HMRC’s DRD powers allow it to recover unpaid tax directly from the taxpayer’s bank accounts, subject to safeguards, including that HMRC will leave at least £5,000 in the taxpayer’s accounts. Having paused activity due to the COVID-19 pandemic, HMRC restarted DRD in September 2025, and believes that DRD has a strong deterrent effect.
However, the government is concerned that HMRC’s current collection powers, including DRD, are not well suited to lower value debts, and is consulting on proposals to extend HMRC’s DRD powers. The consultation document explains why change is needed, sets out the process for DRD of low-value tax debts and outlines possible safeguards.
The scale of lower value tax debt
The consultation document notes that:
- approximately 1 in 10 taxpayers do not pay their tax liabilities in full on time;
- 4.8 million individuals and companies hold low value debts, with a total value of around £4 billion; and
- each year, over 750,000 low value tax debts - worth over £2 billion - remain uncollected after multiple collection attempts.
Based on the proposals set out in the consultation document, it is expected that HMRC will put in place an automated process to recover lower value tax debt debts (up to £5,000 for individuals and £10,000 for businesses) in “affordable monthly instalments” directly from the taxpayer’s bank and building society accounts. The powers will apply to the individual or business’ total tax debts, across all tax regimes.
The extended DRD powers would be used only after HMRC has exhausted its standard collection powers, and after the taxpayer has been given a final opportunity to pay or to contact HMRC. Safeguards would apply, including to protect those taxpayers who need additional support, and HMRC may consider rolling-out the process in a phased ”test and learn” approach.
In some ways, the extended DRD powers are a mandatory version of the time to pay (TTP) arrangement, under which taxpayers contact HMRC to agree a payment plan to settle their tax debts. As is the case for TTP plans, it is expected that, once instalment payments begin under the extended DRD powers, any penalties associated with the tax debt will stop accruing.
The consultation closes on 28 August 2026.
Give your views
The consultation is part of a package of measures intended to reduce tax debt announced as part of Tax Update 2026. Other measures include proposals for more timely payment of tax due under income tax self assessment (ITSA) and for mandatory payment of VAT and pay as you earn by direct debit.
ICAEW will be responding to the consultations. If you have any feedback that could contribute to ICAEW’s responses to the consultations, please contact:
- Adelle Greenwood, by 10 July 2026, for more timely payment under ITSA.
- Ed Saltmarsh, by 17 July 2026, for mandatory payment by direct debit.
- Richard Jones, by 31 July 2026, on low-value tax debts.
Prepare for 2026/27 series
ICAEW's Tax Faculty looks at the key tax changes applying from April 2026.
The Tax Faculty
ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
Further resources
Latest news
TAXwire and Tax Track
Stay up to date with the latest developments by signing up to the Tax Faculty's weekly enewsletter and listening to the Tax Track podcast series.
Listen now Newsletter sign upPractical guidance
Tax Faculty resources
The Tax Faculty offers expert guidance and support enabling you to provide the best advice on tax legislation to your clients or business. We offer clear direction in taxing times. Membership is open to everyone.
ICAEW support
Training and events
Browse upcoming and on-demand ICAEW events and webinars focused on developments in tax practice and policy.
Events and webinars CPD courses and more