What HMRC has proposed
HMRC is reviewing new powers to recover lower-value, persistent tax debts. Increasingly, HMRC targets persistent tax debts owed by individuals and businesses who repeatedly ignore collection efforts.
The proposals appeared in a public consultation earlier this year. Under them, HMRC could recover debts through affordable monthly instalments. Crucially, those instalments would come directly from a taxpayer’s UK bank or building society account.
Why the change is being considered
Some debts prove difficult and costly to recover using existing enforcement methods. Consequently, HMRC wants a more efficient route.
The scale explains the concern. HMRC estimates that more than 750,000 lower-value debts remain unresolved each year, worth over £2 billion in total. Standard collection attempts have already failed in each of those cases.
Proposed limits on deductions
Importantly, the framework would cap automated direct deductions. Specifically, the proposed limits are:
- £5,000 for individuals
- £10,000 for businesses
Therefore, larger liabilities would remain outside the new process.
How the process would work
The new power would apply only as a last resort. In other words, HMRC must first exhaust its standard collection procedures completely.
Taxpayers would then receive a formal Pre-Deduction Notice (PDN). This notice offers a final opportunity to act. At that stage, a taxpayer could:
- Pay the debt in full
- Contact HMRC to discuss their circumstances
- Arrange a Time to Pay agreement
- Raise a formal objection
Currently, the government proposes a 14-day notice period. However, several professional stakeholders want longer. Indeed, many are calling for at least 30 days.
Safeguards for vulnerable taxpayers
HMRC has also proposed protections for those who need extra support. Likewise, safeguards would apply to anyone facing genuine financial hardship. These include:
- Mandatory affordability checks before any deduction begins
- Manual case reviews where circumstances warrant them
Consequently, the process should not push taxpayers into hardship. As HMRC targets persistent tax debts, these protections matter enormously.
What happens next
The technical consultation closed on 28 August 2026. Accordingly, the government is expected to publish a formal summary of responses later this year. Further detail should follow after that.
Do not wait for a Pre-Deduction Notice
Are you struggling with an outstanding tax liability? Act now, rather than later. Contact our team today. We will help you engage with HMRC, explore a Time to Pay arrangement and resolve matters before enforcement escalates.
