Can HMRC Take Money From Your Bank Account?

Can HMRC take money from your bank account today? Yes, but only in narrow cases, under a power called Direct Recovery of Debts (DRD). DRD lets HMRC require a bank or building society to pay unpaid tax straight from someone’s current account, savings account or cash Individual Savings Account (ISA).

HMRC’s issue briefing on DRD says it’s for people and businesses that have the money to pay but choose not to.

DRD took effect in 2015 and was paused during the pandemic. HMRC restarted it in a controlled trial in September 2025, then widened its use from April 2026.

Scotland is outside DRD and recovers tax debts through its own process, called a summary warrant, so the power applies only to the rest of the UK.

Seeing Your Data Isn’t the Same as Taking Money

It helps to separate two different activities. The first is information: HMRC collects data so the tax it charges is correct. The second is enforcement, which means recovering money someone already owes.

Savings interest is the clearest example. Banks and building societies send HMRC a yearly figure for the interest each customer earned, once the tax year closes. HMRC uses that to work out any tax due, usually collecting it through your tax code, the code your employer or pension provider uses to deduct tax.

If a tax calculation built on that data looks wrong, the site’s guide to checking and challenging an underpaid tax bill explains how to query it.

Alongside the new power, the Budget added a plan to consult on wider third-party reporting of property income.

Matching data is about getting the bill right. Taking money from an account needs a separate legal power with its own conditions, set out in the next section.

The two do meet in one place. The new power relies on affordability checks, and the government’s response to the consultation says credit reference agency data can support them. It hasn’t settled on a final method yet.

What Has to Happen Before HMRC Can Act?

Under the current DRD rules, all of these need to apply before money can be frozen:

• a debt over £1,000 that’s established, with the time limit for appeals passed
• repeated attempts by HMRC to get in touch have been ignored
• the person can afford to pay but is choosing not to
• for an individual, HMRC agents have visited them face to face

That visit confirms who they are and that the debt is theirs. HMRC also uses it to discuss ways to settle, including a Time to Pay arrangement, which is HMRC’s name for a payment plan. Anyone found to need extra support is taken out of DRD and offered help, though DRD can resume if they don’t engage with it.

Businesses set up as companies or limited liability partnerships usually go without a visit. They’re still given several chances to settle before HMRC contacts their bank.

HMRC has to leave a combined balance of at least £5,000 across the person’s accounts, so DRD can’t take everything they have.

There’s then a 30-day window to object once HMRC confirms it has frozen the money. Funds stay in the bank during that time and nothing moves until it ends. If HMRC turns the objection down, the person can take it to a county court, where hardship is one of the grounds allowed.

HMRC’s briefing says DRD was used only 19 times over two years ahead of the pandemic pause.

What Did the Budget Change?

What the Budget confirmed is a second, separate power aimed at smaller debts. Where DRD takes a one-off sum, the Budget policy costings say this one would take automated monthly instalments.

HMRC’s factsheet says the new power would:

• apply only to final, no-longer-disputed debts no larger than £5,000 for a person or £10,000 for a company
• kick in only after standard collection has run its course, typically about 10 attempts to reach the person across 9 to 12 months
• drop away if the person gets in touch with HMRC about the debt, at any stage
• reach companies first, with individuals following later
• use an affordability check to decide whether to deduct anything, how much and for how long

Start dates are set by tax in the costings. VAT (Value Added Tax) and PAYE (Pay As You Earn) debts come first, from July 2029. Self Assessment and Simple Assessment debts follow in April 2030, with Corporation Tax, the tax on company profits, in April 2031.

Self Assessment is the tax return system many self-employed people use. Simple Assessment is a bill HMRC issues when it can’t collect tax through your tax code.

Promised safeguards include at least 28 days’ notice before deductions start and manual review for anyone needing extra support. Where someone says money was taken by mistake, HMRC plans to refund it first while it investigates.

The detail isn’t settled yet. The government plans to consult on a draft Code of Practice, setting out how the safeguards work, together with draft law in summer 2027.

Parliament still has to pass the power into law through a future Finance Bill, the annual bill that puts tax changes into effect.

Unlike DRD, the new power comes with no stated minimum balance; the factsheet relies on affordability checks instead.

The government’s response says it doesn’t currently see a minimum balance as necessary, though it’s keeping the idea under review. In June, the Low Incomes Tax Reform Group (LITRG), part of the Chartered Institute of Taxation, flagged the missing minimum.

LITRG has also asked HMRC to check that a debt is correct and not in dispute before any recovery starts.

HMRC’s June consultation put lower-value tax debts at around £4 billion, held by 4.8 million people and companies. Press reports before the Budget added that individuals owed about £950 on average, and that earlier proposals had floated capping deductions at half of disposable income. No cap figure appears in the factsheet.

Worked example: two debts, two outcomes

Priya is self-employed and owes £1,800 on her Self Assessment bill for the 2024 to 2025 tax year, which was due on 31 January 2026. She’s ignored HMRC’s letters and calls, and has £6,200 spread across her accounts.

Her debt is over £1,000, so DRD could apply after a face-to-face visit. Because £5,000 has to stay in her accounts, HMRC could freeze £1,200 at most. The other £600 would still be owed, with interest building on it.

Tom owes £700 on his bill for the same tax year. That’s under £1,000, so DRD can’t touch it today.

A debt that size could fall within the new power, but Self Assessment debts aren’t due to come into scope before April 2030. Even then, contacting HMRC to agree a payment plan would take him out of the process.

Worried HMRC Can Take Money From Your Bank Account?

If you don’t owe HMRC anything, neither power is aimed at you. The exception to watch is a joint account shared with someone who does owe tax. Under both the current rules and the new plans, the other account holder is told and can object.

Think you’ve overpaid instead? You may be owed money back, and the site’s tax refund FAQs explain how to check and claim.

If you do owe tax, ignoring HMRC’s letters is exactly what both powers are built to catch. Contacting HMRC early is likely to keep you well clear of them.

GOV.UK explains what to do if you can’t pay your tax bill on time, including setting up a payment plan. If money’s tight, GOV.UK also points to free debt advice services in each part of the UK.

Key Takeaways

• HMRC can already take unpaid tax from bank accounts under Direct Recovery of Debts, but only for debts over £1,000 owed by people who can pay and refuse.
• At least £5,000 has to stay across your accounts, and individuals get a face-to-face visit first.
• Budget 2026, delivered on 28 October 2026, confirmed a separate power to collect lower-value tax debts in monthly instalments.
• It isn’t due to start until July 2029, with Self Assessment debts from April 2030, and its safeguards are still being drafted.
• Banks reporting your savings interest to HMRC is about checking tax, not taking money.
• Contacting HMRC early, and asking about Time to Pay, is likely to keep you clear of both powers.