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HMRC HAS REVIVED powers allowing it to take money directly from taxpayers’ bank accounts to settle unpaid tax debts. These so-called “direct recovery” powers apply to debts over £1,000, though HMRC must leave at least £5,000 across your accounts after any deduction.

While HMRC insists this is targeted only at “persistent non-payers”, the move is a serious escalation in debt collection and risks catching out individuals and businesses who may not realise they have an outstanding liability.

In today’s Shipleys Tax brief, we summarise how it works, the safeguards in place, and what you should do to protect yourself.

HMRC has revived powers allowing it to take money directly from taxpayers’ bank accounts to settle unpaid tax debts

What’s Happening?

HMRC has re-started use of its Direct Recovery of Debts (DRD) powers, allowing it to take money directly from taxpayers’ bank accounts where tax bills remain unpaid.

According to HMRC’s own briefing, updated 22 September 2025, DRD is again being used after being paused during the pandemic (HMRC – Issue Briefing: Direct Recovery of Debts).

These powers apply to debts of £1,000 or more, but HMRC must leave at least £5,000 across your accounts after any deduction. The rules are set out in HMRC’s policy paper on DRD (HMRC policy paper).

Why Now?

The scheme was first legislated previously but paused during Covid. HMRC has now confirmed DRD is being reintroduced on a “test and learn” basis to help tackle rising levels of unpaid tax.

Professional advisers have warned that while the target is “persistent non-payers”, errors, disputed liabilities, or overlooked correspondence could mean ordinary taxpayers are at risk if they don’t engage early with HMRC.

These powers apply to debts of £1,000 or more, but HMRC must leave at least £5,000 across your accounts after any deduction

What Does This Mean for You?

• All taxpayers are potentially affected — individuals, landlords, and businesses.
• Outstanding debts as low as £1,000 can trigger DRD action.
• Safeguards exist (such as notice, objections and appeals), but the process relies on HMRC’s accuracy.

For clients, this means you should:

• Review your HMRC correspondence and ensure no liabilities are outstanding.
• Deal with disputes early before HMRC escalates collection.
• Get professional advice if you receive a DRD notice.

How Shipleys Tax Can Help

At Shipleys Tax, we specialise in defending clients against HMRC enforcement action. We can:

• Negotiate affordable payment arrangements before HMRC acts.
• Challenge incorrect or disputed demands.
• Protect your cashflow and ensure safeguards are applied properly.

Conclusion

Don’t wait until HMRC knocks on your door (or bank account). If you have unresolved tax issues — even relatively small debts — now is the time to act.

Book a confidential consultation with Shipleys Tax today to safeguard your finances and gain peace of mind against any HMRC enforcement action.

HMRC Direct Recovery of Debts – Frequently Asked Questions

Can HMRC really take money directly from my bank account?

Yes. Under its Direct Recovery of Debts (DRD) powers, HMRC can instruct banks and building societies to transfer unpaid tax directly from your accounts. This power was re-started in September 2025 after being paused during the pandemic.

How much must HMRC leave in my account?

HMRC must leave you with at least £5,000 across all accounts after any deduction. The powers only apply where the debt owed is £1,000 or more.

Will HMRC warn me before taking money?

Yes. HMRC must give you advance notice and an opportunity to object or appeal before any funds are recovered. They will also assess whether you are “vulnerable” and require additional support.

What if I dispute the debt?

If you disagree with HMRC’s figures or the debt is under appeal, you can challenge the action. Professional advice is strongly recommended — errors and disputes can and do occur.

Who is most at risk?

Anyone with unresolved HMRC liabilities could be affected — individuals, landlords, self-employed workers, and businesses. While HMRC says DRD targets “persistent non-payers”, the safest approach is to resolve outstanding matters early.

For further assistance or queries, please contact:

Sheffield: 0114 303 7076                        Leeds: 0113 320 9284                 

Email: info@shipleystax.com

Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking action.

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DOCTORS AND NHS medical professionals may be hit with tax penalties after the NHS Business Services Authority (NHSBSA) admitted to “gross errors” in calculating pension contributions, according to reports. According to the British Medical Association (BMA), nearly 800 doctors were issued with incorrect pension savings statements for the 2023/24 tax year.

In today’s Shipleys Tax brief we look at the latest NHS pension blunder that has left many doctors and consultants at risk of HMRC penalties. Errors in annual allowance calculations mean some GPs cannot finalise their tax returns on time, creating unnecessary stress and possible charges. Here’s what’s gone wrong, why it matters, and—most importantly—what to do now.

What’s gone wrong?

According to the BMA, at least 757 doctors were issued incorrect 2023/24 Pension Savings Statements (PSS). The error relates to the opening value for 2023/24, which was wrongly increased by an extra 1.5% on top of the 10.1% CPI revaluation set by law. This produced incorrect Pension Input Amounts (PIAs) and has made accurate self-assessment difficult for affected clinicians. The NHSBSA has acknowledged the error and indicated the PIA shown was lower than it should have been. 

The error relates to the opening value for 2023/24, which was wrongly increased by an extra 1.5% on top of the 10.1% CPI revaluation…

What does HMRC say?

HMRC allows you to file on time using the best available (provisional) figures and amend within 12 months of the filing deadline without a late-filing penalty. Do note that interest can still apply if extra tax becomes due on amendment. NHSBSA guidance mirrors this approach for affected members. 

Annual allowance refresher – why this is an issue

• Standard annual allowance: £60,000.
• Tapered allowance: if threshold income > £200,000 and adjusted income > £260,000, the allowance tapers down to a minimum of £10,000 at higher adjusted incomes. 

Practical steps for doctors to take now

1. Identify if you’re affected – check your 2023/24 PSS and any NHSBSA letters; note the 1.5% opening value issue. 
2. File by the deadline using estimates – protect yourself from late-filing penalties; diarise to amend within 12 months when the corrected PSS arrives. 
3. Retain evidence – keep NHSBSA/BMA correspondence and workings you used for your estimate.
4. Re-work your position – use payslips and prior statements to sense-check likely PIA and possible carry-forward.
5. Use carry-forward – bring in unused allowances from the previous three years to reduce any annual-allowance charge (where eligible).
6. Assess taper risk – if you’re around the £200k–£260k thresholds, get advice to avoid inadvertent taper traps. 
7. Claim your costs – if you’ve incurred extra accountancy fees or interest solely because of this error, the NHSBSA will consider reimbursement. Keep invoices and bank proof. 
8. Amend promptly – when your corrected PSS arrives, submit the amendment to limit interest and tidy up your records. 

File by the deadline using estimates – protect yourself from late-filing penalties; amend within 12 months when the corrected PSS arrives…

Why this matters for medical professionals

The NHS pension is a major and valuable benefit. However, complex annual allowance and taper rules can create unexpected tax charges and discourage extra sessions—administrative errors only make the situation worse. Specialist advice helps ensure you pay the right tax—no more, no less. 

Conclusion – take professional advice

At Shipleys Tax, we specialise in advising GPs, consultants and healthcare professionals on NHS pension tax. We regularly:

• Check, amend and appeal incorrect pension tax calculations;
• Structure earnings to minimise annual-allowance exposure and protect retirement wealth;
• Handle filings on time—even where provisional figures are needed—and tidy up once corrected data arrives.

Concerned about your NHS pension statement or potential tax penalties? Contact us below:

Sheffield: 0114 303 7076                        Leeds: 0113 320 9284                 

Email: info@shipleystax.com

Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking action.

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GIVEN THE INCREASE in property values, frozen IHT thresholds, and increasing scrutiny of trusts and estate planning by HMRC, more estates than ever are being pulled into the IHT net. One common strategy for reducing Inheritance Tax (IHT) is putting property or savings into trust. Done correctly, it can remove assets from an estate entirely, helping families reduce their exposure to tax on death. But where the arrangements are poorly implemented or the settlor remains involved, things can go badly wrong.

In today’s Shipleys Tax brief, we look at a recent Tribunal case which highlights a common – and costly – trap in inheritance tax (IHT) planning and to how to avoid this. HMRC successfully argued that over £440,000 in trust assets remained taxable on death — despite IHT planning documents suggesting otherwise. The case serves as a warning on how easy it is to fall foul of IHT rules, even with well-intentioned planning and where the practical impact of the planning is not fully thought through. With further reforms under discussion, it’s likely that reliance on informal or outdated planning will face even greater challenge from HMRC.

One common strategy for reducing Inheritance Tax (IHT) is putting property or savings into trust.

The Plan

Many individuals put property or savings into trust thinking it will reduce the value of their estate for IHT purposes. Done correctly, this can work in many cases. But done carelessly – or worse, informally – it can unravel years later, with substantial tax implications.

In essence, that is exactly what happened in a recent case before the First-tier Tribunal, where a family’s well-meaning trust planning failed to exclude over £440,000 from the estate. Despite trust documents stating the assets had been given away, the deceased’s continued involvement meant HMRC was able to include them in the death estate – unfortunately triggering a significant IHT charge after death.

A Family Trust

Back in 2000, Mr Mohammed Chugtai effectively set up two trusts, one covering a semi-detached property and shop, where his daughter lived – and the other covering a bank account into which rent and other income was paid.

In the trusts his children were named as beneficiaries and Mr Chugtai gave up all rights to benefit from the assets. But as it turned out, the reality didn’t quite reflect the legal paperwork.

Over the next 17 years, Mr Chugtai continued to live in the property, ran a retail business from the shop, and used the trust-held bank account to pay personal and household bills. Even a personal tax bill was settled from that account. When the shop was eventually rented out, the income was declared on his personal tax returns – not by the trust.

Despite trust documents stating the assets had been given away, the deceased’s continued involvement meant HMRC was able to include them in the death estate

Although his motivation was to care for a vulnerable daughter – and no one disputed the family circumstances – HMRC took the view that he never truly gave up benefit of either asset. Unfortunately for the Chugtai family the Tribunal agreed.

Why It Went Wrong

This case is a textbook example of what can go wrong when Inheritance Tax Planning is implemented without full and careful follow-through. While the legal structure appeared sound on paper, the deceased continued to behave as though he still controlled and benefited from the assets.

The Tribunal focused on what happened in practice:

• Was rent paid for living in the property?
• Why utility bills and council tax were paid from the trust-held account
• Income and savings continued to flow through the trust-held account.
• The deceased used the shop for business purposes and later for rental income.

The trust deeds clearly excluded him from benefiting. But the Tribunal was clear that actions speak louder than words and hence superseded the legal paperwork.

This case is a textbook example of what can go wrong when Inheritance Tax Planning is implemented without full and careful follow-through.

The judge even commented: “Fine words butter no parsnips” – meaning that well-drafted documents are irrelevant if they’re not matched by practical action.

The Bigger Problem: Common Tax Traps

Cases like this are more common than many realise. Clients often set up trusts with the right intentions but fail to separate themselves from the assets. This might be for practical reasons – ease of use, reluctance to let go of control, or simply not realising that everyday behaviour can have tax consequences.

Even helping a family member can become problematic. The Tribunal acknowledged that Mr Chugtai’s primary reason for returning to the property was to care for his daughter, but that, unfortunately, motive is not a defence when assessing tax liability. The benefit to him – free accommodation, access to funds – was sufficient to render the planning ineffective.

How to Avoid This Hidden Tax Trap – Basics

Inheritance tax planning using trusts can be very effective. But it must be implemented carefully and consistently. Here are some key issues to be aware of:

• Giving up ownership is not enough – you must also give up control and benefit.
• Using the same property or account after gifting it can undo the planning.
• Trust records, accounts and tax returns need to be maintained properly.
• HMRC looks at what actually happened – not just what’s written in the deed.

There are legitimate ways to mitigate IHT even where the donor continues to have some connection with the asset – but these require clear planning and robust documentation.

In this case (and with the benefit of hindsight), there were better alternatives that might have achieved the family’s goals, preserved care for the daughter, and reduced the IHT burden – but they were not followed.

Inheritance tax planning using trusts can be very effective. But it must be implemented carefully and consistently.

Final Thoughts

This case is a cautionary tale for clients and advisers alike. It shows how even well-intentioned inheritance tax planning can backfire if the legal form isn’t matched by practical substance.

Trusts remain a powerful tool for wealth protection and estate planning – but they demand attention to detail, proper administration, and a genuine transfer of benefit and control.

In some cases, personal or family circumstances can change significantly over time, making it difficult — or even impossible — to implement the original advice as intended. In such situations, it’s vital to seek timely follow-up advice to ensure the planning remains effective and compliant

If you’re considering using trusts in your IHT strategy, or if you already have one in place, now is the time to review it. The cost of inaction – as one family learned – can run into hundreds of thousands.

For further assistance or queries, please contact us.

Leeds: 0113 320 9284                                 Sheffield: 0114 272 4984

Email: info@shipleystax.com

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Please note that Shipleys Tax do not give free advice by email or telephone. This article is intended for general information only and does not constitute tax or legal advice. Clients should seek professional guidance before making any decisions.

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