How HMRC can now raid your bank account – and what you need to know

Chancellor John Healey’s plan to let HMRC raid bank accounts over unpaid taxes has sparked fears it could push those on low incomes into financial hardship. Healey revealed at the Budget that the tax authority will get stronger powers to collect overdue tax “from those who can clearly afford to pay”. However, there is no guarantee that a minimum amount will be left in the account – raising fears that pensioners and people on low incomes could be left without enough money to pay rent, mortgages or utility bills. Shorts HM Revenue & Customs will also be able to take money directly from a couple’s joint bank account to pay for just one partner’s tax debts, if no sole account is accessible. Here, The i Paper takes a closer look at exactly how money could be seized – and from who. Who the policy is designed to catch The new powers are aimed recovering cash from people with low-value debts “who can afford to pay but repeatedly fail to do so”, the Treasury has said. The maximum debt pursued would be £5,000 for individuals and £10,000 for companies. But unlike previous debt recovery schemes, there is currently no plan to leave a minimum amount in someone’s account, raising fears it could leave some people without enough to pay their bills. The Government said it did not “think that a minimum account balance is a necessary safeguard” because other measures “would provide enough protection”. These will include a “tailored affordability assessment” before taking any money, and giving people the right to appeal. People will also get a 28-day notice period before deductions begin. How the tax raid could affect couples From July 2029, HMRC will be able to order banks to start taking regular deductions from a person’s current account to recover tax debt that is owed. The Government will be able to recover money from a couple’s joint bank account to pay for just one partner’s debt. It won’t recognise how much the partner who does not owe tax has contributed to the joint account. The Government has said it will “only consider joint accounts if there was no viable sole account” available. However, this could mean that debts are recovered partially from somebody who is not owing. “Where HMRC holds the necessary information” it “will notify the non-debtor prior to any deduction and provide an opportunity to object”, the Government said. Fears for pensioners and people on low incomes Nimesh Shah, of tax firm Blick Rothenberg, told The i Paper that the new powers could become a “sledgehammer” that will unfairly hit pensioners, people on low-incomes, and those with mental health issues. Shah fears there are not clear enough safeguards to stop money being taken from someone who may struggle to pay their mortgage or rent – pushing them into serious financial trouble. “My concern is that vulnerable taxpayers, pensioners, those with mental health challenges, and people facing short-term financial hardship could be caught in the net,” said Shah. “Losing access to funds can have serious implications for paying rent, mortgages and household bills.” The Low Incomes Tax Reform Group (LITRG) is also worried that non-engagement with HMRC may reflect genuine financial problems or difficulty understanding tax debt requests, rather than a refusal to pay. The LITRG said it was not clear how exactly HMRC will assess whether someone can actually afford to have regular debt payments deducted. “Safeguards must ensure that powers are used appropriately and deductions do not leave people struggling to meet day-to-day living costs,” said LITRG’s Sarah Weston. An HMRC spokesperson told The i Paper that the new powers will be “subject to robust safeguards, including checks to ensure instalments are affordable”. They said powers will only be used “after repeated attempts to contact customers who have the means to pay, but refuse to engage with us”. DWP can ask bank to check claimants’ accounts (photo: Mike Kemp/In Pictures via Getty Images) DWP powers to ‘snoop’ on benefit claimants The Department for Work and Pensions (DWP) already has new powers to ask banks to check on the accounts of benefit claimants in a bid to crackdown on fraud. The first “eligibility verification measures” (EVMs) were issued last month, asking banks to identify claimants who may have undeclared savings or remain abroad longer than benefit rules allow. These checks can be made on people receiving Universal Credit, Pension Credit and Employment and Support Allowance. The powers were introduced in legislation last year, aimed at saving taxpayers £1.2bn by the end of the decade. Charities and privacy campaign groups opposed the new powers, with Big Brother Watch claiming it amounted to a “snooper’s charter”. Disability Rights UK said it remains worried that the DWP could use EVMs to “undertake fishing exercises with absolutely no evidence of fraud” – putting claimants at risk of having payments stopped “without any good reason”. Defending the powers, Lilian Greenwood, DWP minister for fraud and debt, has said the Government was “not interested in where people do their weekly shop or how much they’re spending on new clothes”. Banks will only be asked “to identify if somebody may no longer meet the rules for the benefits they receive, allowing us to investigate further where necessary”, said Greenwood. Draft legislation on the new HMRC debt recovery plan is expected to be ready for next summer to start seizures from July 2029. The measure is expected to raise £320m by 2031-32.