Can HMRC take money directly from my account?

Many taxpayers worry about what might happen if they owe money to HMRC and fail to pay on time. One of the most common questions is whether HMRC can take money directly from a personal or business bank account. The short answer is yes, but only in specific circumstances and under strict legal controls. This article explains when and how HMRC can access your bank account, what rights you have, and how to avoid getting to that stage.

HMRC has broad powers to recover unpaid tax, but it cannot simply withdraw money from your bank account without following due process. Its authority comes from the Direct Recovery of Debts (DRD) legislation, introduced in 2015. This gives HMRC the power to recover overdue tax directly from bank and building society accounts, but only when certain strict conditions are met.

What is Direct Recovery of Debts (DRD)?

The Direct Recovery of Debts scheme allows HMRC to collect overdue tax, National Insurance, or other debts directly from individuals or businesses that have repeatedly failed to pay. The aim is to target persistent non-payers rather than those who have made genuine mistakes or are actively trying to settle their debts.

However, HMRC cannot use this power arbitrarily. It must follow a clear process that includes warnings, evidence of non-payment, and a review of the taxpayer’s financial position before any money is taken.

When HMRC can use DRD

HMRC can only use direct recovery if all the following apply:

  • You owe at least £1,000 in unpaid tax or penalties.

  • The amount owed has been legally established and is overdue.

  • HMRC has tried to contact you multiple times for payment.

  • You have not agreed to or maintained a payment plan.

  • You have enough money in your accounts to cover the debt and still leave a minimum balance.

If these conditions are met, HMRC can issue a notice to the banks or building societies holding your accounts and freeze the amount required to pay the debt.

How much HMRC can take

HMRC cannot take all the money in your account. The law requires that at least £5,000 remains across all your accounts after the debt is recovered. This safeguard ensures that taxpayers are not left without basic living funds.

For example, if you owe £2,500 and have £10,000 across two bank accounts, HMRC could freeze and recover £2,500, leaving £7,500 untouched.

If your total balance is below £5,000, HMRC cannot proceed with direct recovery.

The process HMRC must follow

Before taking any money, HMRC must go through several formal steps:

  1. Issuing demands for payment – HMRC must have already sent bills, reminders, and final notices asking for payment.

  2. Reviewing your circumstances – They must check that you have sufficient funds and no existing payment arrangements.

  3. Sending a formal notice – You will receive a letter explaining their intention to use direct recovery, the amount owed, and the accounts affected.

  4. Giving you 30 days to respond – During this time, you can dispute the debt, provide evidence, or negotiate a repayment plan.

  5. Freezing funds – If no agreement is reached, HMRC instructs your bank to freeze the specified amount. You will be notified when this happens.

  6. Final transfer – After a further review, HMRC can transfer the frozen funds to settle your debt.

Throughout this process, you have the right to appeal and to request that HMRC reconsider its decision.

What types of debt can be recovered

HMRC can use DRD to recover most forms of unpaid tax, including:

  • Income Tax and Self Assessment liabilities.

  • VAT and PAYE arrears.

  • Corporation Tax.

  • Penalties or interest from late payment or filing.

However, DRD cannot be used to recover debts under formal insolvency proceedings or where the debt is under active dispute.

Your rights and safeguards

The law includes several safeguards to protect taxpayers from unfair action. You have the right to:

  • Receive a full written explanation before any funds are taken.

  • Object or appeal if you believe the debt is incorrect.

  • Provide financial evidence showing that recovery would cause hardship.

  • Request a review or negotiate a time-to-pay arrangement.

If HMRC proceeds incorrectly or without following procedure, you can challenge the decision through its internal complaints process or by appealing to the County Court.

How HMRC obtains your bank details

HMRC can access information about your bank accounts through tax returns, employer records, or data provided by banks under information-sharing agreements. However, this does not give them unrestricted access to your accounts; it only allows them to identify where funds are held.

Any request to withdraw funds must go through the DRD process with proper notification and oversight.

How to prevent HMRC from taking money directly

The best way to avoid HMRC enforcement is to stay in communication and address problems early. Most direct recoveries occur because taxpayers ignore correspondence or fail to arrange payment plans.

You can prevent this situation by:

  • Responding promptly to all HMRC letters or notices.

  • Contacting HMRC if you cannot pay your tax bill on time.

  • Requesting a Time to Pay arrangement, which allows instalments over several months.

  • Seeking professional help from an accountant or tax adviser to negotiate with HMRC.

HMRC prefers voluntary compliance and will usually work with taxpayers who make genuine efforts to settle their debts.

What happens if you ignore HMRC

If you continue to ignore HMRC’s requests, it can take stronger enforcement action in addition to direct recovery. This may include:

  • Deductions from your wages or pension.

  • Seizure of assets through enforcement officers.

  • Court proceedings or charging orders on property.

  • Bankruptcy or company winding-up petitions.

Direct recovery is usually considered a last resort after other methods have failed.

Example in practice

A small business owes £6,800 in unpaid VAT and has ignored several reminders. HMRC issues a final demand, then a DRD notice explaining it will recover the amount directly. The business has £15,000 in its accounts.

After 30 days with no response, HMRC instructs the bank to freeze £6,800. The remaining £8,200 stays available. The funds are later transferred to HMRC, clearing the debt, and the business avoids further enforcement.

Had the business contacted HMRC earlier, it could have arranged a payment plan and avoided direct recovery entirely.

How accountants can help

Accountants play a vital role in preventing and resolving HMRC debt recovery actions. They can:

  • Review the accuracy of tax bills or penalties.

  • Negotiate payment plans and reduce interest charges.

  • Communicate with HMRC on your behalf to stop enforcement.

  • Provide evidence if recovery would cause financial hardship.

  • Ensure future tax obligations are met to avoid recurrence.

Having an accountant involved early can often resolve issues before HMRC resorts to formal collection powers.

Conclusion

HMRC can take money directly from your bank account, but only after following a strict legal process under the Direct Recovery of Debts scheme. You will always receive written notice and have the opportunity to dispute or arrange payment before funds are taken.

By keeping communication open and seeking advice promptly, most taxpayers can avoid direct recovery altogether. Working with an accountant ensures your tax affairs stay up to date, preventing HMRC from needing to take enforcement action in the first place.