HMRC targets smaller tax debts

HMRC has indicated that more resources are being directed towards smaller outstanding debts where there has been little or no response to earlier contact. Cases may be moved more quickly from informal reminders to formal action by Debt Management, using the existing range of collection tools. This includes renewed use of the direct recovery of debts power, which allows HMRC to remove funds directly from bank and building society accounts, including ISAs, once tax and tax credits debts exceed £1,000 and appeal rights have expired, provided that at least £5,000 is left across all accounts. Before using this power, HMRC must visit the taxpayer, confirm the position, discuss options such as Time to Pay and consider whether there are any indicators of vulnerability.

Direct recovery sits alongside other measures such as coding out PAYE underpayments, taking control of goods, court proceedings and insolvency where appropriate. Safeguards apply: when direct recovery is initiated, funds are effectively frozen for 30 days while objections can be made, and there is a right of appeal to the county court on limited grounds such as hardship or third‑party rights. These protections operate within the wider Self-Assessment and appeals framework, including the standard 30‑day time limit to challenge assessments and decisions.

The operational shift takes place against the backdrop of the government’s consultation on HMRC powers and tax administration, which is considering whether the current mix of powers, safeguards and oversight remains proportionate and consistent across taxes. The consultation builds on earlier moves to harmonise penalties, information‑gathering powers and tribunal processes, and the way tools such as direct recovery are now used is likely to inform that debate. Reviewing outstanding balances, ensuring contact details held by HMRC are up to date, and engaging promptly where debts arise should help reduce the risk of unexpected enforcement action as these developments progress.