John Healey will unveil his first Budget as Chancellor next week (Image: Getty)
HM Revenue and Customs (HMRC) is reportedly set to be given new powers to deduct funds and interest from current and savings accounts of people and businesses who do not respond to demands for payment, with the move expected to be announced in next week’s Budget. The closely-watched fiscal event will be John Healey’s first as Chancellor, having been appointed to the role by the Prime Minister, Andy Burnham, in July. It comes as the Government looks to recover some £4billion in existing unpaid smaller tax debts. That’s made up from some 4.8million people and businesses that owe less than 10,000, according to HMRC’s own figures.
Among the individual taxpayers the average unpaid debt is around £950. HMRC currently only has the power to take money directly from accounts if the debt is over £1,000 and they would be left with a minimum of £5,000 across their accounts so the deduction does not cause hardship.
A new approach could see the minimum debt lowered to just a few pounds, the Times reports. The Government already has powers to take funds from your account without a court order in some circumstances. It comes as the Government looks to clampdown on the billions of tax it fails to recover each year.
HMRC revealed the figure for the last tax year was around £60billion in total. Dan Neidle, founder of Tax Policy Associates, voiced concern about the idea of an automatic system, suggesting it could mean people who are facing financial difficulties could be treated the same as those deliberately avoiding paying tax.
He told the newspaper: “It would be good to understand the safeguards that will be put in place.” The Times also quoted a Government source as saying that “rigorous” protections would be in place to protect vulnerable people.
The measure was proposed earlier this year, with HMRC saying “strong safeguards are at the heart of the proposal”. The UK tax authority said in corporate report that this would include:
- using this power after more than 10 attempts to contact customers to pay what they owe
- identifying customers who may need extra support
- giving clear and multiple opportunities to explain personal circumstances
- setting repayments at an affordable level
- clear rights to challenge decisions, including independent review
HMRC said the protections “are designed to ensure the power is used fairly, proportionately and only where appropriate”. The Express has approached the HM Treasury for comment.
Bank Account Warning as HMRC Could Be Given Powers to Take Money Directly From Accounts
Millions of people across Britain could be watching the next Budget closely after proposals to expand HM Revenue and Customs’ powers to recover unpaid tax debts raised concerns about how money could be taken directly from bank accounts.
The issue centres on whether HMRC should be allowed to recover smaller tax debts from current accounts and savings without first going through the courts. The government says the aim is to collect money owed by people and businesses who repeatedly ignore attempts to contact them. However, the proposals have also prompted questions about safeguards, financial hardship and the risk of mistakes affecting ordinary taxpayers.
The important distinction is that HMRC already has limited powers to recover certain tax debts directly from bank accounts. The current debate concerns expanding those powers to cover lower-value debts, rather than giving the tax authority an entirely new ability to access anyone’s savings.
According to the government’s published briefing, the existing direct recovery system was restarted in a controlled phase in September 2025, with a wider rollout planned from April 2026. In June 2026, the government also launched a consultation on tackling lower-value tax debts. <Cite refs={[“turn476398search1″,”turn476398search3”]}/>
Why HMRC Wants Stronger Recovery Powers
HMRC is responsible for collecting taxes that fund public services, including healthcare, education, transport and other government spending. Most taxpayers pay what they owe on time, but unpaid debts can accumulate when individuals or businesses fail to settle their bills.
The government argues that some debts remain outstanding not because the taxpayer cannot afford to pay, but because repeated requests for payment are ignored. In such cases, officials say, stronger recovery measures could reduce the amount of money lost to unpaid tax.
In a parliamentary answer published in June 2026, the government said more than 750,000 lower-value debts, collectively worth over £2 billion, were returned to HMRC each year by debt collection agencies after recovery efforts had been ignored. It said fewer than 250,000 companies and individuals were expected to fall within the scope of the proposed lower-value measures annually once fully operational. <Cite refs={[“turn476398search3”]}/>
Ministers argue that improving collection could help ensure that people who meet their tax obligations are not disadvantaged compared with those who repeatedly fail to pay.
Nevertheless, the effectiveness of such a policy will depend on how the rules distinguish between deliberate refusal to pay and genuine financial difficulty.
Could HMRC Take Money From Your Bank Account?
Under the existing direct recovery rules in England, Wales and Northern Ireland, HMRC can seek to recover qualifying tax debts directly from bank and building society accounts in certain circumstances.
The current system generally applies where the debt is at least £1,000 and sufficient money is held across the taxpayer’s accounts. HMRC must also follow safeguards intended to prevent serious financial hardship. One important protection is that at least £5,000 must remain available across the relevant accounts. Scotland has a different legal process for recovering debts. <Cite refs={[“turn476398search0″,”turn476398search4”]}/>
The proposed expansion would seek to cover smaller debts that are not recovered through existing methods. The exact details and safeguards for any extension depend on the government’s policy and legislative decisions.
This does not mean HMRC can simply take money from every bank account at will. The powers concern established debts owed to the tax authority and are subject to specific conditions and procedures.
For taxpayers, the practical lesson is to take official correspondence about unpaid tax seriously, check whether the amount claimed is correct and contact HMRC promptly if there is a dispute or difficulty paying.