HMRC targets persistent tax debts
HMRC is reviewing proposals to introduce new powers for recovering lower-value, persistent tax debts from individuals and businesses that repeatedly fail to engage with collection efforts. The proposals, set out in a public consultation earlier this year, would allow HMRC to recover debts through affordable monthly instalments taken directly from a taxpayer's UK bank or building society account. The measure is intended to address debts that are difficult and costly to recover using existing enforcement methods. HMRC estimates that more than 750,000 lower-value debts, worth over £2 billion in total, remain unresolved each year after standard collection attempts have failed. Under the proposed framework, the automated direct deductions would be capped at £5,000 for individuals and £10,000 for businesses.
The proposed process would only apply after HMRC's standard collection procedures have been completely exhausted. Taxpayers would first receive a formal Pre-Deduction Notice (PDN), giving them a final opportunity to pay the debt, contact HMRC, arrange a Time to Pay agreement, or raise a formal objection. A 14-day notice period is currently proposed by the government, though several professional stakeholders are calling for an extended notice window of at least 30 days.
HMRC has also proposed safeguarding measures for individuals requiring extra support or experiencing genuine financial hardship, including mandatory affordability checks and manual case reviews where appropriate.
The technical consultation closed on 28 August 2026, and the government is expected to publish a formal summary of responses later this year.
