HMRC confirms 4 reasons why it can take money from people's bank accounts

The HMRC has shared who all will be affected by the new regulations that will allow the direct withdrawal of funds from individuals' bank accounts. Earlier this week, the department announced that it has started again the scheme that allows the recovery of outstanding debts directly from debtors' bank accounts.

The department has resumed its practice of directly recovering unpaid taxes from individuals' bank accounts, a policy that had been paused during the pandemic. Reintroduced on Monday as part of a "test and learn" phase, the Direct Recovery of Debts (DRD) allows tax authorities to instruct banks and building societies to transfer funds from a debtor's account or cash ISA when they owe £1,000 or more and have the financial means to pay.

This measure targets those who deliberately avoid settling their tax obligations despite having sufficient resources.

HMRC has emphasised that safeguards are in place to protect vulnerable individuals and ensure that the process does not cause undue hardship.

An HMRC spokesperson said: "Most people pay tax on time and in full - but it's right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to. These powers are subject to robust safeguards and we'll continue to support customers who need help with their payments."

In its spring statement, the Government confirmed that HMRC would resume the Direct Recovery of Debts (DRD) process, targeting individuals who have the means to pay their tax debts but choose not to.

Under this scheme, banks and building societies can be instructed to withdraw funds directly from a debtor's account-including cash ISAs-when the amount owed reaches £1,000 or more.

To protect vulnerable individuals and prevent financial hardship, HMRC has implemented several safeguards.

These include acting only on confirmed debts where the appeal period has expired and the debtor has repeatedly failed to respond to contact attempts. Anyone disputing the debt retains an automatic right to appeal. Furthermore, HMRC ensures that at least £5,000 remains in the debtor's accounts to cover essential costs such as wages, mortgage payments, and other critical household or business expenses.

HMRC stated on its website: "The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so. "

Dawn Register, a tax dispute resolution partner at BDO, commented: "Given the pressure on public finances, it's clear that HMRC is determined to get tougher on those who can pay but don't pay.

"For those who are struggling financially we would always recommend that they explore 'time to pay' options to allow them to pay in instalments."

1. An individual or business has established debts of more than £1,000;

2. They've passed the timetable for appeals;

3. Repeatedly ignored HMRC's attempts to make contact;

4. A minimum of £5,000 remains in their account if payment was taken