HMRC relaunches Direct Recovery of Debts to seize funds from bank accounts and ISAs

London — HM Revenue & Customs will again have the power to take money directly from bank accounts and cash ISAs of taxpayers who owe tax and have repeatedly refused to pay, a move described by some experts as draconian.

Under the Direct Recovery of Debts (DRD) scheme, which was launched in 2015 and relaunched in 2025 after a Covid pause, HMRC can deduct funds from a debtor’s account if they owe £1,000 or more and have ignored warnings. Banks and building societies will be required to process the transfers after HMRC agents visit the taxpayer to confirm the debt and discuss repayment options. The rules require that a person be left with at least £5,000 in the account to cover essential expenses, and there is a 30-day window for tax appeals before any seizure can occur. Vulnerable customers will not be targeted under the scheme.

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Tax experts have criticized the debt-recovery 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, a level higher than before the pandemic. The government has signaled it wants to collect more, with a target of over £11 billion in additional unpaid debt by 2030. To support debt recovery, the government has invested about £630 million and hired approximately 2,400 new debt-management staff.

There will undoubtedly be practical challenges for HMRC in using these powers, but safeguards aim to prevent overreach, Register added.

The policy was first introduced in 2015 and paused during the pandemic. It was officially relaunched in 2025 after being empowered by Chancellor Rachel Reeves in the Spring Statement in March 2025, as part of a broader push to improve the tax authority’s ability to recover debt from those who owe money but have the means to pay. The government says the DRD relaunch will target those who need to file a self-assessment tax return or who derive significant income from investments, second properties, and savings interest, while emphasizing that the scheme will only apply to debts considered recoverable after warnings and opportunities to resolve the issue.

Critics argue the approach risks disproportionate impact on ordinary savers and small business owners, and they warn about potential mistakes in identifying the correct debtor. Supporters, however, say robust safeguards, new debt-management staff, and a measured, test-and-learn approach will help minimize errors while tightening revenue collection.

As the program proceeds through its test phase, observers will be watching how HMRC balances rigorous enforcement with protections for those who may be vulnerable or unable to pay, and whether the reforms translate into meaningful reductions in unpaid tax.

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