HMRC Regains Authority to Seize Funds Directly from Defaulters’ Bank Accounts

The tax authority, HM Revenue & Customs (HMRC), has been granted renewed powers to access individuals’ bank accounts and recover outstanding tax debts directly. This move, dubbed “draconian” by tax professionals, allows HMRC to retrieve funds from debtors owing more than £1,000, including those with cash ISAs, through their banks or building societies.

Initially launched in 2015, the Direct Recovery of Debts (DRD) scheme was paused during the Covid pandemic but has now been officially reinstated by HMRC following approval from Chancellor Rachel Reeves in the March 2025 Spring Statement. The primary objective of the DRD scheme is to target individuals capable of settling their tax liabilities but have persistently evaded payment.

The scheme primarily impacts individuals who submit self-assessment tax returns, such as self-employed individuals or those with substantial income from investments, rental properties, or savings interest. Before any funds are withdrawn from their accounts, taxpayers can expect a visit from HMRC agents to confirm the debt ownership, discuss repayment options, and provide an opportunity for the taxpayer to appeal within 30 days.

Under the new regulations, individuals must retain a minimum balance of £5,000 in their accounts for essential expenses, and HMRC must allow a 30-day appeal period before initiating direct withdrawals. HMRC has assured that individuals identified as ‘vulnerable’ will not be targeted under the scheme, although some tax experts have criticized the enhanced powers.

Dawn Register, a tax dispute resolution partner at advisory firm BDO, emphasized the government’s determination to crack down on delinquent taxpayers: “Given the pressure on public finances, it’s clear that HMRC is determined to get tougher on those who can pay but don’t pay.” According to government data, HMRC is owed £42.8 billion in unpaid taxes, with plans to recover an additional £11 billion by 2030.

To bolster debt recovery efforts, the treasury has allocated £630 million to enhance HMRC’s capabilities, including the recruitment of 2,400 new debt management personnel. An HMRC spokesperson affirmed that while most taxpayers comply with tax obligations, it is imperative to pursue those who have the means to pay but deliberately evade payment, with stringent safeguards in place to support taxpayers requiring assistance with payments.