- At the 2025 Budget, the government announced the following steps to deal with the significant increase in debt that is over a year old and is not in a managed payment arrangement:
- enhancing their plans announced at Spring Statement 2025 to recruit additional debt management staff
- increasing HMRC’s use of debt collection agencies to collect older debts, following a successful trial launched after Spring Statement 2025, to support HMRC in addressing the volume of debt for which enforcement action is uneconomic
- On 23 June 2026 HMRC published:
- a new consultation on tackling lower value debts, targeting taxpayers who can pay but have not responded to multiple contact attempts from HMRC. The proposals would enable HMRC to collect debts directly from customers’ accounts in regular instalments, supported by a comprehensive suite of safeguards to ensure the power is used fairly and proportionately. HMRC does not expect debts in scope to exceed £10,000 (including any interest and penalties at the point of action).
- a consultation on mandating Direct Debit for payments of PAYE and VAT, which is intended to prevent mistakes and misallocations which result in short term debt
- a consultation on reforms for ITSA Taxpayers with Pay as You Earn (PAYE) income who will be required to pay more of their forecasted Self-Assessment liabilities in-year through PAYE from April 2029
- Timing: the consultations are closing on 4 August (more timely payment for those in ITSA with PAYE income), on 16 August (direct debit for PAYE and VAT) and 28 August (tacking lower value debts). Changes to the ITSA payments are expected from April 2029. No date has yet been set for the proposed changes to the VAT and PAYE payments or Lower Value Debt.
Resources (click to open)
- Tacking lower value debts (HMRC, June 2026)
- Requiring payment of VAT and PAYE return liabilities by Direct Debit (HMRC, June 2026)
- Timely Payments in income tax Self Assessment (HMRC, June 2026)
- The HMRC tax debt strategy — update - GOV.UK (HMRC – 26 November 2025)
