HMRC restarts bank-direct debt recovery under DRD scheme in test phase

HM Revenue & Customs has relaunched its Direct Recovery of Debts (DRD) powers, enabling banks and building societies to withdraw funds directly from a debtor’s account when tax bills remain unpaid. The scheme targets debts of £1,000 or more and includes funds held in cash ISAs; it is expected to apply mainly to taxpayers who file self‑assessment returns or receive significant investment income, second properties and savings interest.

Originally launched in 2015, DRD was paused during the Covid-19 pandemic and was officially relaunched in a ‘test and learn’ phase after the Spring Statement in March 2025, when Chancellor Rachel Reeves granted HMRC new powers. Under the rules, a taxpayer must be left with at least £5,000 in their account to cover essential expenses, and there is a 30‑day window for tax appeals before HMRC can raid an account. Vulnerable customers will not be targeted under the program.

Before any deduction, HMRC agents will visit the taxpayer to confirm the debt, verify that it is owed and discuss repayment options. The agency says it will target those who can afford to pay but repeatedly refuse to settle their bills. It also says vulnerable customers will be shielded from the program.

Tax experts have criticised the move as draconian. 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.”

Unpaid tax backlog stood at £42.8 billion in recent figures, and the Government aims to collect more than £11 billion of additional unpaid tax by 2030. To bolster recovery efforts, HMRC has invested about £630 million and hired roughly 2,400 debt management staff. Analysts caution that practical challenges lie ahead in deploying DRD at scale, but say safeguards exist to prevent overreach. The program reflects a broader push to improve tax collection from individuals with greater means who have fallen behind.