HMRC debt collection and enforcement

If a tax bill has gone unpaid, HMRC does not go straight to bailiffs or the courts. Its own guidance describes a sequence: contact first, then a visit or a debt collection agency, then its enforcement powers, and insolvency only as a final step. HMRC says it uses enforcement as a last resort and picks the powers that suit the case, so the order is not fixed.

This guide explains HMRC’s debt collection and debt recovery powers stage by stage, what the letters mean, and where a Time to Pay arrangement fits. It describes England and Wales first, with the main differences in Scotland and Northern Ireland.

What happens if you miss a tax payment?

Three things follow.

• Late payment interest runs from the day the payment is overdue until it is paid. For the main taxes the rate is the Bank of England base rate plus 4% a year.
• Late payment penalties may follow, depending on the tax. For Self Assessment outside Making Tax Digital, a 5% penalty is added at 30 days, six months and twelve months. VAT, and Income Tax under Making Tax Digital, use a newer regime in which penalties can start from day 16. Our guide to late payment penalties and penalty points has the detail.
• HMRC gets in touch. GOV.UK says HMRC will always try to contact you if you miss a payment, by letter, text or a visit at home or at work.

HMRC can also keep a repayment due to you and set it against the debt and, if you have PAYE income, adjust your tax code to collect it.

Except where it suspects fraud or criminal activity, HMRC says it will try to contact you and agree a way forward before it takes action. If there is no response, or no agreement, the debt moves on. In broad terms:

Does HMRC use debt collection agencies?

Yes. HMRC can pass a debt to a private debt collection agency. According to GOV.UK, an agency working for HMRC:

• contacts you only by letter, text message or phone, and never visits your home or workplace
• can take payment, or discuss paying through a Time to Pay arrangement
• passes the case back to HMRC if neither is possible, and HMRC then tells you what happens next

HMRC says every agency it uses is regulated by the Financial Conduct Authority. An agency collects by agreement; if it cannot, the debt goes back to HMRC, which decides whether to use its own enforcement powers. If an adviser is to deal with the agency for you for more than a day, HMRC needs your written authority, usually on form 64-8. A complaint about an agency can go to the agency or to HMRC.

The HMRC debt collectors list: is the agency genuine?

HMRC publishes the current list of agencies that may contact you on its GOV.UK page What will happen if you do not pay your tax bill. The list changes from time to time, so check the live page rather than a copy elsewhere.

Before paying anyone, check:

• Is the agency on HMRC’s current list?
• Did they turn up in person? Agencies working for HMRC do not visit. Someone at the door saying they are from HMRC should be one of HMRC’s own officers, who carries an identity card with a name and serial number. GOV.UK explains how to confirm the identity of someone representing HMRC.
• Are you being asked to use a number or link in the message itself? If in doubt, contact HMRC using the details on GOV.UK instead.

What is an HMRC 7-day warning letter?

“7-day letter” is not HMRC’s own term. Its Debt Management and Banking Manual calls the letter that warns of bankruptcy or winding up an insolvency warning letter. HMRC sends one when it has decided a case is suitable for insolvency action. The letter says insolvency is the next step, explains what that would mean, and gives a last chance to pay. It normally comes with a statement of the amounts owed.

HMRC does not publish the letter’s wording or the time it allows. One such letter, quoted in a 2025 High Court judgment (DG Resources Ltd v HMRC), set out what would happen if the company did not pay in full within seven days:

• HMRC’s solicitors would present a petition to the High Court to wind the company up, without further warning
• the petition would be served and then advertised in the Gazette, no less than seven business days after service
• the company’s bank might freeze its account

In that case HMRC did not present a petition as soon as the seven days ran out, so the gap between the letter and a petition can vary. That is no reason to wait. HMRC’s manual also has a version of the letter that cancels a Time to Pay arrangement that has broken down.

A 7-day letter should not be confused with a notice of enforcement, which warns that goods may be taken (see below). In England and Wales that notice used to give at least seven clear days; since 1 May 2026 it must give at least 14.

If an insolvency warning letter has arrived:

1. Check the figures against the statement enclosed. Is any of it an estimate, already paid, or under appeal?
2. Contact HMRC before the deadline with a realistic payment proposal backed by figures. HMRC’s manual tells its officers to negotiate by phone where possible, looking at the ability to pay, the amount owed and the ability to keep up future payments.
3. If a petition is threatened, speak to a solicitor or a licensed insolvency practitioner at once.

Can HMRC take your possessions?

Yes, in each part of the UK, although the procedure differs.

England and Wales: the notice of enforcement and taking control of goods

HMRC can recover unpaid tax by taking control of goods, using the procedure in Schedule 12 to the Tribunals, Courts and Enforcement Act 2007. Its own officers do this, not debt collection agencies.

• The notice of enforcement. Nothing can be taken until HMRC has given written notice of the debt. Since 1 May 2026, the notice must be given at least 14 clear days before goods are taken; Sundays, bank holidays, Good Friday and Christmas Day do not count. If a debt adviser asks before that period ends, it extends to at least 28 clear days, except for some business debts of people who are VAT-registered or in partnership.
• The visit. An officer can call between 6am and 9pm, ask for payment and list goods that could be sold. Goods can be removed at once, or left with you under a controlled goods agreement with a deadline to pay. You can keep using them, but not sell or give them away. If the agreement is broken, HMRC can remove and sell them after giving notice.
• What cannot be taken. Basic household items are protected, such as a cooker, fridge, washing machine, a table and chairs, beds and bedding. The general exemption for tools and equipment needed for work, worth up to £1,350, does not apply when HMRC is the one enforcing. Some vehicles are exempt, such as one displaying a disabled person’s badge.
• Fees. Fixed fees set by regulations are added to the debt. Since 1 May 2026 they are £79 for the notice of enforcement; £247 when an officer first attends to take control of goods, plus 7.5% of any amount owed above £1,900; and £116 if goods are removed for sale, plus 7.5% of any amount owed above £1,900.

If the goods sell for more than is owed, the balance after costs is paid back to you. If they sell for less, the rest is still owed.

Scotland: summary warrant and diligence

In Scotland, HMRC applies to the sheriff for a summary warrant under section 128 of the Finance Act 2008, and the sheriff must grant it on HMRC’s application. A sheriff officer then serves a charge for payment, which gives 14 days to pay or to agree a payment plan.

After that, HMRC can instruct the sheriff officer to carry out diligence, which can mean:

• bank arrestment: recovering the debt from a bank account
• earnings arrestment: deductions from wages
• attachment: seizing and selling possessions
• money attachment: taking cash, for example from a shop till

Northern Ireland: distraint

In Northern Ireland, HMRC uses distraint: seizing and selling goods without a court order. An officer can call between sunrise and sunset, and goods may be left with you under a walking possession agreement until a deadline to pay. The fees are on a different scale from England and Wales.

Can HMRC freeze your bank account?

In some circumstances, yes.

Direct recovery of debts (England, Wales and Northern Ireland). Schedule 8 to the Finance (No. 2) Act 2015 lets HMRC require a bank or building society to put a hold on money in a debtor’s accounts and later pay it over. It applies only where £1,000 or more is owed, and it comes with safeguards:

• the hold must normally leave at least £5,000 across the person’s accounts
• HMRC says individuals receive a face-to-face visit before direct recovery is considered, while companies and limited liability partnerships usually do not
• HMRC says it stops if the person is identified as needing extra support
• there are 30 days to object to HMRC, on grounds including that the debt has been paid or that the hold would cause exceptional hardship, followed by a right of appeal to the county court
• money is not taken out until the objection period has passed and any objection or appeal is settled

HMRC paused direct recovery during the pandemic, restarted it in a controlled “test and learn” phase in September 2025, and said it would extend it to more people from April 2026.

Scotland. A summary warrant allows a bank arrestment instead.

Insolvency. HMRC warns that a company’s bank may freeze its account once a winding-up petition is advertised, for reasons explained below. GOV.UK also says a bank will usually freeze an individual’s accounts once they are made bankrupt.

Collecting a tax debt through your tax code

If you have PAYE income from a job or pension, HMRC may adjust your tax code to collect a debt. The amount is spread across the remaining months of the tax year, and GOV.UK says up to 50% of gross income can be taxed this way.

HMRC’s manual sets a sliding limit on the debt collected like this: £3,000 where PAYE earnings are under £30,000, rising in steps of £2,000 for each further £10,000 of earnings, to £17,000 where they are £90,000 or more. Check a new tax code notice carefully: the code itself is what does the collecting.

Court action: county court and sheriff court

In England and Wales, HMRC says it can use the county court where someone has assets to cover the debt and refuses to pay. Once it has a judgment, it can ask the court for:

• a charging order, which secures the debt on property or certain investments
• an attachment of earnings order, taking regular deductions from wages, with safeguards for essential expenses
• a third party debt order, taking money owed to you by someone else

In Scotland, court action is in the sheriff court, and earnings are reached by an arrestment of earnings. Property charging orders do not apply there. In Northern Ireland, a charging order over land goes through the Enforcement of Judgments Office.

Court papers carry their own deadlines. If a claim form arrives, a solicitor should see it promptly.

Statutory demands, bankruptcy and winding-up petitions

HMRC says it applies to the courts to make a person or company insolvent only as a final step, after considering every other way of recovering the debt. It says insolvency is usually used where:

• it thinks the debt will not be recovered and future tax will not be paid
• someone has actively avoided paying despite being able to
• it suspects someone is not being honest about their assets

Once it starts insolvency proceedings, HMRC is bound by insolvency law like any other creditor.

Statutory demands

A statutory demand is a formal written demand for payment in a prescribed form. In England and Wales:

• For an individual, a creditor can petition for bankruptcy only if at least £5,000 is owed. If a statutory demand is neither paid nor set aside within three weeks, the creditor can petition. An application to set the demand aside must be made within 18 days of receiving it if you were in the UK.
• For a company, a demand for more than £750, left at the registered office and not paid within three weeks, is one way of showing the company cannot pay its debts. A company cannot apply to set a statutory demand aside, but it can apply to the court to stop a winding-up petition.

A statutory demand is not always the first step. The law also lets a company be shown to be unable to pay its debts as they fall due by other evidence, and lets a bankruptcy petition follow a court judgment that has gone unpaid.

Bankruptcy petitions

A creditor owed £5,000 or more can apply to the court for a bankruptcy order. The court sets a hearing at least 14 days after the petition is given to you, and the petition can be opposed up to five days before it. If you own a property alone, HM Land Registry marks its title once a petition is filed, which may stop you selling it.

Scotland has its own procedure, called sequestration, and Northern Ireland has its own insolvency legislation.

HMRC winding-up petitions and winding-up orders

For a company, HMRC’s final step is a winding-up petition, presented through its solicitors. The petition is served on the company and advertised in the Gazette no less than seven business days after service and no less than seven business days before the hearing.

HMRC’s own letter warns that the bank may freeze the company’s account at this stage, and the reason is legal. A winding up by the court is treated as starting when the petition is presented, and any disposal of the company’s property after that is void unless the court orders otherwise. A bank that learns of a petition has reason to stop payments out.

A creditor can withdraw a petition if the company pays or makes an arrangement to pay. If the court makes a winding-up order, the official receiver takes charge, the company’s bank account is usually frozen and its assets are sold. Directors can be disqualified for up to 15 years if they have not carried out their duties properly, and in some situations HMRC can pursue directors for company tax: see our guide to directors’ personal liability for company tax.

Can HMRC take my house?

Not directly, and not without a court. There are two routes to a home.

A charging order. After a county court judgment, HMRC can ask the court for a charging order, which secures the debt on the property so that it is paid when the property is sold. HMRC can also ask the court for an order for sale, and the court decides whether to grant it. HMRC’s guidance says it does all it can to avoid forcing the sale of someone’s main home, and that it may force a sale only where the person:

• has more than one property, or
• has been involved in criminal activity

It also says it will not make anyone sell their main home to pay a loan charge or disguised remuneration bill (see our guide to accelerated payment notices and the loan charge). It may, though, ask someone with substantial equity to release some of it, and says that if they do not, it may move to insolvency.

Bankruptcy. If someone is made bankrupt, the trustee may sell their home, depending on the equity left after any mortgage. Where the equity is more than £1,000, the trustee can sell the property or apply for a charging order over it. If the trustee has not dealt with the home within three years of the bankruptcy, it usually goes back to the bankrupt person. A sale can be put off for up to a year to arrange somewhere for children or a partner to live.

HMRC also says it will not ask anyone to draw on their pension pots to pay a tax debt, although pension payments, including lump sums, count as income when it looks at what you can afford.

Does bankruptcy clear HMRC debt?

Usually, yes. Bankruptcy normally ends after 12 months, and discharge releases the bankrupt person from the debts included in the bankruptcy, which can include tax owed to HMRC.

The law keeps some debts alive after discharge. The ones most likely to matter here are:

• debts incurred through fraud to which the bankrupt person was a party
• fines for criminal offences (a penalty for an offence under tax law can be released only with the Treasury’s consent)

Whether a particular tax debt counts as one incurred through fraud depends on the facts, and is a question for a solicitor or insolvency practitioner.

Bankruptcy is not a free release: the trustee can sell assets, including the home, and take spare income, and an income payments agreement or order continues after discharge until it ends. The alternatives include an Individual Voluntary Arrangement (a trust deed in Scotland) and, for a company, a Company Voluntary Arrangement, set up through a licensed insolvency practitioner. HMRC votes on these and says it looks positively at proposals that explain circumstances fully and honestly and make an achievable offer.

Breathing Space and HMRC debts

The Debt Respite Scheme, known as Breathing Space, applies in England and Wales. It gives an individual with problem debt legal protection from most creditor action:

• a standard breathing space lasts up to 60 days, pausing most enforcement action and contact from creditors and freezing most interest and charges
• it is available only through a debt adviser, and not if you have had one in the previous 12 months (a separate mental health crisis breathing space has no such limit)

Debts owed to HMRC can be included, because debts owed to the Crown qualify. HMRC’s guidance says late payment interest is worked out to leave out the breathing space period. Some debts are excluded, including debts arising from fraud and business debts that relate only to the business where the person is VAT-registered or in a partnership when they apply. A limited company cannot use Breathing Space.

Breathing Space does not apply in Scotland or Northern Ireland; a free debt adviser there can say what protection is available.

How Time to Pay fits with enforcement

GOV.UK describes enforcement as what may happen if you do not contact HMRC or cannot agree an instalment plan. An arrangement that is agreed and kept to is therefore the usual way to keep a debt out of enforcement, and there are chances to agree one at most stages:

• a debt collection agency can discuss one
• an HMRC officer on a visit can take a part payment as part of one
• in Scotland, the 14-day charge for payment allows time to agree one
• after an insolvency warning letter, HMRC’s manual still has officers consider an offer

An arrangement is not a right: HMRC checks that it is affordable and expects savings and assets to be used first. If one breaks down, HMRC can cancel it and move the case to enforcement, or straight to an insolvency warning letter, and penalties it held off can become payable. Our guide to HMRC Time to Pay arrangements explains how to set one up, the online limits for Self Assessment, VAT and PAYE, and what HMRC will ask.

If a letter about tax arrears has arrived: what to do

1. Work out what it is. A reminder, a debt collection agency letter, a notice of enforcement, an insolvency warning letter, a statutory demand and a court claim each mean something different. Our page on identifying your HMRC letter may help.
2. Check the figure. If HMRC has estimated the tax because a Self Assessment return was not filed, filing the return generally replaces the estimate, within time limits. For VAT, GOV.UK says to send a correct return if an estimated assessment is too high. If the amount itself is disputed, see how to appeal an HMRC decision.
3. Note the deadline on the letter. Each step has its own.
4. Make contact before it passes, with a proposal backed by figures: income, spending, what has been done to raise money, and how future tax will be paid on time.
5. Get free debt advice if there are other debts too. GOV.UK points to MoneyHelper in England and Wales, and to free services in Scotland and Northern Ireland.
6. If a statutory demand, court claim or petition has arrived, see a solicitor or licensed insolvency practitioner straight away.

We are accountants. If a letter about unpaid tax has arrived, we can check what is owed and why, prepare the figures HMRC asks for, and put a payment proposal to HMRC. Where court proceedings are involved, a solicitor or insolvency practitioner is needed, and we will say so at the outset. See our fees or contact us with a photo of page one of the letter.

Frequently asked questions

Do HMRC debt collectors come to your house?

Debt collection agencies working for HMRC do not: they contact people only by letter, text or phone. HMRC’s own officers may visit a home or business, and they carry identity cards that can be checked with HMRC.

Can HMRC take money from my bank account without warning?

A hold can be placed on an account before you hear about it, but HMRC must then send you a copy of the hold notice. You have 30 days to object, and money is not taken until any objection or appeal is settled. HMRC says individuals get a face-to-face visit before direct recovery is considered at all.

Can HMRC take my car?

In England and Wales a vehicle can be taken under the taking control of goods procedure like other goods, after a notice of enforcement. The usual exemption for vehicles needed for work does not apply when HMRC is enforcing, although some vehicles are protected, such as one displaying a disabled person’s badge.

Is a 7-day letter from HMRC a court document?

No. It is a warning letter. A winding-up or bankruptcy petition is a court document, and the time to act on the warning is before one is presented.

Can HMRC make me bankrupt for a small debt?

Not below the limit: in England and Wales, a creditor’s bankruptcy petition needs a debt of at least £5,000. HMRC also says insolvency is its last resort. Smaller debts can still be collected in the other ways described above.

Sources

• HMRC, What will happen if you do not pay your tax bill (GOV.UK, updated 23 October 2026), including the list of debt collection agencies
• HMRC, “If you cannot pay your tax bill on time” (GOV.UK), and “Confirm the identity of someone representing HMRC” (GOV.UK, updated 7 October 2026)
• HMRC, “Issue briefing: Direct Recovery of Debts” (GOV.UK, updated 11 June 2026)
• HMRC Debt Management and Banking Manual: DMBM618010 and DMBM618090 (coding out), DMBM657050 (notice of enforcement), DMBM655020 (distraint), DMBM667320 and DMBM667400 (charging orders), DMBM670100 (summary warrant terms), DMBM685505, DMBM685510, DMBM685535 and DMBM685570 (insolvency warning letters)
• HMRC Compliance Handbook, CH140320 (interest: breathing space)
• Insolvency Service, “Debt Respite Scheme (Breathing Space) guidance for money advisers” (GOV.UK)
• GOV.UK, “Becoming bankrupt”, “Statutory demands” and “Protecting your company from compulsory liquidation”
• Finance Act 2008, sections 127 (taking control of goods) and 128 (summary warrant: Scotland)
• Finance (No. 2) Act 2015, Schedule 8 (enforcement by deduction from accounts), paragraphs 2, 4, 8, 10, 12 and 13
• Taxes Management Act 1970, section 28C (determination where no return delivered) and section 61 (distraint: Northern Ireland)
• Tribunals, Courts and Enforcement Act 2007, Schedule 12; Taking Control of Goods Regulations 2013 (SI 2013/1894), regulations 4 and 6; Taking Control of Goods (Fees) Regulations 2014 (SI 2014/1), Schedule; both as amended from 1 May 2026 by SI 2026/366
• Insolvency Act 1986, sections 123, 127, 129, 267, 268, 279, 281 and 283A; Insolvency (England and Wales) Rules 2016, rule 7.10
• Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (SI 2020/1311), regulation 5
• DG Resources Ltd v HMRC [2025] EWHC 2208 (Ch), paragraphs 4 and 5

This guide is general information, not advice on any particular case.