The short answer
HMRC's 2026 proposal for lower-value tax debt recovery: who it targets, possible bank-account collection, safeguards and what to do if you cannot pay.
HMRC is consulting on a proposal to recover some lower-value tax debts from people and businesses who can afford to pay but repeatedly refuse to engage with HMRC. The proposal could allow HMRC, in tightly controlled circumstances, to collect money directly from a bank account or spread repayments into manageable instalments.
This is a policy proposal, not a new rule that allows HMRC to take money from every account whenever a tax bill is late. The factsheet focuses on non-engagement after repeated contact attempts and says the government is seeking views on fairness, proportionality and safeguards. If you cannot pay, contact HMRC early and use the current payment-plan route rather than waiting for a recovery action.
Proposal, not a universal rule
Possible direct collection
Safeguards are part of the design
What is HMRC proposing?
The government says most people and businesses pay what they owe, but a smaller group repeatedly does not respond to HMRC even when they can afford to pay. The consultation proposes extending existing debt-recovery powers for that situation, with a focus on lower-value debts that may be difficult to pursue efficiently through more formal enforcement routes.
The factsheet says the proposed approach could allow HMRC, in tightly controlled circumstances, to:
- collect repayment directly from a customer's bank account; or
- spread the repayment into manageable instalments instead of taking one lump sum.
The proposal is about collecting an amount that is already due. It does not create a new tax charge, change the tax calculation on a return or turn an ordinary disagreement about liability into proof that someone can afford to pay.
Who is the proposal aimed at?
The policy material is aimed at people and businesses who have an HMRC debt, can afford to pay it and repeatedly refuse to engage despite attempts to contact them. It is not described as a threshold that every taxpayer can apply to themselves, and the factsheet does not publish a simple debt amount at which the proposed power would automatically begin.
| Situation | How to treat it |
|---|---|
| You have received a tax bill and can pay it | Pay through the normal HMRC route and keep the confirmation. |
| You cannot pay the bill in full | Contact HMRC promptly and ask about a payment plan or other support. |
| You disagree with the amount | Use the relevant correction, appeal or dispute route; do not ignore the correspondence. |
| You have not responded to repeated HMRC contact | Treat the situation as urgent and seek help before a recovery action is considered. |
| You have only read a news report about the proposal | Do not assume the report is the final law or that your account is at immediate risk. |
The proposal should not be used to label everyone with a late payment as deliberately refusing to engage. HMRC's own wording distinguishes customers who need support from a minority who can afford to pay but choose not to respond.
Is this the same as Direct Recovery of Debts?
No. HMRC already has a controlled Direct Recovery of Debts (DRD) framework for certain cases involving people or businesses who can afford to pay but choose not to do so. HMRC's current issue briefing explains that the process has safeguards and is used for a small minority of cases.
The June 2026 factsheet proposes extending existing powers to address lower-value debts where current enforcement tools may not be efficient. The exact relationship between the proposal and existing DRD safeguards must be confirmed in the consultation response and any later legislation or operational guidance.
Do not copy a safeguard or threshold from an older DRD document and present it as the final design of the lower-value debt proposal. Conversely, do not assume that a consultation proposal has removed or replaced the current framework.
What safeguards does HMRC describe?
The factsheet says the proposed power would be used only after more than 10 attempts to contact a customer about paying what they owe. It also describes the following protections:
- identifying customers who may need extra support;
- giving clear and multiple opportunities to explain personal circumstances;
- setting repayments at an affordable level; and
- providing clear rights to challenge decisions, including independent review.
These are safeguards described in the proposal. They are not a checklist that proves a future action is lawful in an individual case, and they do not replace the instructions in a letter or notice from HMRC.
What should you do if you cannot pay HMRC?
Do not wait for a recovery letter before making contact. GOV.UK says you may be able to set up a payment plan to pay overdue tax in monthly instalments. The online route may ask for the relevant tax reference, UK bank details and information about income and spending. HMRC may ask for more detail where the online service is unavailable or the debt is more complex.
A safer response to a tax payment problem
- 1Check the tax, period, amount and payment date on the HMRC notice; keep the notice and any account messages.
- 2If the amount is wrong, use the relevant correction or appeal route and explain the evidence rather than simply withholding payment.
- 3If the amount is right but unaffordable, contact HMRC promptly and check the current payment-plan service.
- 4Prepare a realistic income-and-spending summary and details of other tax debts if HMRC asks for them.
- 5Keep confirmation of contact, agreed instalments and payments, and query any mismatch quickly.
The current payment-plan route is separate from the proposal. A plan is not automatically available, and the terms depend on the debt and circumstances. If the issue involves insolvency, a company, joint finances, vulnerability or a disputed liability, consider independent professional or debt advice.
Prepare an affordability conversation
A payment plan works best when the taxpayer can explain both the debt and the cash-flow problem. Prepare a list of essential household or business costs, available cash, regular income, other HMRC liabilities, secured borrowing and any major change that caused the shortfall. Use actual figures and dates rather than an optimistic forecast. A sole trader should keep business and personal cash flow separate; a company director should not move company money into a personal account without checking the legal and tax consequences.
If the debt amount is disputed, make that clear at the start. A payment arrangement does not necessarily resolve whether a return, assessment or penalty is correct. Keep the evidence for the correction or appeal while discussing how to prevent late payment. If the amount is accepted but the taxpayer needs time, ask HMRC what instalment amount, review date and payment reference apply. Missing one instalment can change the position, so set a reminder and keep the confirmation.
Why the proposal status matters
The June factsheet is evidence of policy direction, not an authority to predict an account action. It does not publish a universal lower-value threshold, a final bank-account process or a final statutory route. A headline saying “HMRC can take money” can therefore be misleading if it omits the proposed non-engagement condition, contact attempts, vulnerability safeguards and challenge rights. Use the proposal to prepare records and respond early, not to calculate an automatic exposure.
The existing Direct Recovery of Debts material is also not a template for the new scheme. It explains a current controlled process, while the lower-value proposal may change scope, value limits, notices, holds, affordability and review. Keep the two labels separate in internal policies and do not tell a customer that a proposal is already an enforcement notice.
If a future notice refers to a bank account, read the exact account, amount, tax type and release or challenge instructions. Protecting essential living or trading cash may require urgent advice, but moving funds or closing an account does not make the tax liability disappear and can create additional problems. Contact HMRC through a verified route and record the time and reference of the conversation.
What is confirmed and what is not?
Confirmed in the June 2026 factsheet
- HMRC is consulting on a way to address lower-value tax debts where customers can afford to pay but refuse to engage.
- The proposal may include direct collection from a bank account and/or manageable instalments.
- The proposal describes repeated contact attempts and safeguards for vulnerable customers and challenges.
- The consultation seeks views from individuals, businesses and representative bodies.
Not final in the published material
- The final legal power and its effective date.
- The precise debt scope and any minimum or maximum value.
- The detailed process for bank-account information, holds, collection and release of funds.
- The final relationship with existing Direct Recovery of Debts procedures.
- The practical appeal, review and affordability process.
Do not ignore an HMRC notice
The proposal is not a reason to delay payment or correspondence. Follow the current HMRC notice and payment rules that apply to your debt today. If you cannot pay, contact HMRC through the official payment-problems route and keep evidence of the conversation.
How does it relate to Self Assessment?
Self Assessment taxpayers should still follow the current return and payment calendar. The separate Payments on Account guide explains the current January and July instalments, while the Self Assessment deadlines guide covers filing and late-payment dates.
This proposal is also separate from HMRC's proposed 2029 PAYE collection reform. The Self Assessment payment reform guide concerns the possible timing of collection for people with both PAYE and Self Assessment income; it does not describe a debt-recovery power for non-engagement.
For a current cash-flow plan, use the Tax Reserve Assistant and confirm the actual liability, due date and payment options through HMRC. A planning tool cannot change the legal amount owed or guarantee that HMRC will agree instalments.
Frequently Asked Questions
Can HMRC take money from my bank account for any late tax bill?
Is the lower-value tax debt policy already law?
What should I do if I cannot pay HMRC?
Is this the same as Direct Recovery of Debts?
Does this proposal change my Self Assessment deadline?
What safeguards are proposed before HMRC recovers a lower-value debt?
Can a payment plan stop HMRC debt recovery?
What should I do if I receive an HMRC debt notice now?
This guide reflects HMRC material published on 23 June 2026 and related HMRC debt guidance updated in 2026. It should be reviewed again if the consultation response, legislation or operational guidance changes the proposal.
Official sources
Related Guides
HMRC Direct Recovery of Debts 2026 — Bank Account Rules
How HMRC Direct Recovery of Debts works in 2026, including eligibility, the £1,000 and £5,000 safeguards, objections, appeals and payment plans.
Air Passenger Duty UK 2027/28 — Rates from 1 April 2027
UK Air Passenger Duty rates from 1 April 2027: domestic, Band A, B and C fares, reduced and standard classes, higher-rate flights and private-jet changes.
UK Customs Intermediary Registration Proposal 2026
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Review notes and assumptions
Reviewed
2026-09-22
Assumptions
- This guide reflects HMRC material published on 23 June 2026 and describes a consultation proposal, not a new universal power that automatically applies to every tax debt.
- The existing Direct Recovery of Debts briefing describes current controlled debt-recovery powers; it is kept separate from the proposed lower-value debt extension.
- Whether a payment plan is available depends on the tax, debt status and the taxpayer's circumstances; this guide does not decide eligibility.