Can HMRC access my bank accounts? 

If you’re wondering whether HMRC can access your bank accounts and see your financial transactions, you’re not alone. It’s a valid concern for many self-employed individuals, company owners, and side-hustlers.

But what kind of access does HMRC actually have to your finances? Can they view your personal or business bank accounts without permission, or are there restrictions and legal steps involved? And do they have the right to recover debts from your bank accounts or freeze assets?

In this simple guide, we explain how HMRC interacts with bank accounts, when and why they might want to see them, the extent of HMRC’s powers, and some best practice tips to keep your records and filings in good order.

Can HMRC access my personal or business bank account?

By default, bank account data is private and legally protected by confidentiality obligations. This means that HMRC can’t simply look at certain financial information on a whim. But with reasonable justification and proper authorisation, HMRC can access your personal or business bank accounts and see your transactions.

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In instances where HMRC has reason to believe that tax fraud has occurred — such as undeclared income or falsified tax returns — they can formally approach your bank and request specific information. These requests follow a legal procedure and often (but not always) require your express consent or approval from an independent tax tribunal.

However, if your finances are in order and you’re filing accurate tax returns on time, there’s little reason for HMRC to want to access and scrutinise your bank accounts.

What legal authority does HMRC have to look at bank accounts?

Under Schedule 36 of the Finance Act 2008, HMRC has the legal power to investigate tax returns and obtain data from relevant data-holders – provided that it has reasonable grounds to do so, and that access to such information is reasonably required to facilitate an investigation or tax compliance check.

The Finance Act 2021 introduced an amendment to Schedule 36, providing HMRC the power to issue Financial Institution Notices (FINs) requiring financial institutions to provide information, including bank account statements, for the purpose of checking a person’s tax position or collecting a tax debt.

HMRC does not require approval from the taxpayer or an independent tax tribunal before issuing a FIN. However, there are legislative safeguards in place to prevent indiscriminate use of Financial Institution Notices, including:

• Information or documents sought must be reasonably required to check a taxpayers’ tax position or recover unpaid taxes.
• An authorised officer must approve each FIN. HMRC has provided specific training on FIN powers.
• HMRC can only issue a FIN if, in the reasonable opinion of the officer giving the notice, it would not be onerous for the financial institution to comply.
• Upon issuing a FIN, officers must tell the taxpayer why the information is needed. This requirement can only be overridden with the agreement of the independent tax tribunal. The tribunal must be satisfied that informing the taxpayer may undermine the collection or assessment of tax.

Additionally, the legislation requires HMRC to provide the House of Commons with an annual report on the use of FINs. According to the Report on HM Revenue and Customs Financial Institution Notice powers (2023 to 2024), no formal complaints have been made by taxpayers or financial institutions against the use of FINs to date. 

What is an independent tax tribunal?

A tribunal is part of the court system but independent of the government, HMRC, and other government agencies. The First-Tier Tribunal (Tax Chamber) is on broadly the same level as a Crown Court, but their procedures are less complex and more informal. The Upper Tribunal Tax and Chancery Chamber is the equivalent of the High Court, dealing primarily with appeals arising from the First-Tier Tribunal. 

Why would HMRC want to look at my bank account?

HMRC’s Fraud Investigation Service (FIS) and Risk and Intelligence Service (RIS) have the authority to use criminal investigation powers to investigate HMRC-related offences and ensure taxpayers are paying the correct amount of tax. 

These powers enable HMRC to check taxpayers’ bank accounts and work with other agencies to verify compliance with tax laws. However, HMRC investigations and tax compliance checks are rarely random, and most relate to civil matters rather than criminal activity. 

Understanding why HMRC may launch an investigation can help you stay compliant and minimise the risk of raising suspicions. It’s also crucial to maintain accurate financial records, declare income and expenses correctly, and seek expert advice when required.

With this in mind, let’s look at the reasons why HMRC might want access to your bank account and see your transactions:

1. Accounting errors

This is one of the most common triggers for an HMRC investigation. Whether deliberate or accidental, submitting tax returns or accounts with incorrect figures can be a red flag for tax non-compliance. This can lead HMRC to question the accuracy of other reported figures.

2. Financial discrepancies

HMRC cross-references tax return data with information it already holds or obtains from other agencies or financial institutions. If your declared earnings or profits differ significantly from industry averages, your lifestyle, previous tax returns, or even credit reports, HMRC may suspect you’re hiding income to evade tax.

For example, if you have a number of expensive cars registered in your name with DVLA, HMRC will check that this is commensurate with your income.

3. Inconsistencies in tax returns

Irregular patterns of income over several years without an apparent reason, claiming unusually high expenses, or claiming personal expenses as business expenses can all attract HMRC’s attention. 

Other common examples include profit rates falling over a number of years, low debtors, low closing stock, or high creditors or accruals.

4. Continuous late filing

If you frequently file your tax returns late, HMRC may suspect that your business is lax and non-compliant in other areas, such as bookkeeping and income disclosure. 

5. Tip-offs by third parties

Other people or organisations – including government agencies, UK and foreign financial institutions, accountants, and members of the public – can report you if they believe you’re evading tax or committing another type of fraud against HMRC.

6. Investigating serious crime

HMRC can access bank accounts to assist other government agencies with investigations into money laundering or terrorist financing. However, beyond the narrow range of the most serious criminal offences, HMRC has a duty of confidentiality. 

 

7. Verifying voluntary disclosures

Taxpayers can make voluntary disclosures to HMRC if they know or believe they have not paid the correct amount of tax. HMRC will carry out financial checks to verify the accuracy of the disclosure.

8. Debt recovery

The Direct Recovery of Debts (DRD) measure gives HMRC the power to recover tax debts directly from cash held in taxpayers’ bank or building society accounts. This includes funds held in cash in ISAs.

Will HMRC notify me before accessing my bank account?

In most cases, yes. If you have tax debts, HMRC will try to contact you to discuss the situation and find a solution before beginning a formal investigation, taking action against you, or requesting to see your bank accounts. 

However, this is not always the case where fraud or criminal activity is suspected. If HMRC believes alerting you could compromise evidence or enable fraud to go undetected, they can legally keep access requests confidential until formalising their inquiries.

Can HMRC seize assets or freeze bank accounts?

HMRC can seize assets and freeze bank accounts, but only in extreme cases. As a last resort, HMRC can use its debt enforcement powers to facilitate the collection of outstanding tax if:

• You cannot be contacted
• You refuse to pay what you owe
• Your debt is returned to HMRC from a debt collection agency

These powers enable HMRC to recover debts directly from a taxpayer’s bank or building society account, through their earnings, from a shop till, or by seizing and selling their assets. 

Asset seizure also commonly occurs in cases where there is a suspicion of tax evasion, money laundering, or other fraudulent or illegal activities. 

Furthermore, HMRC can apply to the courts to make individuals, partnerships, and companies insolvent after considering all other avenues of debt recovery, but this is very rare in practice. If a company is liquidated, HMRC debts generally rank alongside other creditors for repayment, which can make debt recovery more unlikely. 

Recovering debts directly from your bank account

HMRC does not require court approval to recover tax debts directly from debtors’ bank accounts. These powers arise under the Direct Recovery of Debts (DRD) measure. 

However, to ensure debtors do not face any undue hardship from such action, HMRC must:

• Only take action against those who have finalised tax debts.
• Only use DRDs to recover money from debtors with tax and/or tax credits debts of more than £1,000.
• Leave at least £5,000 in the debtor’s accounts.
• Only take DRD action after the timetable for appeals has passed.

A debtor can also object directly to HMRC. If they disagree with HMRC’s decision following an objection or appeal, they can lodge an appeal with a County Court.

Moreover, to ensure only appropriate debtors are targeted for DRD action, vulnerable customers must receive a face-to-face visit from an HMRC agent before commencing any DRD action. This enables HMRC to determine whether such action is valid and appropriate in the circumstances.  

Should I keep separate personal and business bank accounts?

Whether you’re self-employed, renting out property, or operating a side hustle as a sole trader, best practice dictates that you should always use a dedicated business bank account for all business income and expenses. 

In the case of running a company, a separate bank account is essential because the company is legally separate from its directors or shareholders. Moreover, if you hold company money in a director’s personal bank account, there will likely be tax consequences both for the company and the individual.

To avoid mistakes and stay on the right side of HMRC, it is prudent to: 

• Maintain receipts, invoices, and a digital audit trail.
• Use integrated accounting software with real-time reporting.
• File honest, complete tax returns – no rounding down, no omissions.
• Only claim legitimate business expenses.
• File tax returns on time.
• Store financial records securely for at least 6 years from the end of the accounting period they relate to.
• Consult with a reputable accountant if your tax affairs become complex, you are unsure, or you simply want peace of mind. 

Creating a clear distinction between personal and business income and expenses will give you greater control over your finances. This approach will minimise risk, help you stay compliant, and reduce the chances of triggering an HMRC investigation or tax compliance check. But on the off chance you’re selected, your finances and bank accounts should be in order.

Concerned about tax compliance or an HMRC investigation?

If you’re unsure about any aspect of bookkeeping or filing tax returns, speak to a reputable accountant or tax advisor for help managing your tax affairs.

However, if you’re at the centre of an HMRC investigation or worried about the potential for one, seeking legal advice from a tax fraud solicitor may be the best course of action.

Please comment below if you have any questions about this post, or get in touch with the Rapid Formations team if you’d like to speak to us about forming a limited company.