Budget 2015: Taxman can raid your bank accounts

HMRC will have new powers to raid your bank account. Should you be worried?

Workers' pay 'up in real terms'

George Osborne has given the taxman permission to raid your personal bank accounts if you don't pay your tax.

Plans to change the law to make this possible emerged in documents published alongside the Budget. The question is whether we should be worried.

The idea is that if you owe £1,000 or more in tax or tax credit debts, and you have resisted the taxman's efforts to get you to pay up, HMRC will be able to dip into your accounts and take the money that is due.

Good news?

It's a money-spinner for the government, which is relying on HMRC to make up a major chunk of savings by clamping down on tax avoidance and evasion. HMRC has said that it expects to use these powers against people and businesses around 17,000 times a year. It's thought it will dip into accounts and take £20 million this year, £110 million next year, £130 million the year after, then £115 million and £95 million in subsequent years.

Every penny that is clawed back this way is a penny that Osborne won't be cutting from welfare, so on the one hand this brings great news to every honest taxpayer. It is also offers HMRC a new solution when they are faced with persistent offenders who clearly have the money to pay their taxes but are refusing to do so.

Bad news?

On the other hand, however, it raises concerns about the reach of the taxman. HMRC already has all sorts of details about your financial affairs from all sorts of companies, and a sophisticated IT system to crunch the numbers together to check you've given it the whole picture. The new powers are the final piece of the puzzle, which in theory would allow HMRC to decide that you've been hiding income, and then help itself to the tax on that income.

There are plenty of people who are worried by this level of involvement by a public body in their private life, and there are still more who ask what will happen if the taxman makes a mistake.

To get around these concerns, the government says it will bring in a number of safeguards. Before the money is taken from accounts, people will get to meet someone from HMRC face-to-face, to discuss their position and hopefully iron out any misunderstandings. They will also have the right to appeal against it in the county court before any money is taken.

In addition, the taxman can't clear you out: they have to leave £5,000 across your remaining accounts, and if the money is in a joint account, HMRC will only be able to take a pro-rata proportion of the balance in the account.

However, Richard Morley, partner in the Tax Dispute Resolution division of accountant BDO, says that even with these safeguards, people are bound to be worried, adding: "As it pursues this policy, HMRC is going to need to reassure people that innocent taxpayers will not be caught out."

He adds: "A lot of questions still remain around whether the hardened debtor, who is likely to keep funds offshore, will be caught. HMRC can only seize money from UK bank accounts making it harder from them to get hold of funds outside the UK banking system. The devil is in the detail and it remains to be seen how this announcement will play out in practice."

But what do you think? Do you have any concerns about HMRC's new powers? Let us know in the comments.

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