Many business owners assume that HMRC’s reach is limited to business bank accounts — but that’s not entirely true.
Under certain circumstances, HMRC can request information from banks and other financial institutions relating to a taxpayer’s accounts — including personal accounts — where they believe tax has been underpaid or incorrectly reported.
This article explains when and why HMRC may look into your financial affairs, what can trigger their attention, and what steps you can take to stay compliant and protected.
HMRC’s Legal Powers to Access Bank Information
HMRC has the authority to issue what’s known as a Financial Institution Notice (FIN). This notice allows HMRC to obtain information directly from a bank, building society, or other financial institution without needing the account holder’s consent.
These notices are typically used when HMRC:
• Is investigating a potential tax discrepancy
• Needs evidence to verify income, assets, or undeclared earnings
• Believes there have been irregular transfers between accounts
The request can relate to business or personal accounts, provided the information is considered relevant to establishing a taxpayer’s correct tax position.
The financial institution must comply with the request within a set timeframe, and the taxpayer isn’t always notified beforehand.
Direct Recovery of Debts
In specific cases where tax remains unpaid, HMRC also has powers to recover funds directly from a taxpayer’s bank accounts.
This process — known as Direct Recovery of Debts (DRD) — is only used after multiple warnings and where:
• The outstanding tax debt exceeds £1,000
• Repeated attempts to collect payment have failed
• The taxpayer has ignored correspondence or refused a payment plan
Even then, HMRC must leave the taxpayer with a minimum balance of £5,000 across all accounts to ensure basic living costs are protected.
What Can Trigger HMRC to Review Bank Accounts?
While most taxpayers won’t face such scrutiny, HMRC’s data analytics and cross-referencing tools can highlight irregularities quickly. Common triggers include:
• Unexplained deposits or transfers inconsistent with declared income
• Frequent or large cash deposits
• Lifestyle mismatches — e.g. modest declared income but significant personal spending
• Inconsistencies between business and personal accounts
• Failure to file returns or respond to HMRC correspondence
HMRC also routinely receives information from third parties such as letting agents, employers, investment providers, and overseas tax authorities — all of which can flag discrepancies.
Best Practices for Business Owners and Directors
To minimise the risk of HMRC scrutiny, ensure your financial affairs are clear, consistent, and transparent:
1. Keep personal and business accounts separate
Avoid mixing transactions — this helps HMRC see a clear distinction between personal spending and business income.
2. Document all movements of funds
Clearly record any director’s loans, dividends, or personal transfers between accounts.
3. Check for consistency
Ensure your tax returns, business accounts, and actual bank activity align.
4. Declare all income sources
Include dividends, rental income, and investments. HMRC cross-checks this data regularly.
5. Review regularly with your accountant
Proactive advice helps identify issues before HMRC does.
The AJN Approach
At AJN Accountants, we go beyond routine compliance.
Our approach ensures clients maintain total clarity over both their business and personal tax positions — reducing the likelihood of HMRC enquiries and providing peace of mind that all reporting is consistent, compliant, and defensible.
If you’d like a confidential review of your director’s loan account, business-to-personal transfers, or overall tax position, get in touch with our team today.
At AJN Accountants, we can review your situation and help you decide the best approach to make sure you don’t pay more tax than you need to.
