HMRC Restarts Direct Bank Account Deductions for Tax Evaders With New Lower-Value Debt Plans

HMRC has confirmed it is actively using powers to take money directly from the bank accounts of tax evaders, with a fresh expansion planned to target smaller debts.

The Direct Recovery of Debts (DRD) powers, which allow HMRC to instruct banks to transfer funds, were restarted in September 2025 after being paused during the pandemic and rolled out more widely from April 2026.

The current rules apply to individuals and businesses who have ignored repeated contact and owe more than £1,000. HMRC must leave at least £5,000 across a debtor’s accounts and individuals are entitled to a face-to-face visit before any money is taken. A 30-day objection window also applies once funds are placed on hold.

The government is now consulting on extending the scheme to lower-value debts. Under the proposals, HMRC could use automated monthly deductions to recover total debts of up to £5,000 for individuals and £10,000 for businesses, without the current £5,000 protected balance safeguard. The consultation closes on 28 August 2026.

Official figures show over 750,000 lower-value tax debts, worth more than £2 billion, remain uncollected each year after repeated attempts.

Victoria Todd, Head 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”.

The Institute of Chartered Accountants in England and Wales has also raised concerns about the proposed 14-day notice period, recommending a minimum of 30 days for taxpayers to respond.

HMRC maintains that DRD is only used against those who can afford to pay but choose not to engage, and that support is available for vulnerable customers.