Corporate report

Tackling lower value tax debts factsheet

Published 23 June 2026

What is this is about?

Most people and businesses pay the tax they owe on time. However, a significant amount of tax becomes debt each year, and not all of it is repaid.

HM Revenue and Customs (HMRC) already works closely with customers to help them settle what they owe in a way that is affordable and fair. But a small number of people and businesses repeatedly do not respond to HMRC, even when they can afford to pay.

This consultation seeks views on proposals to extend existing debt recovery powers to collect debts from customers who can afford to pay but choose not to and have refused to engage with HMRC. It also seeks views on strong protections to ensure it is used fairly and proportionately.

This would complement HMRC’s existing successful activity targeting higher value tax debts.

The challenge

• around £100 billion of tax each year becomes debt
• most customers resolve their debts quickly when they engage with HMRC
• however, a minority who can afford to pay repeatedly refuse to do so, despite repeated attempts to contact them
• each year, over 750,000 lower value debts (worth over £2 billion) remain uncollected after multiple collection attempts

When people and businesses do not engage at all, they cannot receive help to manage their debts. This is unfair to those who pay or enter into affordable arrangements, and risks undermining confidence in the tax system.

What HMRC already does

HMRC encourages early engagement and offers support, including:

• flexible payment plans based on what people can afford
• additional help for those facing financial difficulties or need extra support
• where people and businesses still do not engage, HMRC can use enforcement powers such as:
  • court action
  • recovering debts directly
  • insolvency proceedings in serious cases

These powers can be complex and are not always suitable for smaller debts, making it difficult for HMRC to collect lower value debts.

Why change is needed

There is currently no single tool designed to efficiently deal with high volumes of lower value debts where customers refuse to engage.

Without action, this gap risks:

• reducing fairness in the system
• creating the impression that some people can avoid paying by not engaging

What is being proposed

The government is consulting on extending existing powers to recover lower value tax debts from customers who can afford to pay but refuse to do so, despite repeated attempts to contact them. This approach is already used elsewhere in government and by other tax administrations.

This would allow HMRC, in tightly controlled circumstances, to:

• collect repayments directly from a customer’s bank account
• spread payments into manageable instalments, rather than taking a single lump sum

The aim is to help resolve debts, while ensuring fairness across the system.

Protecting customers

Strong safeguards are at the heart of the proposal. These would include:

• using this power after more than 10 attempts to contact customers to pay what they owe
• identifying customers who may need extra support
• giving clear and multiple opportunities to explain personal circumstances
• setting repayments at an affordable level
• clear rights to challenge decisions, including independent review

These protections are designed to ensure the power is used fairly, proportionately and only where appropriate.

Next steps

The consultation asks whether this proposal:

• is a fair and proportionate approach
• would be effective in addressing non-engagement
• includes the right safeguards

Views are welcomed from individuals, businesses, representative bodies and other stakeholders.