When HMRC comes chasing for unpaid tax, it’s not something to take lightly. The 2024 Autumn Budget revealed that the government is investing in 1,800 HMRC debt management staff – 1,200 existing roles extended and 600 new recruits.
Alongside new technology and access to credit agency data, this expansion is expected to boost tax collections by £2 billion a year by 2029/30. So what does this mean if you (or your company) owe HMRC money?
How HMRC Collects Unpaid Tax
The collection process varies depending on the type of tax:
- PAYE underpayments of £2,999.99 or less can often be collected by reducing your future tax code. Larger amounts usually require direct payment.
- If payment isn’t made, HMRC may issue a simple assessment letter, pulling the taxpayer into self-assessment.
- From there, late payers receive a series of reminders and calls, often starting with a private debt collection agency.
- If the debt remains unpaid, HMRC’s Debt Management Department may step in to agree a Time to Pay (TTP) arrangement, allowing repayment in monthly instalments. Interest will apply, but penalties won’t — provided the TTP is set up within 30 days of the due date.
Since 2015, HMRC has also had the power to directly recover ‘significant debts’ (over £1,000) from bank accounts, including ISAs. At least £5,000 must remain across all accounts after recovery to cover living costs.
Enforcement Officers and Controlled Goods Agreements
If debts are still not settled, HMRC can escalate matters:
- Enforcement officers (either internal or external) may visit to pursue payment.
- An HMRC officer can ask you to sign a Controlled Goods Agreement (CGA), giving you seven more days to pay before assets can be seized and auctioned. Fees apply: £110 plus 7.5% of any debt over £1,500.
- Private debt agencies cannot issue CGAs – only HMRC officers can.
It’s important to note that HMRC enforcement officers cannot evict or arrest. However, they can apply for a charging order against property, which could ultimately lead to a forced sale through the courts if the debt remains unpaid.
Can HMRC Pursue Company Directors Personally?
While limited companies offer some protection, HMRC can still take action in certain circumstances:
- If a dissolved company owes tax, HMRC can pursue directors directly.
- Directors may face action if found guilty of wrongful trading or fraudulent behaviour, such as misappropriating funds.
- HMRC tends to target directors first, as shareholders generally aren’t personally liable beyond their investment in shares.
The Bigger Picture – The Tax Gap
According to HMRC’s Measuring Tax Gaps 2025 report, the total theoretical UK tax liability for 2023/24 was £876 billion. Of this, £829.2 billion was collected — leaving a tax gap of £46.8 billion (5.3%).
This gap is exactly what HMRC’s expanded debt collection team will be tasked with reducing.
Final Thoughts
With HMRC hiring more staff and tightening up its collection processes, businesses and individuals with outstanding tax debts are more likely than ever to face enforcement action.
The key takeaway? If you’re struggling to pay, it’s always better to be proactive. Arranging a Time to Pay or seeking advice early can prevent costly penalties, asset seizures, or personal liability for directors.
Worried About Tax Debt?
If you’re concerned about HMRC chasing you or your business for unpaid tax, don’t wait until enforcement action begins.
Contact Jon and the team at Jon Davies Accountants today — we’ll help you understand your options, negotiate with HMRC, and protect your business.
If you found this useful, please share it using the icons at the side of the page, or leave a comment below.
Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk