Budget 2026: Healey grants HMRC sweeping powers to chase tax debts
John Healey has given HM Revenue and Customs (HMRC) more funding and sweeping powers “to collect overdue tax from those who can clearly afford to pay but ignore repeated contact”, in yet another clampdown on tax debts.
The move marks a major expansion of the taxman’s power and comes amid the government’s push to stamp out tax evasion and recover lost revenue.
The Chancellor is giving HMRC sweeping powers to deduct funds and interest from the current and savings accounts of businesses and individuals who fail to respond to payment demands, effective from July 2029.
Under current direct recovery of debts rules, HMRC can take money directly from accounts only if the debt is over £1,000 and would leave a minimum of £5,000 across accounts so the deduction does not cause hardship to the taxpayer or business.
The government is investing an additional £70m over the next five years to expand HMRC’s partnerships with private sector debt collection agencies.
The full Budget revealed that HMRC will also receive more funding to recruit an additional 670 compliance officers by 2029-30.
The Chancellor added in his speech: “I am reforming the administration of self-assessed income tax from 2029……bringing more of these taxpayers in line with the majority, so that they make smaller, more regular payments instead of facing larger bills that are harder to pay.”
Starting from April 2029, taxpayers will be required to set up direct debit instructions for VAT and PAYE return liabilities to collect any unpaid balances.
Labour’s focus on tax collection
HMRC has been the focus of Labour’s ‘Close the Tax Gap’ initiative. The latest estimate is that tax evasion cost £5.5bn in 2022–23, about 0.7 per cent of all taxes owed, but as a Public Accounts Committee (PAC) report noted, this figure could be “just the tip of the iceberg”.
In the 2024 Budget, former Chancellor Rachel Reeves committed £1.4bn to the agency for a five-year plan to hire 5,000 new compliance staff. As part of the Budget, Reeves also gave HMRC a £154m investment to modernise its debt-management case system.
In her Spring Statement in 2025, she singled out tax evaders and gave HMRC an additional 500 compliance staff, with expectations to bring in over £1bn in additional gross tax revenue annually by 2029-30.
The Labour government has also expanded HMRC’s criminal investigation powers and policies to target suspected fraud and delayed payments, including stricter penalties for late payments and targeted crackdowns on loopholes.
The agency continued to dominate ‘winding-up petition’ applications filed with the High Court over the last couple of years against businesses and sports clubs, including chef Gino D’Acampo’s restaurant empire.