From July 2029, HMRC will be able to automatically deduct unpaid tax straight from a bank account, without going to court first, where the taxpayer has the means to pay but has not engaged despite repeated contact. The power, confirmed by Chancellor John Healey in last month's Budget, covers debts up to £5,000 in an individual's current or savings account and up to £10,000 in a company account. Tax advisers at MHA have already raised a fair question in response: not whether HMRC should chase unpaid tax, but how confident anyone can be that the debt figure HMRC is acting on is actually right.
What changed
HMRC already has a direct recovery of debts power today. It can take money straight from an account, but only where the debt is over £1,000 and only if at least £5,000 is left in the account afterwards, a safeguard that in practice rules out using it against anyone without a healthy buffer sitting in their business or personal account. The new power removes that friction for smaller, more straightforward debts. It is pitched specifically at the £5,000-and-under (individual) and £10,000-and-under (company) range, triggered not by the size of the debt but by a taxpayer's failure to respond despite being able to pay, and it works through recurring deductions rather than a single lump sum. James Kipping, head of private client at MHA, called this the real shift: "the significant development is the proposed creation of something approaching an HMRC-imposed payment plan, with the department determining affordability and then causing recurring payments to be extracted from the taxpayer's account." HMRC is, in effect, writing its own instalment plan into your account rather than agreeing one with you.
The context is the tax gap: the difference between what's owed and what HMRC actually collects, which stood at £59.2 billion in 2024/25. The government expects the new power to raise £50 million in its first year, rising to £255 million in 2030/31 and £320 million in 2031/32, which tells you how much of that gap HMRC believes is sitting in accounts that could pay today but haven't been pushed hard enough to.
Worked example: a joinery company that stopped answering the phone
Take an illustrative case: a ten-person joinery and fit-out company turning over £550,000 a year, with a £9,000 corporation tax bill that fell due after a slow quarter, two unanswered HMRC letters and a change of bookkeeper that meant nobody was reading the post. Under today's rules, that £9,000 debt already clears the £1,000 trigger for direct recovery, but HMRC still has to leave £5,000 sitting in the company's account once it's taken its share, so in a company holding £11,000 at the time, the most it could currently take in one go is £6,000, and building the case to do that is slow enough that it rarely happens for a debt this size. From July 2029, the same £9,000 falls comfortably inside the new £10,000 company threshold. If the company still hasn't responded to repeated contact by then, HMRC can set up its own recurring deduction based on what it assesses the company can afford, without first building the same case or necessarily leaving the same £5,000 cushion behind. The debt itself hasn't changed. What's changed is how quickly and how automatically it gets collected once a business stops answering.
A sole trader version of the same story sits under the £5,000 individual threshold: a self-employed electrician with a £3,200 self-assessment balance outstanding since January, three reminder letters ignored, and enough coming into a personal account each month to cover it. Today, that debt is too small and the account too thin a buffer to realistically trigger direct recovery. From 2029, it is squarely inside the kind of case this power is designed for.
The question MHA is asking
Rachel Nutt, tax partner at MHA, put the concern in proportionate terms rather than alarmist ones: "most compliant taxpayers are unlikely to be affected, but the success of the measure will depend on robust safeguards and ensuring it is used proportionately where debts are undisputed, and other recovery options have been exhausted." Her specific worry is about notices going astray: "given we often end up in debates with HMRC that they believe a notice has been sent by them, and yet neither us (as agent) nor the client will have received a copy, it is a cause for concern." Kipping's unresolved questions sit alongside hers: how HMRC decides a debt is correct and final, how it tells deliberate refusal to engage apart from genuine inability to pay, what data it uses to judge affordability, and how fast a wrongly taken payment gets reversed. None of those are abstract objections. They are the practical questions any business owner would ask before trusting a government department to decide, unilaterally, what comes out of their account and when.
HMRC's own response, given to City A.M., sets out where it says the line will sit: deductions will "only be considered after repeated attempts to contact customers who have the means to pay, but refuse to engage," they carry "robust safeguards, including checks to ensure instalments are affordable," and anyone can "contact us at any time to discuss other ways to pay" instead. That's a reasonable design on paper. Whether it holds up depends entirely on how HMRC answers Kipping and Nutt's questions once the detail is published, which it hasn't been yet.
What it means for a UK business owner in practice
If your tax affairs are up to date and you reply when HMRC writes to you, this changes nothing. The power is explicitly built around non-engagement, not around owing money. The risk sits with the business owner who lets a debt sit unanswered because things are busy, because a letter went to an old address, or because an unopened envelope feels easier to deal with next month than this one. A missed Self Assessment reminder or a corporation tax letter that lands while you're mid-job is exactly the kind of gap this power is designed to close, and from 2029 it closes faster and more automatically than it does today. The safest position, now and after 2029, is the same one: a debt HMRC knows you're actively dealing with is never the target of an automatic deduction built around people who won't engage at all.
What to do this week
First, if you have any unresolved HMRC correspondence sitting unopened, read it this week and respond, even if the response is simply that you can't pay the full amount yet. Second, if a debt has built up, contact HMRC and agree a Time to Pay arrangement rather than letting it go unanswered; an agreed plan takes you outside the group this power is aimed at, both today and in 2029. Third, check that HMRC and your agent both hold your current address and that any agent authorisation is up to date, given Nutt's point about notices going missing between HMRC, the agent and the client. Our tax planning service reviews where your filing and payment position actually stands rather than waiting for a letter to tell you, and our Self Assessment service gives you your tax figure months before January, so there's no unopened bill to avoid in the first place.
What is still uncertain
The July 2029 start date, the £5,000 and £10,000 thresholds, and the revenue projections are all confirmed in the Budget detail reported by City A.M. What isn't yet published is the detail MHA is asking for: the exact affordability assessment HMRC will use, how a wrongly taken deduction gets reversed and how quickly, and what "robust safeguards for vulnerable taxpayers" means in practice. The power still has to pass through the Budget's Finance Bill before it becomes law, so expect more detail, and potential amendment, as that legislation goes through Parliament over the next two to three years.