The UK government is set to grant HM Revenue & Customs (HMRC) expanded powers to access taxpayers' bank accounts in order to recover unpaid tax debts, according to reports ahead of the upcoming Budget. The new measures aim to tackle an estimated £4 billion owed in smaller tax debts by allowing HMRC to automatically deduct owed amounts directly from current and savings accounts.

Currently, HMRC has the authority to recover tax debts exceeding £1,000 from bank accounts, provided the debtor retains at least £5,000 after the deduction. These powers have been in place since 2015 but were temporarily suspended during the COVID-19 pandemic. They were reintroduced in 2025 by the Labour government. The planned changes would lower the threshold for intervention, potentially enabling deductions for debts of just a few pounds in cases where taxpayers have repeatedly failed to engage with HMRC. The scope of deductions could also extend to include outstanding fines and accrued interest.

The anticipated policy shift follows a summer consultation by HMRC on reducing the debt recovery threshold to more effectively address lower-value arrears. HMRC's analysis indicates that roughly 4.8 million individuals and companies carry tax debts below £10,000, with the average debt among individuals around £950.

While the government positions these powers as a tool to recover otherwise uncollected revenue, tax experts and advocacy groups have raised concerns about the potential impact on vulnerable taxpayers. The Low Incomes Tax Reform Group, which supports those unable to afford professional tax advice, has stressed the need for robust safeguards to protect individuals living on limited incomes. Critics also warn the system may struggle to differentiate between intentional non-payment and legitimate circumstances such as illness or financial hardship.

Nimesh Shah of tax advisory firm Blick Rothenberg voiced apprehension that the expanded authority could be applied too broadly, likening it to a “sledgehammer” approach. He also noted risks that HMRC might seek to collect incorrect amounts if tax assessments are inaccurate, compounding difficulties for taxpayers.

The tax authority has faced scrutiny in the past for alleged misuse of its powers, including instances of data access without clear justification and errors in tax code calculations, which have fueled calls for more cautious implementation.

A Treasury spokesperson declined to comment on the specifics of the forthcoming Budget announcements, reiterating that tax policy decisions fall within the Chancellor of the Exchequer’s remit to announce during fiscal events.