If you owe HMRC money and you have been ignoring the letters, the rules around what can happen next are tightening. At Budget 2026 the Chancellor, John Healey, set out plans for stronger powers to collect overdue tax “from those who can clearly afford to pay”, including the ability to order banks to make regular deductions from a current account. The detail on how HMRC can take money from your bank account has been reported in national coverage, including The i Paper on 4 November 2026, and it has understandably worried a lot of small business owners.
Here is what is already in force, what is being planned, and what to do if you are behind.
HMRC already has the power to recover tax directly from bank and building society accounts. This process, known as direct recovery of debts, allows HMRC to collect qualifying unpaid tax debts directly from a person’s bank or building society account. It is not a new idea and applies to qualifying tax debts of more than £1,000.
Crucially, it comes with a process. HMRC is expected to have made repeated attempts to contact the debtor before this stage and to have given clear notice of its intention to act. Under the existing safeguards, at least £5,000 must remain available across the person’s accounts. There is also a 30-day window in which to object to the proposed recovery. If HMRC rejects the objection, the taxpayer can appeal to the County Court.
So if you have arrears, the honest position is this: the power to take money from an account is not hypothetical, and it has been available for years.
The change is not the principle; it is the automation and the reach. As reported by The i Paper, the plans include:
That last point is the one drawing the sharpest criticism. Consumer and tax experts have warned that pensioners and lower income households could be left short of the money they need for rent, mortgage or utility bills.
Two things are worth being precise about. The plan targets lower value debts where the taxpayer can afford to pay but has repeatedly failed to engage. And the measure is a plan announced at the budget, with the deduction regime dated from July 2029, not something that starts next month. Anyone telling you HMRC is emptying accounts this week is overstating it.
The profile that gets caught is not the person who cannot pay. It is the person who can pay, has been contacted repeatedly, and has not responded. In practice that often looks like:
The new policy is intended as a last-resort measure. According to the government’s consultation response, taxpayers will typically have received at least 10 contacts, and their debt will generally be at least nine months old before this process is considered. Those who engage with HMRC to manage their debt, including through a payment arrangement, will not be considered for this particular policy.
Normally, company tax debts remain the responsibility of the company rather than its directors personally. However, HMRC can pursue directors personally in specific circumstances, including certain PAYE liabilities, fraudulent VAT activity and cases involving tax avoidance or evasion. If you are a director dealing with company arrears, it is important to understand your personal position rather than assume you are automatically protected.
Read: HMRC Automatic Bank Deductions: What Beneficiaries Must Know Now
Whatever the automation looks like, the safeguards that exist today tell you the sequence to expect:
If you are wondering how HMRC can raid your bank account, it is important to understand that direct recovery is not supposed to happen without prior contact and safeguards. Under existing rules, HMRC must follow a defined process, including attempts to contact you, notification of its intention to recover the debt and an opportunity to object.
The practical message is blunt: the letters that feel like noise are the evidence that the process is running. Ignoring them does not pause it; it simply uses up the stages where you still have leverage.
If you are concerned about HMRC enforcement or believe your tax affairs may be under investigation, professional HMRC investigations support can help you understand your position and the options available.
Talk to HMRC before enforcement. A time to pay arrangement lets you spread the debt over an agreed period. It is easier to get before enforcement action starts than after, and HMRC’s willingness depends on you having a realistic proposal and keeping to it.
For wider support with managing outstanding tax liabilities and staying compliant, explore our tax services.
Get the numbers straight first. A time-to-pay proposal needs to show what you can genuinely afford each month, not what you wish you could afford. That means knowing your real cash position, not last quarter’s management accounts.
Related Article: Changes to Lower Value Tax Debts: HMRC Bank Deduction Plans
Deal with the cause, not only the arrears. If the same shortfall recurs every quarter, an instalment plan buys time but does not fix anything. This is where a cash flow review earns its keep, because a plan built on money you do not have fails at the second instalment.
Use the appeal routes where they exist. If the debt figure is wrong or a penalty is unfair, say so within the window. Appeals are time-limited, and the deadlines are not sympathetic.
Do not move money to avoid a deduction. Transfers designed to defeat recovery are treated seriously and make a bad position worse.
HMRC already has the power to recover tax directly from a bank account, and it uses it. The Budget 2026 plans would make that recovery more automated, extend it to joint accounts in defined circumstances, and set it running from July 2029. The protections that matter most are the ones you trigger yourself: telling HMRC you have a problem, with numbers and a proposal, before the process reaches the stage where the decision is made for you.
If you are behind on tax and want a second pair of eyes before you call HMRC, we can look at the position with you, including the director exposure question if there is a company involved.
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