New Proposals May Grant HMRC Greater Access to Banking Data and Wage Deductions

Chancellor Rachel Reeves is exploring new measures to tighten tax collection on savings, including granting HMRC expanded powers to deduct taxes directly from wages and access detailed banking information.

The initiative forms part of a broader effort to ensure taxpayers meet their obligations, as the Treasury seeks additional revenue without raising tax rates. The government is concerned that many savers are not properly declaring interest earned on their accounts.

During the Spring Statement, Reeves pledged to increase prosecutions for tax fraud by 20%, committing additional resources to HMRC’s crackdown on tax evasion. Consultation papers published after the statement suggest that banks may be required to provide National Insurance details of savers, making it easier to link individuals to their financial assets.

Currently, financial institutions supply HMRC with data on taxable savings, but inconsistencies in reporting mean that a significant portion remains unreadable. Officials argue that improving data accuracy would help ensure taxes are collected fairly and efficiently, securing funding for public services.

The proposals also include changes to the PAYE tax system, allowing HMRC to adjust tax codes more frequently to collect unpaid tax on savings interest. This could impact nearly 900,000 additional savers by 2028-29, as frozen income tax thresholds push more people into higher tax brackets.

While the Treasury defends the move as a step towards better compliance, critics warn that it risks excessive government control. Some tax experts have expressed concerns that increasing surveillance of personal finances could lead to an overreach in state powers.

Amid these developments, fears are growing over potential reductions in cash Isa allowances, with ministers reportedly considering a sharp cut from £20,000 to £4,000 to encourage investment in other financial products.