The tax authority has regained the ability to access individuals’ bank accounts directly to retrieve unpaid taxes. HM Revenue & Customs (HMRC) can now extract funds from accounts of debtors owing over £1,000 to HMRC, including cash ISAs. This initiative, known as Direct Recovery of Debts (DRD), was paused during the pandemic but has been reinstated following approval from Chancellor Rachel Reeves in the Spring Statement of March 2025.
The primary objective of the scheme is to target individuals who have the means to settle their tax liabilities but have persistently neglected to do so. Most impacted individuals are likely to be those who submit self-assessment tax returns, such as self-employed individuals or those with substantial income from investments, second properties, or savings interest.
Before any deductions are made from their accounts, taxpayers can anticipate a visit from HMRC agents to confirm the debt, discuss repayment options, and verify the taxpayer’s identity. The new regulations stipulate that individuals must retain at least £5,000 in their accounts for essential expenses, and a 30-day appeal period is mandated before HMRC can withdraw funds directly.
HMRC has assured that individuals classified as ‘vulnerable’ will not be subjected to this enforcement measure. Nevertheless, some tax experts have criticized the new powers, highlighting HMRC’s increased efforts to collect outstanding taxes amid challenging economic conditions.
Government data reveals that HMRC is owed £42.8 billion in unpaid taxes, a figure that has risen significantly due to the pandemic. The government aims to recover an additional £11 billion in outstanding debts by 2030. To enhance debt recovery capabilities, the treasury has allocated £630 million, resulting in the recruitment of 2,400 new debt management staff at HMRC.
An HMRC spokesperson emphasized the importance of pursuing tax payments from those capable of settling their obligations but choosing not to. The spokesperson reiterated that stringent safeguards are in place, and support will be provided to customers requiring assistance with their payments.
