Labour will let the taxman raid bank accounts without a court order to recover £4bn in unpaid tax

Chancellor John Healey is expected to unveil the powers in Wednesday's Budget, slashing today's £1,000 debt threshold and ditching the rule that taxpayers keep £5,000. Around 4.8 million people and firms each owe under £10,000, roughly £4billion in all. The typical individual bill is only £950. Officials could also claw back fines and interest from current and savings accounts.

HMRC is reportedly eyeing credit reference agencies to judge what each debtor can afford.

Dan Neidle of Tax Policy Associates warned automated grabs may hit people in genuine difficulty.

A senior government source promised 'rigorous' protections, but victims must challenge deductions themselves.