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02 Oct 2025

HMRC restarts taking tax debts from bank accounts – what you need to know

The scheme is being trialled again as HMRC looks to claw back some of the £42.8bn in unpaid tax.

Ruby FlanaganSenior Content Producer

With a background in financial journalism across national titles, Ruby loves helping people take control of their money and specialises in pensions, tax, banking and benefits.

HMRC has relaunched its power to seize unpaid tax directly from taxpayers' bank accounts and cash Isas.

Known as the Direct Recovery of Debts (DRD) power, the practice was suspended during the pandemic but is now back in a 'test and learn' phase.

The idea of HMRC dipping into your bank account may sound alarming, but in reality this power has been used very sparingly since it was first introduced.

Here, Which? explains how DRD really works, the safeguards built in, and the practical steps you should take if you’re struggling to pay your tax bill.

HMRC's DRD power explained

DRD was first introduced by the Finance Act 2015 and started to be used by HMRC from April 2016. It requires banks and building societies to pay HMRC unpaid tax straight from an account when a person or business can afford to pay but chooses not to.

It can be applied when the tax owed is more than £1,000 and it primarily impacts self-assessment taxpayers, businesses, and individuals with significant income from investments, second properties, and savings interest.

The government confirmed its restart earlier this year in the Spring Statement, as part of plans to collect £11bn more in unpaid tax by the end of 2030.

The latest figures show that £42.8bn in tax owed to HMRC remains unpaid – significantly higher than before the pandemic.

On its website, HMRC states: 'The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.'

Between April 2016 and December 2018, DRD was used just 19 times, recovering £361,678 in total. During this period, more than 22,000 taxpayers were considered for DRD action – showing the power has been applied very sparingly despite concerns it could be more widespread.

Find out more: tax returns 2025: important deadlines

How does it work?

The tax office says it will only be applied when the person has ‘established debts’, has passed the timetable for appeals, and has repeatedly ignored HMRC’s attempts to make contact.

Before the debt is considered for a DRD, the taxpayer will have a face-to-face visit from HMRC. In this meeting, HMRC will explain what other options a taxpayer has for resolving the debt, and will assess if the person could be considered vulnerable.

If they are, the DRD is halted, and extra support will be provided.

If going ahead, HMRC will then contact your bank or savings providers to check you have the funds to pay the tax bill.

HMRC has confirmed that it would always leave at least £5,000 in the account so that it does ‘not put a hold on money needed to pay wages, mortgages or essential business or household expenses’.

Once this is confirmed, HMRC will first notify the taxpayer that the payment is 'on hold', and then contact them again to confirm the date the money will be taken.

If no objection or appeal is made within 30 days, the tax debt payment will be automatically taken from the account.

Find out more: how to pay off your debts

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How to appeal

If you disagree with the DRD, then you can object to it by either sending a formal objection to HMRC or by filing an appeal with the County Court. According to the guidance, you can object if:

You've already paid the debt (all or part of it)
You don't think you owe the amount they say you do
The DRD action will cause you financial hardship
There's a third party who has a stake in the affected accounts

4 steps to take if you can't pay your tax bill

It can be scary not being able to cover your tax bill, but you can't stick your head in the sand and ignore it. Instead, you should follow these steps.

1. Make sure you file on time

Even if you can't pay, always file your tax return (if required) by the deadline to avoid an immediate £100 late-filing penalty. It's important to note that this filing penalty applies even if you have no tax to pay.

If you fail to submit within three months, then you are charged £10 per day up to a 90-day maximum – so you could be charged £900.

Failing to file after six months and you face a £300 penalty or 5% of the tax due, whichever is higher. You face this again if you fail to file your return after 12 months, and increased penalties can apply if you are deliberately concealing information.

2. Contact HMRC

If you have an outstanding tax bill or are worried you are going to miss a future payment, then you'll need to contact HMRC as soon as you can.

The longer you leave your tax debt unpaid, the more it will grow as interest and late payment penalties will be added.

You should call the relevant helpline number for the tax payment you are struggling with. You can find all these on the Gov.uk website.

3. Ask for a ‘time to pay’ arrangement

This is a formal agreement with the tax office that allows you to pay your tax bill in affordable monthly instalments. You can also be given extra time to pay.

You need to tell HMRC how much you can afford to pay, and how long you will need to clear the debt.

HMRC will expect you to use any available savings or investments to cover it, so if you have some you will need to use it.

If you owe £30,000 or less for self-assessment and are within 60 days of the payment deadline, you may be able to set up a payment plan online using your Government Gateway account.

If you owe more than £30,000, have missed the deadline, or can't use the online service, you must call HMRC’s payment support line.

4. Seek advice

Time to pay agreements aren’t given to everyone and are granted on a case-by-case basis.

If your debt is large, your circumstances are complex, or you are struggling to negotiate with HMRC, you can get support and advice from a non-profit debt advice service like Citizens Advice, StepChange Debt Charity, or Business Debtline (for self-employed/business tax).