HMRC reactivates direct-from-bank recovery powers for unpaid taxes targeting £1,000+ debts
Direct Recovery of Debts relaunched in 2025 with safeguards, a 5,000-pound minimum balance rule, and a 30-day appeal window, as critics call the move draconian
HM Revenue & Customs will be able to take money directly from debtors’ bank accounts or cash ISAs for unpaid tax, in a relaunch of the Direct Recovery of Debts scheme. The policy targets those who owe more than £1,000 and who have repeatedly refused to pay. The scheme was first introduced in 2015, paused during the Covid-19 pandemic, and is now relaunched in a 'test and learn' phase after Chancellor Rachel Reeves provided new powers in the Spring Statement 2025.
HMRC says the program will focus on people who can pay but do not. It applies largely to individuals who must file a self-assessment tax return, such as the self-employed or taxpayers with significant investment income, second properties, or savings interest.
Under DRD, taxpayers will receive a visit from HMRC agents before any money is taken from their bank account to verify the debt and discuss repayment options. The rules require leaving at least £5,000 in the account to cover essential expenses. There is a 30-day window for appeals, which must have passed before HMRC can raid the account. People identified as vulnerable will not be targeted under the scheme.
Tax experts have lambasted the taxman’s debt-reclaiming powers. Dawn Register, a tax dispute resolution partner at advisory firm BDO, said: “Given the pressure on public finances, it’s clear that HMRC is determined to get tougher on those who can pay but don’t pay. The relaunch of this draconian power underlines how important it is not to stick your head in the sand and ignore HMRC demands.”
The latest figures show there is £42.8 billion in tax owed to HMRC that remains unpaid, with the amount of unpaid tax significantly higher than pre-pandemic levels. The Government wants to collect over £11 billion more in unpaid debt by the end of 2030. It has invested £630 million to improve HMRC’s ability to recover debt, including hiring 2,400 new debt management staff. ‘There will undoubtedly be practical challenges for HMRC in using these powers but we hope that the safeguards in place will prevent it from overstepping the mark,’ Register added.
There will be a broader discussion about how this tool fits into HMRC’s wider strategy to increase tax collection, but critics warn the program risks eroding trust between citizens and the tax authority if misapplied. Supporters say it is a necessary step to close stubborn gaps in compliance and reduce escalating arrears that weigh on public finances.
Officials acknowledge practical challenges, including the need to avoid disproportionately affecting vulnerable populations and to ensure clear, transparent processes for debt assessment and appeals. The DRD relaunch marks a milestone in a wider push to bolster tax collection capacity, alongside continued reform and modernization of HMRC’s enforcement toolkit.
