Can HMRC check your personal bank account? It’s a question many people ask, worried that the taxman can freely browse their financial data.

Currently, the answer to the question is a qualified ‘yes’. If HMRC is investigating a taxpayer, it has the power to issue a ‘third party notice’ to request information from banks and other financial institutions. It can also issue these notices to a taxpayer’s lawyers, accountants and estate agents.

However, this doesn’t mean that the taxman can issue these notices willy-nilly. HMRC not only has to prove that information is ‘reasonably required’, but the taxpayer or a tax tribunal must give approval.

This is likely to be changing soon. When the Finance Bill 2021 receives Royal Assent, HMRC will be able to issue a new ‘Financial Institution Notice’, requiring financial institutions to provide information about a taxpayer. For this, independent tribunal approval will no longer be necessary.

Automatic submission of bank account data?

If new proposals from the Office of Tax Simplification become law, the taxman may be able to access your financial data – even if you are not under investigation.

How so? The new proposals are designed to simplify the personal tax system and could even see the end of Self Assessment. The new system would see data from banks, pension providers and others being automatically fed into a new digital tax portal. You would be able to log into this and see your tax bills.

As the OTS report puts it:

The government should extend the use of third party data to:

    1. improve the accuracy of tax reporting and improve the taxpayer experience
    2. make the data held by HMRC from third parties visible to taxpayers and agents through the forthcoming Single Customer Account
    3. update tax codes and prepopulate individuals’ tax returns.

What data will HMRC be able to access?

While the proposals are not set in stone, the kinds of third-party data HMRC wants to access include:

  • Bank and building society interest (building on the information already available)
  • Dividends from UK companies and distributions from authorised unit trusts
  • Distributions from UK and overseas open-ended investment companies
  • Pension contributions
  • Gift aid payments to charities
  • Data from investment and wealth managers including information about chargeable gains, excess reportable income, interest, dividends and equalisation payments
  • Insurance bond chargeable events
  • Royalties

As you can see, the question “Can HMRC check your private bank account?” may soon only cover part of the story!

What happens next?

It’s important to remember that the OTS proposals are just that – proposals. Although a consultation on them has concluded, there is no obligation on government to make them law.

That said, a government spokesman has said that it will “carefully consider the findings to inform our work to build a trusted, modern, tax administration system.”

Given this, it would be wise to make sure your financial accounts are in good condition over the coming months. Importantly, self-employed people must ensure they have a separate business bank account and personal bank account. We can also help you make sure that your accounts are well managed and can advise you on cloud accounting software that helps achieve this. If you are a THP client, get in touch with your account manager for help.


Avatar for Ben Locker
About Ben Locker

Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.

Join The Conversation
Cyber Essentials Plus certification
Sign up for our Newsletter