes Tax Reform Group, said: “We are particularly concerned that the proposals do not currently include a minimum amount that must be left in a taxpayer’s account.
“For those living on a tight budget, deductions could leave them struggling to meet essential living costs.”
She emphasised that HMRC must develop robust methods to identify vulnerable individuals and distinguish them from those deliberately avoiding payment.
Robert Salter, of Blick Rothenberg, added: “Is there a risk that such automatic collection arrangements could drive taxpayers into further debt?”
The consultation remains open until 28 August
|
GETTYHMRC has indicated it may cap deductions at 50 per cent of a customer’s disposable income, though this remains under consideration.
Ministers have defended the expanded powers as essential for maintaining a fair tax system.
Dan Tomlinson, the exchequer secretary to the Treasury, said: “The vast majority pay on time and in full, so it’s vital for a fair tax system that we seek to recover debt from those who can afford to pay but refuse to.”
He added: “These extended powers would ensure fairness for all taxpayers, while support will continue to be offered to those wanting help with their payments.”
The measures form part of broader efforts to address Britain’s growing tax gap, which reached £59.2bn in 2024-25, rising from £46.8bn the previous year.
HMRC stated that more than 750,000 lower value debts totalling over £2billion remain uncollected annually despite at least 10 contact attempts.
The consultation remains open until 28 August.