HMRC could be given the power to recover unpaid tax directly from people's bank accounts even if they owe as little as 1p under new Government proposals.

The plans, which are now out for consultation, would remove the current £1,000 minimum debt threshold before HMRC can use its Direct Recovery of Debts powers.

If approved, the changes would mean the tax authority could, in theory, recover debts of any value, although ministers insist the powers would be used only against people who can afford to pay but repeatedly refuse to do so.

The consultation also proposes scrapping the existing rule that requires HMRC to leave at least £5,000 in a taxpayer's bank account after recovering money.

At the moment, HMRC can only recover money directly from bank accounts where someone owes more than £1,000, with both safeguards having been in place since the powers were introduced in 2015.

The proposal does not mean HMRC would automatically take 1p from every taxpayer. Instead, removing the threshold would allow officials to pursue smaller unpaid tax debts where they believe someone has repeatedly ignored requests to pay.

HMRC estimates fewer than 250,000 individuals and businesses each year would be eligible for the expanded powers, with fewer still expected to end up on automatic repayment plans.

The proposals have prompted concern among tax experts, who argue the measures could give HMRC too much power.

Nimesh Shah, of tax firm Blick Rothenberg, said: "I have some sympathy for HMRC for having to expend significant time to chase smaller amounts and the associated time and cost can be higher than the amount involved."

However, he warned: "My concern is that this could be used as a 'sledgehammer' by HMRC without the proper safeguards in place."

He added: "There is also the issue of where HMRC have assessed the incorrect amount of tax and they then use this power to recover an amount which actually isn't due."

Victoria Todd, of the Low Incomes Tax Reform Group, also questioned whether the proposals go far enough to protect people on lower incomes.

She said: "We are particularly concerned that the proposals do not currently include a minimum amount that must be left in a taxpayer's account."

She added: "For those living on a tight budget, deductions could leave them struggling to meet essential living costs."

Todd said HMRC would need robust systems to identify vulnerable taxpayers and distinguish them from those who are deliberately refusing to pay.

Robert Salter, also of Blick Rothenberg, raised further concerns, asking: "Is there a risk that such automatic collection arrangements could drive taxpayers into further debt?"

HMRC has suggested deductions could be capped at 50% of a person's disposable income, although that proposal is still being considered as part of the consultation.

Defending the plans, Exchequer Secretary to the Treasury Dan Tomlinson said: "The vast majority pay on time and in full, so it's vital for a fair tax system that we seek to recover debt from those who can afford to pay but refuse to."

He added: "These extended powers would ensure fairness for all taxpayers, while support will continue to be offered to those wanting help with their payments."

According to HMRC, more than 750,000 lower-value tax debts worth more than £2billion go uncollected every year despite officials attempting to contact taxpayers at least 10 times. The measures form part of wider efforts to reduce the UK's tax gap, which reached £59.2billion in 2024-25, up from £46.8billion the previous year.

The consultation is open until August 28.