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Consultation response: Proposals to tackle lower value tax debts

28 August, 2026

The ATT has responded to the HMRC consultation on proposals to tackle lower value tax debts ('the Consultation') 

The Consultation sets out proposals to extend an existing HMRC enforcement power to recover lower value tax debts from taxpayers who have persistently failed to engage with HMRC. The proposals are aimed at taxpayers who have repeatedly failed to respond to HMRC's attempts to contact them and collect what is owed.

Under the proposals, HMRC could recover debts by deducting affordable monthly instalments directly from a taxpayer's UK bank or building society account. HMRC have confirmed that taxpayers would be notified in advance and given a final opportunity to pay the debt or contact HMRC before any deductions are made. Although the upper debt limits have not yet been finalised, HMRC have indicated that they do not expect debts within scope to exceed £5,000 for individuals or £10,000 for businesses (which we understand to be businesses registered with Companies House), including any interest and penalties.

In our response to the Consultation, we recommend that HMRC: 

  • Introduce stronger safeguards, including a requirement to 'confirm contact' with taxpayers before they enter the automated deduction process. Where reasonably practical, some form of verified contact should be established before the proposed power can be used.
  • Extend the proposed 14-day Pre-Deduction Notice period to at least 30 days.
  • Review the wider debt management process before introducing the proposed power, including addressing cases where debts are pursued incorrectly.
  • Improve communication and access to HMRC, increase awareness of and access to Time To Pay arrangements, and explore whether initiatives such as the Digitising Post Programme could improve existing processes.
  • Consider whether a lower 'upper debt value limit' than the proposed £5,000 for individuals and £10,000 for businesses would be more appropriate.
  • Introduce additional affordability protections, including a protected minimum account balance and prevent deductions from placing a taxpayer into an overdraft or increasing their borrowing.
  • Strengthen protections for joint account holders and only recover funds from joint accounts where ownership can be verified.
  • Allow taxpayers to request reasonable variations to deduction arrangements without pursuing a formal objection.
  • Introduce an independent review stage before appeals reach the tribunal or courts, helping to resolve disputes more quickly and proportionately.