Corporate report

Issue Briefing: Direct Recovery of Debts

Updated 22 September 2025

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. 

This briefing explains how HMRC recovers tax debt by requiring banks and building societies to pay directly from the accounts of that minority. It details how this works in practice, and the robust safeguards we apply. These safeguards are outlined in detail in section 4. 

1.  Why is recovering debt important? 

Individuals and businesses need to pay the tax that is due otherwise it is unfair on the honest majority. The money we collect is vital to fund public services. 

The vast majority of people pay their taxes in full and on time. Last year, HMRC brought in £858.9 billion in tax. About 90% was paid on time but the rest became a debt. 

Some people require an additional prompt or reminder to pay what they owe, and a significant number of people pay once they are contacted. 

Direct Recovery of Debts (DRD) is used when an individual or business can afford to pay what they owe but are choosing not to. These powers are an effective incentive to pay and were used only 19 times in two years, before pausing during the COVID-19 pandemic. 

2. What’s happening now? 

The government announced in the Spring Statement 2025 that HMRC would re-start the use of DRD for individuals and businesses who choose not to pay the tax they owe. HMRC paused the use of DRD during the COVID-19 pandemic and has now re-started in a ‘test and learn’ phase. 

3. How it works 

This policy allows HMRC to recover money owed by requiring banks and building societies to pay directly from a debtor’s account, and/or funds held in Cash Individual Savings Accounts (ISAs). It can be used where debtors owe £1,000 or more, subject to the safeguards that are detailed in section 4. 

4. The safeguards 

There are stringent safeguards in place to ensure that debtors do not suffer undue hardship once money is taken from their accounts and that adequate protection is in place for vulnerable customers. This includes: 

• only taking action against those who have established debts, have passed the timetable for appeals, and have repeatedly ignored our attempts to make contact. Anyone who disputes the amount owed has the automatic right to appeal 

• guaranteeing that every debtor will receive a face-to-face visit from HMRC agents before their debts are considered for recovery through DRD, this meeting will provide a further opportunity for us to: 

  • personally identify the taxpayer and confirm it is their debt 

  • explain to debtors what they owe, why they are being pursued for payment, and discuss payment of the debt 

  • discuss options to resolve the debt, including offering a Time to Pay payment plan to the debtor, where appropriate 

  • identify debtors who are in a vulnerable position and offer them the support from a specialist team to help them settle their debts 

• only debtors who have received this face-to-face visit, have not been identified as vulnerable, have sufficient money in the bank and have still refused to settle their debts will be considered for debt recovery through DRD 

• only considering the use of DRD on those with tax and tax credits debts of more than £1,000 

• always leaving a minimum of £5,000 in the debtor’s accounts, so that we do not put a hold on money needed to pay wages, mortgages or essential business or household expenses 

There is a clear process in place for debtors to object or appeal. This includes: 

• providing a 30-day window (once debt recovery has been initiated) for debtors to lodge an objection to HMRC. Money will be held in the account, but no funds will be transferred until this period has passed and a decision will be made on objections within 30 days 

• debtors can appeal against HMRC’s decision to a county court on specified grounds, including hardship and third-party rights 

HMRC is committed to clear governance and transparency. The Commissioners of HMRC will maintain oversight of the use of the power and statistics will be published on the number of times the power is used, and appeals are raised. 

5. Helping those in genuine difficulty 

Some people experience genuine financial difficulty paying their tax. This often happens when their life is affected by a major personal event, or their business develops a problem. HMRC routinely takes a sympathetic approach to those who need additional support. 

When people realise they are not going to be able to pay on time, or if they require additional assistance with their taxes, they should get in touch as soon as possible. 

HMRC has a strong track record in this area, with: 

• highly effective Time to Pay payment plans, which sees 9 in 10 agreements successfully completed. This is expanding online while also providing more tailored support to customers through better use of data 

• the extra support team providing additional support via phone or video appointments for customers whose health condition or personal circumstances make it difficult to contact HMRC. Customers can ask an adviser when they call HMRC or use the extra support team webchat  

To make sure vulnerable customers are fully supported during the use of DRD: 

• a debtor that meets the strict criteria for DRD but is considered vulnerable, or in need of extra support will be taken out of DRD and offered help through the extra support team 

• HMRC worked with voluntary organisations and professional bodies on their communications to debtors affected by DRD, to ensure they provide helpful advice on how to seek further assistance