HMRC to retrieve up to £17k per year in tax debts from pay slips

HM Revenue and Customs (HMRC) is set to be given the authority to collect up to £17,000-a-year of tax debts directly from high earners’ pay packets.
 
New powers that come into force this week will see the current limit of £3,000-a-year increased amid existing controversy regarding HMRC plans to collect tax debts by dipping into taxpayers’ bank accounts.
 
HMRC has opted to raise the limits on the debt it can retrieve from the pay-as-you-earn (PAYE) system as it was "inefficient and unfair" to be forced to use more expensive debt pursuit methods when seeking larger sums.
 
The tax authority believes the new rules would potentially aid debtors on higher incomes as they could stagger the repayment of their debts over the tax year, as opposed to paying up front.
 
"Taxpayers welcome the option to have tax debt collected by instalment. This is a very longstanding feature of the payroll system but the increase in the current threshold will allow more tax debts to be paid in this way," said HMRC.
 
The changes are expected to raise £115m in the 2015-16 tax year and have courted less controversy than HMRC’s plans to deduct money direct from personal bank accounts as those earning less than £30,000-a-year will still be subject to the current £3,000 limit.
 
HMRC is set to adopt a sliding scale so only those earning more than £90,000-a-year would face a £17,000 deduction.
 
Patrick Stevens, tax policy director of the Chartered Institute of Taxation (CIoT), said the reaction to taking money out of individuals’ pay packets had been "really quite relaxed", as opposed to the strength of reaction to the plans to take money from bank accounts.
 
"In both cases HMRC have the power to take money from you, although in the case of the direct recovery of debts it is only done once," said Stevens.
 
"In the case of a coding notice it is done over 12 months so you would have time to complain about it."

Last updated: 30th September 2014