The Autumn Budget Was Another Warning About HMRC Collections.Posted: Dec 4, 2025

The 2025 Autumn Budget has confirmed something we have warned about several times now. HMRC is coming for unpaid tax debt.

The Chancellor may not have made many friends with her budget, and certainly, there has been an amount of controversy around it. One thing that was clear, though, was that she was looking to bring in money, and one of the ways she seems to be looking for that money is through unpaid debts to HMRC.

In short, the Treasury is turning its attention to enforcement, and it seems to be looking to unpaid VAT, PAYE and Corporation Tax, amongst other areas, as targets. That means businesses cannot afford to be complacent about tax. It also doesn’t seem to be just a larger debt grab exercise, and enforcement is tabled right across the board.

Not only did the budget clearly target the hot topic of HMRC debt, but it also allocated the funding, staff, and gave the political backing for them to go after the money owed. So, whether you run a small independent business or a larger organisation, it’s now going to be more important than ever to keep your tax affairs in order.

HMRC enforcement became a budget priority

One of the most significant announcements in the Budget in relation to the insolvency world was an £89 million investment in HMRC collections. That is a lot of money, so, considering this was aimed specifically at improving tax debt collection, they are certainly going to try to make it a responsible spend. Alongside this, the government has pledged to increase ‘high-street enforcement’. I think we can reasonably expect that it will mean a more visible and proactive approach to collecting what’s owed.

There is more to be aware of, though, because the Treasury has also confirmed that consultations will begin in 2026 on how to ensure PAYE and VAT are paid more promptly. Among the proposals being explored are, for example, expanded direct debit requirements. That is effectively automating tax payments and reducing the opportunity for delays or missed deadlines.

Not to put too fine a point on it these measures are a major shift in approach, and it could spell trouble for businesses that are trying to juggle financial issues and being a little too relaxed about paying HMRC as a result. It seems that the days of putting off tax payments may be numbered. Soon, assuming they deliver on their promises, timely compliance will be structurally enforced by a strict payment regime. Not only that, but there will be a swift, efficient collection process in place for when it isn’t.

• Key point: HMRC now has new funding to actively pursue unpaid tax from all businesses.

Turning the microscope on Directors

The other interesting point from the budget was that it also introduced several changes aimed directly at company directors. They seem to be especially interested in those involved in insolvency processes or repeat failures. In fairness, we have been expecting a crackdown in this area for some time, and it seems that it is here. The government has now committed £25 million over five years to fund a new Abusive Phoenixism Taskforce. A grand name for something which will be targeting individuals who dissolve companies to avoid debts and then just set up again under a new name. There doesn’t seem to be any real detail on what that will mean yet, but what we do know is that it will be a specialist unit within the Insolvency Service with around 50 inspectors. The focus will, as you would expect, be on ‘rogue’ directors who misuse the insolvency process.

At the same time, the Company Directors Disqualification Act 1986 is set to be updated, widening the grounds for disqualifying directors. That could include a Fair Work Agency that will be able to disqualify directors who repeatedly breach workers’ rights.

This tougher stance shows a growing lack of tolerance in the Insolvency Service for anyone they consider a ‘rogue director’. It is a loud warning to anyone intending to misuse the insolvency process to escape obligations, including tax liabilities. For directors of distressed businesses, of course, it is important to be as transparent as possible. The risks are rising, and proper conduct is now going to be under greater legal scrutiny.

Key point: Directors will face increased scrutiny and risk penalties if they misuse insolvency to avoid tax.

Tax evasion offences will be strengthened

Another significant development is the proposed introduction of a new criminal offence for reckless evasion of direct taxes. This is expected to be subject to consultation in early 2026. We can probably expect it to bring direct tax (like Corporation Tax) in line with existing rules for indirect tax (like VAT).  The upshot will be that reckless, i.e. unintentional infringement of the law, will make directors liable in much the same way as intentional fraud.

What that means in practical terms remains to be seen, but it could well mean that directors and finance managers could face criminal charges for failing to take reasonable care over tax matters. That is, even if they did not intend to defraud HMRC. It’s a big change in emphasis, and it underlines the growing focus on responsibility, diligence and governance in financial reporting.

If the result is that the lines between oversight and offence become narrower, then businesses will need to be more rigorous than ever with their tax compliance processes.

• Key point: A new offence could make directors criminally liable for reckless tax behaviour.

Time to pay is still there, but don't wait too long

It is still possible to negotiate solutions such as Time to Pay arrangements with HMRC, but businesses must act early and communicate clearly. Leaving tax debt unresolved, particularly in the current environment, increases the risk of penalties, enforcement visits, and even legal action such as winding-up petitions. We have seen this in action over recent months, and it is becoming an increasingly significant factor in insolvencies.

With the backing of Treasury funding and a clear government mandate, the department is becoming much more assertive in its pursuit of overdue liabilities. We can no longer view HMRC as a quiet or passive creditor. They mean to collect.

For businesses already in difficulty, or those heading in that direction, tax arrears are now one of the most urgent areas to address as part of a recovery plan. Just as important is to understand when they cannot be addressed and to act. If you cannot pay HMRC, don’t hesitate to call us and let’s talk.

• Key point: Ignoring tax debt is not an option, and early engagement is essential.

Sort HMRC now, not later!

The Budget sent a clear message, and for business owners and directors, the practical takeaway is straightforward. Staying compliant with VAT, PAYE and Corporation Tax obligations should now be built into day-to-day financial planning with no exceptions. Those who continue to operate with outdated assumptions, such as it is ok to prioritise other payments ahead of tax, are putting themselves and their companies at serious risk.

The direction all of this is heading seems very clear. HMRC is being equipped with the authority, the staff and the tools, and then being told to go out and close the tax gap. They will do that through enforcement, where they see appropriate and not necessarily through extended negotiations as in the past. Directors who fail to take this seriously therefore risk not only financial consequences but personal legal exposure.

If your business is dealing with tax arrears or cashflow issues, it’s time to act. Professional advice and early intervention can make the difference between recovery and insolvency. Just as important, where insolvency is unavoidable, acting as soon as you are concerned and calling us will help set you on the right road.

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