UK HMRC tax debt recovery challenges

HM Revenue and Customs (HMRC) is managing £43.8 billion in outstanding tax debt at the end of the 2025-26 financial year. While this represents 4.7% of total tax receipts—an improvement from 5.6% in 2022-23—the total remains significantly higher than the pre-pandemic average of approximately £15 billion.

The National Audit Office (NAO) has warned that the age of the debt is increasing, with 51% of the debt being more than a year old. HMRC estimates that roughly 46% of the current balance may never be paid. To address these challenges, HMRC has utilized additional staff, private collection agencies, and data-driven approaches, generating an estimated £10.7 billion in revenue.

In response to difficulties with non-engaging debtors, HMRC is expected to expand its Direct Recovery of Debts (DRD) powers. This would allow the agency to deduct money directly from taxpayers' current and savings accounts. While current rules allow recovery for debts exceeding £1,000 if the taxpayer retains at least £5,000, new measures may lower this threshold for repeat offenders.