Credit Score Basics > Does filing your tax return late affect credit score?

Does filing your tax return late affect credit score?

Wollit Team2 minute read · Updated 17th September 2024

Filing your tax return on time is important for everyone in the UK. However, sometimes life gets busy, and deadlines can be missed. That usually means a few penalties, and in extreme cases it can also affect your credit score. Here is why.

What is a tax return?

In the UK, you might have to report your income and pay taxes through something called self-assessment. This depends mostly on how you earned money. People who need to file a self-assessment tax return include: self-employed people, investors who made a profit, but sometimes even PAYE employees who earned over £100,000. Best to check with HMRC.

Self-assessment means that you are responsible for calculating how much tax you owe and sending your tax return to HMRC. The deadline for filing your self-assessment tax return is usually January 31st after the end of the tax year, and you must also pay any taxes owed by the same date.

If you miss these deadlines, you may face penalties.

What happens if I file my tax return late?

If you file your tax return late, HMRC will impose some penalties.

If your tax return is up to three months late, you will get a fixed penalty of £100. This penalty applies even if you don’t owe any tax.

If your return is more than three months late, the penalties will start adding up. First, an extra £10 per day for up to 90 days. Then after six months, another £300 or 5% of the tax due, whichever is higher. After twelve months, you’ll be hit with another charge of either £300 or 5% of the tax due.

These penalties can add up quickly, so it’s important to file as soon as possible if you're late.

Does late filing affect my credit score?

The good news is that filing your tax return late does not directly affect your credit score. This is because HMRC does not share information about your taxes with the credit agencies (Experian, Equifax, and TransUnion). This means that simply filing your return late will not show up on your credit report.

However, filing your tax late could indirectly affect your score.

If you keep missing payments or ignore HMRC's penalties, they may take legal action against you. This could lead to a County Court Judgment (CCJ), which would appear on your credit report and lower your score. And if HMRC sends your debt to a collection agency, this could also harm your credit rating if it leads to further legal actions.

In short, ignoring your tax debts can lead to serious problems, including legal action and damage to your credit score. It’s essential to deal with any outstanding taxes as soon as you can, and if you cannot afford to pay all in one go, reach out to HMRC and discuss a payment plan.