Millions of taxpayers face direct deductions from their bank accounts under new HMRC debt plans

Up to 4.8 million individuals and businesses owing around £4 billion in tax debts could potentially fall within the scope of new HMRC powers allowing money to be taken directly from taxpayers' bank accounts.

A government consultation on tackling lower value tax debts, which closes on Friday 28 August 2026, proposes that, after HMRC's existing debt collection processes have been exhausted and where taxpayers have repeatedly failed to engage, the department could instruct banks and building societies to make direct monthly deductions from a taxpayer's account to recover outstanding debts.

HMRC estimates that the measures could apply to debts of up to £5,000 for individuals and £10,000 for businesses.

In its response to the consultation, BDO has warned that the Government must introduce stronger safeguards before giving HMRC the power to recover tax debts through direct monthly deductions.

Dawn Register, a Tax Dispute Resolution Partner at BDO, said:

"These proposals would give HMRC the ability to recover lower value tax debts by taking money directly from individuals' and businesses' bank accounts. For millions of taxpayers, that represents a significant new intervention by the tax authority and it is essential that the safeguards are robust.

“While we support HMRC taking action against those who deliberately refuse to pay tax or engage with the tax authority, the proposals raise important questions around affordability, taxpayer rights and whether HMRC has sufficient resources to operate the system fairly.

“One of the more controversial aspects of these proposals is that money could be taken directly from bank accounts through an automated process. That makes it particularly important that taxpayers are given adequate notice, clear information about their rights and a meaningful opportunity to challenge HMRC's view of the debt before any deductions are made.

"Taxpayers should be able to appeal not only the deduction notice itself but also whether the amount HMRC says is owed is correct."

BDO believes further detail is needed on how the proposals will work in practice and has called for HMRC to publish more information about the taxpayers who could be affected. In particular, the firm says HMRC should provide a breakdown of how many of the 4.8 million taxpayers in scope are individuals and how many are businesses.

Register added:

"Before introducing powers to access funds directly from taxpayers' accounts, HMRC should be clearer about who would be affected and why existing debt collection tools are not achieving the desired results.

"There is also a fundamental question about whether sufficient effort has been made to understand why many taxpayers are not engaging with HMRC in the first place. Any solution should address the root causes of tax debt, not simply the symptoms.

"We support fair and effective tax collection. However, powers that allow HMRC to reach directly into taxpayers' bank accounts should only be introduced when the safeguards, appeals process and affordability protections are fully developed and clearly understood.

“Before any full-scale roll out of these plans, we would strongly suggest this is trialled for corporate debts first before being used for individuals."

BDO's response identifies three principal concerns with the proposals:

• Whether HMRC has sufficient resources and trained staff to administer a new debt recovery regime effectively
• How affordability will be assessed fairly, particularly for vulnerable taxpayers and businesses facing temporary cash flow pressures
• The need for a full right of appeal, including the ability to challenge the underlying tax debt before money is deducted from a bank account.

The firm also argues that more consideration should be given to existing alternatives, including Time to Pay arrangements, which HMRC has previously reported achieve high levels of successful repayment.
 

ENDS

Note to editors

BDO LLP operates in 19 offices across the UK and Ireland, employing 8,500 people. It has revenues of £1.1bn.

It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing (CR&O) services predominantly to the entrepreneurial, ambitious and growing mid-sized businesses that are driving growth in the UK and Ireland economies.

BDO LLP is the UK and Ireland member firm of the BDO Global network.

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The BDO international network provides business advisory services in 169 countries and territories, with 95,000 people working out of 870 offices worldwide. It has revenues of US$11bn.

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