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HM Revenue & Customs (HMRC) could receive expanded powers to recover unpaid taxes directly from bank and savings accounts under proposals expected to be announced in the UK’s Autumn Budget on October 28, 2026.
Chancellor John Healey is reportedly preparing measures that would allow the tax authority to automatically deduct relatively small outstanding debts from taxpayers who repeatedly fail to respond to payment requests.
- UK Chancellor John Healey is expected to announce expanded HMRC powers allowing automatic deductions from current and savings accounts for unpaid tax debts worth as little as a few pounds.
- The proposals target approximately 4.8 mn individuals and businesses owing less than £10,000 each, with outstanding debts totaling about £4 bn and an average individual debt of £950.
- Tax experts warn that automated collection could affect vulnerable taxpayers, while HMRC is considering affordability assessments and safeguards that could limit repayments to 50% of disposable income.
The proposed changes could reduce the minimum debt eligible for direct recovery from more than £1,000 to just a few pounds, according to The Times. Outstanding penalties and interest could also be included.
The measures would target an estimated 4.8 mn individuals and businesses with tax debts below £10,000, collectively owing approximately £4 bn. The average outstanding balance among individual taxpayers is £950, according to figures cited in reports.
The proposals have not been formally confirmed, and their final scope and safeguards remain subject to government decisions.
HMRC seeks to expand bank account tax debt recovery powers
Under existing legislation introduced in 2015, HMRC can recover unpaid taxes directly from bank and building society accounts without obtaining a court order.
The current Direct Recovery of Debts framework applies where a taxpayer owes more than £1,000 and at least £5,000 remains available across their accounts after the debt has been recovered.
Those powers were suspended during the Covid-19 pandemic and reinstated in 2025 under the Labour government.
The latest proposals would extend direct recovery to substantially smaller debts, using automated monthly deductions rather than relying solely on one-off payments.
The changes follow a government consultation launched in June 2026 on recovering lower-value tax liabilities from individuals and businesses that persistently fail to engage with HMRC.
Officials argue that existing enforcement mechanisms are less efficient when applied to large numbers of small debts, particularly where taxpayers do not respond to repeated requests for payment.
The government is considering a system under which deductions could be made directly from current and savings accounts after other collection efforts have failed.
The measures would be aimed at taxpayers who can afford to settle their liabilities but repeatedly fail to engage. Unpaid tax bills can also result from administrative mistakes, missed correspondence or a lack of awareness rather than deliberate avoidance.
Tax experts warn of risks to vulnerable taxpayers
The planned expansion has raised concerns that automated enforcement could affect people experiencing financial hardship, illness or difficulties communicating with HMRC.
The Low Incomes Tax Reform Group, which represents the interests of taxpayers who cannot afford professional advice, has previously called for strong protections for individuals living on limited budgets.
A central concern is whether an automated system could reliably distinguish deliberate non-payment from circumstances in which taxpayers have legitimate reasons for failing to respond.
Dan Neidle, founder of Tax Policy Associates, warned that automated recovery processes could struggle to identify these differences.
Tax professionals have also questioned whether the system would adequately protect people whose liabilities have been incorrectly calculated.
Nimesh Shah, of accounting and tax advisory firm Blick Rothenberg, previously described the potential use of the powers as a “sledgehammer” by HMRC.
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.
Dan Neidle, founder of Tax Policy Associates
Previous reporting has documented concerns about HMRC’s access to bank account information and cases involving incorrectly calculated tax codes.
Critics argue that expanding automated recovery without effective checks could expose taxpayers to deductions before errors or disputes have been resolved.
Under the arrangements described in reports, affected individuals would bear responsibility for challenging recovery decisions, making the accessibility of review procedures a significant issue.
HMRC considers affordability checks and credit agency data
HMRC is exploring the use of information from credit reference agencies to assess taxpayers’ financial circumstances and determine how much they can reasonably repay.
Such assessments could incorporate income, expenditure and other financial information to establish affordable deductions.
Earlier proposals suggested limiting repayments to no more than 50% of an individual’s disposable income, although the final methodology has not been confirmed.
The government has also considered allowing debts to be repaid through manageable monthly instalments rather than requiring immediate settlement of the entire outstanding amount.
A senior government source told The Times that the expanded powers would include “rigorous” safeguards for vulnerable taxpayers.
The consultation framework envisages repeated attempts to contact individuals before enforcement, opportunities to explain personal circumstances and mechanisms for challenging decisions.
The effectiveness of these protections will depend on how HMRC assesses affordability and identifies taxpayers who require additional support.
UK Budget expected to clarify HMRC enforcement plans
The proposed measures form part of the government’s efforts to improve the recovery of outstanding tax liabilities, particularly smaller debts that can be costly to pursue through conventional collection procedures.
- Although the estimated £4 bn in unpaid taxes represents the pool of lower-value liabilities identified in reports, it does not establish how much additional revenue HMRC would ultimately recover under the proposed system.
The Treasury has declined to confirm the reported changes ahead of the Budget.
“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals,” a Treasury spokesman told The Times.
If adopted, the reforms would extend HMRC’s existing authority to collect tax debts directly from financial accounts, potentially bringing much smaller liabilities within the scope of automated enforcement.
The October 28 Budget is expected to clarify the proposed eligibility thresholds, repayment arrangements and protections for taxpayers facing financial hardship or disputing the amounts claimed.
