Does HMRC Debt Affect Credit Rating?


Does owing taxes affect credit score UKHMRC debt does not usually have an impact on your credit rating unless you are declared bankrupt. This is because HMRC is not a credit reference agency and they do not share information about unpaid tax bills with credit bureaus.

If you are unable to pay your HMRC debt and are declared bankrupt, this will have a negative effect on your credit rating.

If you are struggling to pay your tax bill, there are several options available to you, including setting up a payment plan, negotiating a time to pay arrangement, or seeking advice from a debt management organisation.

It is important to address your HMRC debt as soon as possible to avoid any negative consequences down the line

What is HMRC debt?

HMRC debt refers to the amount of money that an individual or business owes to Her Majesty’s Revenue and Customs, which is the UK government agency responsible for collecting taxes and enforcing tax law. HMRC debt can arise from various sources, such as unpaid income tax, national insurance contributions, VAT, or corporation tax.

It is important to note that HMRC debt can accrue interest and penalties over time if left unpaid, which can make it more challenging to pay off in the future. If you are struggling to pay your HMRC debt, it is recommended that you seek advice and support from a financial advisor or debt management organisation to help you manage your finances and find a viable solution to pay off the debt.

Does owing taxes affect credit score UK

No, owing taxes itself does not directly affect a person’s credit score. However, failing to pay taxes on time or in full can result in penalties, interest charges, and legal action from HMRC, which can ultimately impact a person’s credit score. If an individual fails to pay their taxes and the HMRC obtains a court judgment against them, it will appear on their credit report, potentially lowering their credit score.

Additionally, if the individual enters into a payment plan with the HMRC, the arrangement may be recorded on their credit file, which can also affect their credit score. Therefore, while owing taxes may not affect a credit score directly, the consequences of not paying them can have an indirect impact on a person’s creditworthiness.

How can I pay HMRC debt?

If an individual has a debt to HM Revenue and Customs, it is important to address it as soon as possible. If left unpaid, HMRC may take legal action against the debtor. While imprisonment is a possibility for the most extreme cases, it is highly unlikely for most people. However, other legal actions such as a County Court Judgment (CCJ) or a bankruptcy petition can seriously impact an individual’s financial situation and credit score.

Clearing the debt in a timely manner is therefore advisable to avoid these consequences. HMRC could nevertheless declare you bankrupt, which would make it more difficult for you to obtain credit in the future.

Does debt collection affect credit rating in the UK?

Yes, debt collection can affect a person’s credit rating in the UK. When a debt is not paid on time, the creditor may transfer the debt to a collection agency, which will then attempt to collect the debt on behalf of the creditor. The collection agency may report the unpaid debt to credit reference agencies, which can impact a person’s credit rating.

If the debt remains unpaid, it can lead to a default being recorded on the individual’s credit report, which can have a negative impact on their credit score for up to six years. This can make it more difficult for the individual to obtain credit or a loan in the future.

If the debt is paid in full and the collection agency updates the credit reference agencies, it can help to improve the individual’s credit rating.

Why you should pay HMRC debts

Paying HMRC debts is important for several reasons. Firstly, failing to pay your debts can result in interest charges, penalties, and legal action, which can lead to further financial difficulties. Secondly, HMRC has a range of powers to recover unpaid debts, such as taking control of assets, issuing court orders, or even bankruptcy proceedings. These actions can have a significant impact on an individual’s financial situation and credit score.

Unpaid crown debts can affect an individual’s ability to obtain credit or a loan in the future. Finally, addressing debts in a timely manner can help to avoid unnecessary stress and worry. the crown offers various payment options and support to help individuals repay their debts, such as instalment plans and debt relief orders.

Read more: Can HMRC Debt be written off?

Can HMRC take from my pay?

Yes, HM Revenue and Customs can take money directly from an individual’s pay if they owe tax or other debts. This is called a ‘direct earnings attachment’ and means that HMRC can instruct an employer to deduct money from the employee’s wages to repay the debt. However, HMRC can only do this after following a specific process and obtaining a court order.

The court order will specify the amount to be deducted from the employee’s pay, which is usually a fixed percentage of their earnings. If the debt is being repaid through a direct earnings attachment, the employee will receive a notice of the deduction and information on how to challenge it. It is important for individuals to address their debts in a timely manner to avoid the risk of legal action and direct earnings attachments

How HMRC take from your pay

HMRC can take money directly from an individual’s pay if they owe tax or other debts. Here are some key points on how this process works:

  • HMRC can only take money directly from an individual’s pay after obtaining a court order, which specifies the amount to be deducted.
  • The court order is sent to the individual’s employer, who will deduct the specified amount from their wages.
  • The amount deducted is usually a fixed percentage of the employee’s earnings.
  • The employer is required to notify the employee of the deduction and provide information on how to challenge it.
  • If the individual has multiple debts, HMRC will prioritize the debts in a specific order.
  • If the individual’s circumstances change and they are unable to pay the agreed amount, they should contact HMRC to discuss their options.
  • HMRC may also be able to take money from an individual’s bank account or seize their assets if they fail to pay their debts.
  • It is important to address HMRC debts in a timely manner to avoid the risk of legal action and direct earnings attachments. Seeking advice and support can help individuals to manage their debts and avoid negative consequences

Will bankruptcy clear personal HMRC debts

Bankruptcy can clear personal debts, including some HM Revenue and Customs debts. However, not all debts can be included in bankruptcy. For example, some debts such as fines and penalties cannot be included, as well as any debts that arose from fraudulent or criminal activity. Additionally, bankruptcy can have serious consequences, such as losing assets and restrictions on obtaining credit.

The bankruptcy process involves an application to the court, and if approved, an official receiver will be appointed to manage the individual’s assets and debts. If the individual has any surplus income or assets, they may be required to make payments towards their debts for a set period of time. While bankruptcy may be a viable option for some individuals, it is important to seek professional advice and consider all options before making a decision

When will HMRC try to make you bankrupt?

HMRC may try to make an individual bankrupt if they owe over £5,000 and have failed to respond to HMRC’s attempts to collect the debt. Bankruptcy is seen as a last resort and is usually only pursued if other collection methods have been unsuccessful. HMRC may issue a statutory demand, which is a legal demand for payment of the debt within 21 days.

If the individual fails to respond to the statutory demand or pay the debt, HMRC can apply to the court to make the individual bankrupt. Bankruptcy can have serious consequences, including losing assets and restrictions on obtaining credit. It is important to seek professional advice and explore other options, such as payment plans or debt management solutions, before considering bankruptcy.

HMRC Contact Details

Post: Pay As You Earn and Self Assessment

HM Revenue and Customs, BX9 1AS, United Kingdom

Phone: 0300 200 3300

+44 135 535 9022
outside UK

Relay UK: dial 18001 then 0300 200 3300.
Official app: official HMRC app

How to contact HMRC about your debts

You might want to ask your financial planner or accountant to speak with HMRC on your behalf. But, you can reach them directly by dialling 0300 200 3300 if you like.

On weekdays, their lines are open from 8 am to 8 pm, and on Saturdays, they are open from 8 am to 4 pm.

HMRC debts shouldn’t be ignored because they won’t disappear.

Read more: Closing a company with HMRC Debts

Frequently asked question

Does tax credits debt affect credit score?

Does tax credits debt affect credit score?

Does paying tax late affect credit rating?

Late payment of tax does not usually directly affect an individual's credit rating in the UK, but it can lead to additional interest and penalties being added to the debt.


Owing taxes to HMRC does not directly affect an individual’s credit score in the UK. HMRC debt is not reported to credit reference agencies and does not appear on an individual’s credit report. However, if the debt remains unpaid for an extended period, HMRC may take legal action to recover the debt.

This could result in a court judgment or insolvency arrangement, which would be recorded on an individual’s credit report and negatively impact their credit score. It is important to address HMRC debts in a timely manner and seek professional advice if necessary to avoid the risk of legal action and negative consequences for creditworthiness.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.

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