Labour's Budget will give taxman sweeping new powers to take money straight from bank accounts of people failing to pay

HMRC will be handed sweeping new powers to take money directly from the bank accounts of people who fail to pay their taxes under plans expected to be announced at the Budget.

The taxman will be able to automatically deduct payments from current and savings accounts without obtaining a court order as ministers attempt to recover £4billion in unpaid debts.

Chancellor John Healey is expected to unveil the crackdown targeting millions of individuals and businesses who owe relatively small sums but repeatedly ignore demands for payment.

Under existing rules, HMRC can only seize money directly from accounts if the taxpayer owes more than £1,000 and is left with at least £5,000 after the debt is recovered.

But the threshold could now be slashed to just a few pounds, with officials also able to recover outstanding fines and interest.

HMRC estimates that around 4.8million individuals and businesses owe less than £10,000 each, with their combined debts totalling £4billion.

The average unpaid bill among individual taxpayers is just £950.

The measures, reported by The Times, form part of government efforts to tackle Britain's £60billion tax gap.

HMRC is also considering using credit reference agencies to assess taxpayers' finances and determine how much they can afford to repay each month.

Previous proposals suggested deductions could be capped at 50 per cent of disposable income.

However, the plans have sparked fears that vulnerable people could have money taken from their accounts because of administrative errors, illness or missed correspondence.

Taxpayers would be responsible for challenging deductions they believed were unjustified.

Dan Neidle, founder of Tax Policy Associates, warned automated systems could struggle to distinguish deliberate tax avoidance from genuine difficulties.

But a senior government source insisted the system would include 'rigorous' protections for vulnerable taxpayers.

The Treasury declined to comment on the proposals ahead of the Budget.