Households and firms face a new reality as the state leans on banks, data and face‑to‑face checks to collect debts.
Britain’s tax authority will restart a little‑used power that lets it order banks and building societies to hand over money from customers’ accounts. The move targets unpaid liabilities at a time when the tax gap stands at an estimated 5.3 per cent, or £46.8bn in 2023/24, and comes with promises of strict checks and a right to appeal.
What is changing and when
The tax authority is rolling out direct recovery orders under a “test and learn” approach after pausing them during the Covid years. These powers have existed since 2015 but saw very limited use early on: just 19 cases between 2015 and 2018 recovered £361,678 in total. The restart signals a sharper focus on debts where officials judge the debtor can pay but has chosen not to.
Direct recovery will target those owing at least £1,000 who have ignored repeated contact and have the means to settle.
Officials say trained agents will visit at home or work before any money moves. That visit is designed to verify the debt, discuss affordable repayment, and check for vulnerability or hardship. Only after this step would the taxman issue an order to a bank, building society or ISA provider.
Who could be affected
Officials frame the policy as aimed at a minority who have the funds but refuse to engage. The safeguards point to a narrow target, yet the reach includes individuals, sole traders and companies, and it spans current accounts, savings and ISAs.
- Minimum debt: £1,000 or more.
- Engagement: repeated contact ignored.
- Ability to pay: evidence shows the debtor can settle.
- Balance protection: at least £5,000 must remain across accounts after any transfer.
- Right to challenge: a 30‑day window to object before funds move.
At least £5,000 must remain in the account(s) after any recovery, creating a buffer to protect day‑to‑day living costs.
How the mechanism works
Officials gather data from tax records and banking information to assess a case. If they believe direct recovery is appropriate, an agent arranges a visit. During that meeting they confirm the sum due, consider payment plans, and check for financial difficulty. If concerns arise—such as illness, loss of income, or safeguarding issues—they can pause enforcement and signpost support.
If they proceed, the authority issues an order to the bank. You then have 30 days to object. During that period, the institution effectively earmarks funds but does not transfer them. A caseworker assesses the objection and issues a decision, typically within the same timeframe. You can take a further challenge to a county court on specific grounds if you still disagree.
Money will not move during the initial 30‑day challenge window, and you can escalate to a county court if needed.
Why now: the push to close the gap
Ministers want to raise billions by narrowing the difference between tax owed and tax collected. The current gap—5.3 per cent of the total tax take—equates to £46.8bn in 2023/24. A broader package includes more compliance staff and stepped‑up fraud prosecutions. A high‑profile tool like direct recovery targets non‑payers without blanket measures such as higher rates for everyone else.
Key figures at a glance
| Measure | Figure |
|---|---|
| Estimated tax gap (2023/24) | £46.8bn (5.3%) |
| Government target from gap measures | £7.5bn |
| Minimum debt for recovery | £1,000 |
| Protected balance after recovery | £5,000 |
| Initial objections window | 30 days |
| Historic use (2015–2018) | 19 cases, £361,678 recovered |
Safeguards and concerns
Policy groups welcome targeted enforcement against deliberate non‑payment but want clearer rules on vulnerability. The Low Incomes Tax Reform Group has asked for more detail on how officials will identify at‑risk taxpayers and what support they will receive. The authority says it takes a sympathetic approach when illness, bereavement or business shocks cause arrears, and it stresses face‑to‑face checks and affordability assessments before any order.
Privacy campaigners also worry about the direction of travel. Later this year, the Department for Work and Pensions is expected to gain parallel powers to recover funds from bank accounts under the Public Authorities Bill. Critics warn that wider access to bank data and direct deductions could expand state oversight of personal finances.
What this means for your money
If you keep up with your returns and engage early when a bill looks wrong, your risk is low. The recovery tool zeroes in on people and firms that ignore letters and calls despite healthy balances. Even then, the £5,000 buffer rule puts a floor under how much can be taken.
For businesses, the policy creates an extra reason to ring‑fence cash for VAT, PAYE and corporation tax. Mixing tax liabilities with working capital raises the chance of a crunch when an unexpected demand lands. For households, it underscores the value of opening post promptly and checking the detail of any assessment.
Worked examples
- Individual with £9,500 across accounts and a £2,000 bill: recovery could proceed because £7,500 would remain above the £5,000 buffer.
- Sole trader with £6,000 across accounts and a £2,000 bill: recovery would not proceed because only £4,000 would remain, which breaches the buffer rule.
- Company owing £15,000 with £50,000 on deposit: recovery could target part or all of the debt after a visit and affordability checks.
If you get a letter or visit
Act quickly. Call the number on the letter, or speak to the visiting officer, and set out your position with evidence. Keep records of income, expenses, and any change in circumstances.
Ask for a payment plan if you can pay in instalments. If the calculation looks wrong, request a review and submit documents to support your case. Use the 30‑day window to file a clear objection if you disagree with an order. Consider independent advice if you feel overwhelmed or unwell.
How this fits into the wider enforcement picture
The restart of direct recovery sits alongside routine tools such as time‑to‑pay arrangements, penalties, and court‑based enforcement. Officials say they will reserve bank account deductions for cases where engagement has failed and assets exist. The promise is a targeted approach: persuasive first, forceful only when other routes stall.
Risks, trade‑offs and practical tips
There is a risk of error whenever automation meets enforcement. The planned home or workplace visit helps reduce that risk, and the appeal window provides a second check. People who fear misidentification can minimise exposure by keeping tax records current, updating addresses quickly, and responding to letters on time.
On the positive side, the policy aims to shift the burden from compliant taxpayers to those gaming the system. If it works as billed—rarely used, tightly controlled, and focused on clear‑cut cases—it could recoup millions without broad‑brush tax rises.
£5,000 buffer sounds reassuring, but rent and payroll can wipe that fast. If HMRC ‘earmarks’ funds for 30 days, does that effectively freeze direct debits? This could definately snowball for small firms even before a caseworker decides.
19 cases in three years, and now a big restart—test and learn on our bank accounts?