HMRC bank account debt recovery powers, Digi Mart USA News (United Kingdom): Chancellor John Healey’s plan to let HMRC take money from bank accounts over unpaid taxes has sparked fears it could push people on low incomes into financial hardship.
Healey revealed at the Budget that the tax authority will get stronger powers to collect overdue tax “from those who can clearly afford to pay.” However, there is no guarantee that a minimum amount will be left in the account, raising fears that pensioners and people on low incomes could be left without enough money to pay rent, mortgages or utility bills.
The new powers are aimed at recovering cash from people with low-value debts “who can afford to pay but repeatedly fail to do so,” the Treasury has said. The maximum debt pursued would be £5,000 for individuals and £10,000 for companies.
Unlike previous debt recovery schemes, there is currently no plan to leave a minimum amount in someone’s account.
The Government said it did not “think that a minimum account balance is a necessary safeguard” because other measures “would provide enough protection.” These will include a “tailored affordability assessment” before any money is taken, and the right to appeal. People will also receive a 28-day notice period before deductions begin.
From July 2029, HMRC will be able to order banks to start taking regular deductions from a person’s current account to recover tax debt that is owed. HMRC will also be able to take money directly from a couple’s joint bank account to pay for just one partner’s tax debts, if no sole account is accessible.
The Government has said it will “only consider joint accounts if there was no viable sole account” available.
Nimesh Shah, of tax firm Blick Rothenberg, told The i Paper that the new powers could become a “sledgehammer” that will unfairly hit pensioners, people on low incomes, and those with mental health issues. “My concern is that vulnerable taxpayers, pensioners, those with mental health challenges, and people facing short-term financial hardship could be caught in the net,” said Shah.
The Low Incomes Tax Reform Group (LITRG) has also raised concerns that non-engagement with HMRC may reflect genuine financial problems or difficulty understanding tax debt requests, rather than a refusal to pay. LITRG’s Sarah Weston said, “Safeguards must ensure that powers are used appropriately and deductions do not leave people struggling to meet day-to-day living costs.”
An HMRC spokesperson told The i Paper that the new powers will be “subject to robust safeguards, including checks to ensure instalments are affordable.” They said powers will only be used “after repeated attempts to contact customers who have the means to pay, but refuse to engage with us.”
Draft legislation on the new HMRC debt recovery plan is expected to be ready next summer, with seizures starting from July 2029. The measure is expected to raise £320m by 2031-32.
