Can HMRC check your bank account and take money directly from your bank account if they so wish? The answer, worryingly, is yes. However HMRC must satisfy certain conditions before they can go dipping into your savings.

How does it work?

If you owe HMRC tax, like always, they will try to recover it. This is usually in the form of letters outlining how much is owed, when you must pay, and the penalties you’ll receive if you fail to settle your debt.

If after being contacted four times you don’t stump up the cash HMRC thinks you owe then they can potentially use their new bank account draining powers.

You must owe at least £1,000 in unpaid tax or tax credit overpayments, and HMRC must leave at least £5,000 across all your bank accounts once the money is taken.

If those conditions are met—and you've ignored at least four payment demands—HMRC can take the money directly from your accounts without needing court or tribunal approval.

Could HMRC always raid your bank account?

No, before this power was introduced, recovering debts like this would usually involve the courts, but that safeguard no longer applies.

In that situation the debtor then has 14 days to get in contact and set up a repayment plan in order to recover their funds. If they fail to do so, HMRC will keep all the money and consider your debt settled.

{{tax-guide}}

Can HMRC take money from joint bank accounts?

Yes, if you owe tax and HMRC uses its Direct Recovery of Debts (DRD) powers, joint accounts are not off limits. This means that even if you hold a joint account with someone else, HMRC can still freeze and remove funds on a proportional basis.

How does it work?

It works on a proportional basis. For example, if you’re one of two account holders, HMRC will typically assume 50% of the funds belong to you, and take that amount to settle your debt.

The other account holder has the right to object if they can prove that more than 50% of the funds are theirs. For example, showing wage slips, bank transfers, or a history of deposits. HMRC may then adjust the amount taken or sometimes even lift the action altogether. 

This is particularly relevant for spouses, business partners, or anyone sharing finances with someone under investigation. If you’re the non-liable party on a joint account, the key is to act fast to protect funds once a notice has been received. 

Can you appeal a DRD notice from HMRC?

If HMRC uses Direct Recovery of Debts (DRD) against you, you have up to 30 days to dispute the action or request a payment plan. It can be challenged in Country Court if you believe the debt is wrong, you weren’t properly notified or you’re a joint account holder being affected. Acting quickly and keeping all evidence is key to appealing a DRD notice from HMRC.

‍

With great power comes great responsibility

There were major concerns about the extension of HMRC’s power. The Government suggested that it’s similar in practice to child maintenance payments, but in that case the Department of Work and Pensions works as an intermediary between two parties. In this scenario HMRC are acting solely in their own interest.

This wasn’t the only overzealous tax collecting power announced in past budgets, either. HMRC can now take money from people simply if they think they may be using illegal tax avoidance methods.

This means they keep the cash until legal proceedings are over, paying it back with interest if they lose. These rules will apply retrospectively to the existing 65,000 outstanding tax avoidance cases. Again, no magistrate or judge is required, meaning HMRC has hugely increased its tax collection powers with no new independent safeguards or checks.

One of the biggest worries is how HMRC will handle these tools; they don’t exactly have a great record when it comes to accuracy. Whether it’s losing physical records or allocating millions of people with the wrong tax codes, HMRC has shown it makes mistakes, and does so often.

For example, it is thought one in three people have the wrong tax code and don’t even know. According to HMRC, 3.5 million people paid too much tax in their review. 

As you might expect, strong-arm tactics combined with a penchant for inaccuracy means many businesses and tax bodies are concerned about HMRC’s new powers. Particularly worrisome is if HMRC suspects you of doing something illegal – they’re going to be able to take the money they think they’ll win from you without any outside checks (and they’ve already had several embarrassing mistakes in this area).

Ronnie Ludwig, a partner at Saffrey Champness, is strongly against the power. He said:

“I am uneasy with the underlying principle. There is a marked lack of external oversight in the proposals. HMRC is effectively a judge and jury, however diligently they go about it.”

Can HMRC take my money?

Let’s find out! Get in touch today to see how we can help you.

Are your expenses in order?

Make sure that HMRC has nothing to complain about, with our Expenses hub. The rules on what you can and cannot claim as business expenses are complicated and vary depending on a number of factors. This handy guide will help you save money by giving you detailed instructions on exactly what you’re entitled to claim and how to go about doing it.

And if you're new to submitting a Self Assessment then make sure to check out our recent article which answers all your key questions about Self Assessment tax returns. From tips on completing your Self Assessment to how long a tax return takes, we've got you covered.