HMRC's plan to raid your bank account - yet more financial repression

The idea that the taxman can help himself to your bank account is another example of how the state is becoming more financially repressive.

I got a letter from a reader a few weeks ago. He was grumpy about some of our marketing. I can see that. But I also thought he was wrong about the bits that he particularly disliked.

His main bugbear in the literature? He thinks the idea that feckless politicians have foolishly run up gigantic debts and are now planning underhand tricks to recoup the money from the pockets of middle-class investors is "clearly a travesty".

I guess he isn't spending much time reading the newspapers. This week provided us with yet another example of the financial repression we have been talking about for some time now the news that HMRC is seeking powers that will allow it to take money directly out of your bank account or Isa to cover tax that it believes you owe, in a manner that, as one commentator puts it, "undermines centuries of established laws and liberties".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

You might think this isn't a big deal after all, everyone should pay the tax they owe (all part of living in a civilised society, etc) and HMRC says it'd only take money from people it had contacted "on average nine times" already.It would also give 14 days notice and leave at least £5,000 in all accounts to make sure no immediate financial hardship was suffered.

We don't think that's enough.

For starters, as MPs pointed out last week, given that HMRC wants to decide for itself who owes what with no independent oversight, "this policy is highly dependent on HMRC's ability to accurately determine which taxpayers owe money and what amounts they owe".

And that's not an ability it's demonstrated much in the past. In 2011, 1.4 million people received demands for a average of just over £1,400 as a direct result of previous HMRC errors.

Another thing to note is that this is merely an extension of powers HMRC has already awarded itself.

A letter to The Times this week from John Wright points out that "HMRC already collects money it thinks it might be owed by using the tax code system". HMRC stated that Wright owed £808 in a "potential underpayment" of tax. As a result, it adjusted his tax code to deduct £67 every month from his pension.

The fact that in correspondence it acknowledges that the sums might be wrong has "not stopped it from continuing to take the money" every month. If it could already take money from Wright's bank account, you can bet the chance of being wrong wouldn't stop them doing that either.

Too many people don't pay their taxes, and the black and grey markets are far too big in the UK (one reason why those of us who do pay our taxes pay more than we feel we should), but that is no reason to make bad laws.

If HMRC needs to take money from bank accounts, it should only be able to do so when it has applied for and received a legal warrant to do so just as it does today when it wants to seize an individual's goods to cover unpaid tax.

Daniel Hannan writes in his excellent book How We Invented Freedom and Why It Mattersthat one of the great joys of British democracy has long been the way in which the state has served the people rather than the other way around.

This kind of thing the idea that HMRC can take your money or property without going via a legal system that gives you right of reply is not only financially repressive, but gives a nasty hint as to how that is changing.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.