HMRC Relaunches Their Power to Recover Unpaid Tax Directly from Taxpayers’ Bank Accounts

HM Revenue & Customs (HMRC) has reinstated its Direct Recovery of Debts (DRD) scheme, allowing it to recover unpaid tax directly from individuals’ bank accounts, including cash ISAs, without needing court approval which could be seen as overly aggressive.

This power applies where a taxpayer owes at least £1,000 in unpaid tax and has ignored repeated requests to settle the debt. Banks and building societies will be required to transfer funds to HMRC directly, bypassing the account holder.

Originally introduced in 2015, the DRD scheme was paused during the COVID-19 pandemic but has now been relaunched following an announcement in the Spring Statement in March 2025. HMRC has said this will begin with a "test and learn" phase.

Who is likely to be affected?

The scheme is primarily aimed at individuals who are required to file a self-assessment tax return and who have not responded to multiple payment requests. This includes:

• Self-employed individuals

• People with significant income from property, savings, or investments

• Taxpayers who have the means to pay but have chosen not to

What protections are in place?

HMRC has stated that safeguards will apply. These include:

• A minimum of £5,000 must remain across all the taxpayer’s accounts after any funds are withdrawn

• The taxpayer will receive a series of letters and warnings before any action is taken

• The scheme is intended to target deliberate non-payment, not individuals facing genuine financial hardship

What action do I need to take?

If you are behind on tax payments, it is important to seek our advice if you are at all unsure about your tax position.

• Respond promptly to all HMRC correspondence

• Reach out to HMRC to discuss a Time to Pay arrangement if needed

• Ensure that tax returns are filed on time to avoid estimated bills

If you’re concerned about how this change may affect you, please don’t hesitate to contact us. We’re here to help you stay informed and compliant.

Article written by Heather Langtree