14th July 2026 | Hudson Contract
HMRC is seeking extra powers to recover unpaid taxes directly from company bank accounts and wants to compel companies to set up direct debits for VAT and PAYE payments.
The moves are revealed in policy updates and subject to consultations that close during the August holiday season.
Under the separate proposals, HMRC would be able to deduct instalments directly from bank accounts on company debts of up to £10,000 with the trigger being “persistent non-engagement”.
HMRC would also be able to mandate direct debit for VAT and PAYE payments, a change that could affect an estimated 2.4 million businesses and sole traders.
The government said construction was among the sectors likely to be most affected.
Hudson managing director Ian Anfield said: “Following on from Making Tax Digital for Income Tax, the taxman now wants powers to dig into company bank accounts directly for unpaid taxes, VAT and PAYE – so it’s more important than ever to get your house in order.
“It is all too easy for companies to get caught in a penalty loop. By the time HMRC sends a letter and they make payment, more interest has accrued. Then they receive a penalty for the unpaid interest and interest on that penalty. Each payment can trigger another liability and the amounts add up quickly.”
Under Making Tax Digital, sole traders and landlords who earned more than £50,000 during the 2024-25 tax year must use HMRC-compatible software to report their income and expenses every three months with the first reports due on 7 August.
From April, those earning over £30,000 must comply with the rules and from 2028 the threshold drops to those earning over £20,000, meaning most construction subbies will be caught.
HMRC estimates that 2.9 million people will have to comply or face points-based penalties for late quarterly updates or returns with separate rules for late payments that increase according to how long payments are overdue.
