Measure
The Chancellor today announced new powers for HMRC to recover lower value tax debts from taxpayers who can afford to pay but repeatedly fail to do so, by taking money directly from their bank and building society accounts. The key elements of this power are as follows:
The measures are projected to raise approximately £300m per year of additional tax once in full operation.
Deposit-takers, including banks and building societies, as well as taxpayers (i.e. both companies and individuals) who owe tax debts to HMRC.
The changes will apply in a “test and learn” phase from Summer 2028, with the phased implementation starting from 2029 for companies and 2030 for individuals.
The government will publish draft legislation for technical consultation in Summer 2027 with a view to including this policy in the next available Finance Bill.
The announcement comes hot on the heels of a National Audit Office (NAO) report (‘HMRC’s management of tax debt’, 23 October 2026) which found that since the Covid-19 pandemic there has been growing non-engagement from tax debtors and that tax debts are becoming older and harder to collect. The NAO highlights that tax debt over a year old and not in a payment plan has risen from £5.3bn (28% of the tax debt balance) at the end of 2019-20 to £18.6bn at the end of 2025-26 (42% of the tax debt balance).
The present announcement was not unexpected and follows an HMRC consultation over the summer.
Ensuring recovery of tax debts is an important element in reducing the tax gap, 10% of which (£5.7bn) in 2024-25 relates to non-payment. However, concerns have been expressed about the need for clear safeguards to protect vulnerable taxpayers and the difficulty of distinguishing deliberate non-engagement from an inability to engage as a result of ill health, outdated contact details, financial abuse or other vulnerability.
From the perspective of deposit-takers, the key concerns with this measure are likely to be:
- The need for clear operational rules and lines of accountability as between HMRC and deposit-takers. In particular, firms will be looking for confirmation that the responsibility for determinations of affordability, vulnerability, account selection and payment schedules lies with HMRC.
- Performing their statutory duties may still result in firms receiving customer complaints, triggering complaint-handling and potential escalation procedures.
- The cost and complexity of implementing the systems changes required, on top of various other tax and regulatory system changes (such as ISA digitalisation, CARF/CRS 2.0, mandatory payrolling of benefits and e-invoicing).
This proposal will benefit from early industry engagement, a realistic implementation timetable set via secondary legislation, clearly defined responsibilities, robust account-matching safeguards and clear prioritisation rules against competing legal obligations (such as court orders, attachment of earnings orders, child maintenance deductions, insolvency processes and fraud-related freezes). Consideration should also be given to statutory protection for deposit takers from liability to customers or third parties for losses arising from following any HMRC instructions that are found to be incorrect or unlawful.