Labour hands HMRC power to empty bank accounts for tiny tax debts

Labour is preparing to give HM Revenue and Customs the power to take unpaid tax straight from people’s current and savings accounts, aiming to recover about £4billion from millions who have ignored payment demands.

Chancellor measures due in next week’s Budget would let the taxman withdraw money automatically, including for comparatively modest bills, according to reporting carried by GB News. Ministers want the crackdown after concluding that existing limits have shielded large numbers who simply disregard the demands, knowing smaller sums are rarely chased hard.

At present HMRC can only seize funds where the debt exceeds £1,000 and must leave the taxpayer with at least £5,000 once the money is taken. Those thresholds would be torn down. The minimum debt could fall to as little as a few pounds. Officials would also be able to recover accumulated fines and interest alongside the original liability, all without a judge’s say-so.

An estimated 4.8 million people and companies each owe less than £10,000. Their combined liabilities come to roughly £4billion. For individual taxpayers the typical outstanding bill stands at just £950. Chasing those sums through debt collectors has proved slow and costly, so the Government wants a direct route into the bank.

HMRC is exploring tie-ups with credit reference agencies so it can see income and outgoings and set monthly instalments. Earlier talk suggested deductions might be capped at half of disposable income. No court approval would be needed before the money moves. The taxpayer would have to fight afterwards if they believe the deduction is wrong.

Britain already asks ordinary workers to meet their obligations on time. A system that lets persistent non-payers hide behind high thresholds while everyone else covers the shortfall is not fair. Direct recovery for genuine debts is one thing; stripping away basic safeguards and handing an error-prone department automated reach into family accounts is another. The state should collect what is owed without treating every disputed bill as fair game for instant seizure.

Dan Neidle, founder of Tax Policy Associates, said the principle was sound yet warned: “I do have concerns that an automated system is going to struggle to distinguish deliberate non-payment from illness or missed correspondence. It would be good to understand the safeguards that will be put in place.” “There is a real problem with people simply not paying their tax, and the rest of us pick up the bill.”

Critics warn of errors and empty accounts

The Association of Taxation Technicians urged HMRC to fix its own failings first. Jon Stride, chair of the ATT’s Technical Steering Group, pointed to debts still being chased while claims sit unresolved because of departmental delays or mistakes, plus the familiar difficulty of even contacting the tax office. Fiona Fernie, a partner at Blick Rothenberg, noted that disputes are often far from clear-cut and said the more direct and automated the process becomes, the greater the risk that innocent taxpayers lose money before liability is settled.

Shadow Chancellor Andrew Griffith attacked the plans as handing the taxman powers “to empty your bank account over a few hundred pounds and leave you with nothing to pay the rent”, calling the scrap of existing safeguards and the credit-agency link-up “outrageous”. HMRC already has a Direct Recovery of Debts route that was suspended in the pandemic and later restored; under current rules seized funds stay frozen for 30 days while objections can be lodged. Debt adviser Claire Cox has stressed that, unlike ordinary creditors, HMRC needs no county court judgment before it acts. The Budget will show how far Labour intends to push the new reach.

Original source: GB News

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