Credit Score Basics > Does an HMRC payment plan affect credit score?

Does an HMRC payment plan affect credit score?

Wollit Team2 minute read · Updated 17th September 2024

If you owe money to HMRC (which stands for His Majesty's Revenue and Customs) and set up a payment plan, you might wonder how this new piece of “tax debt” affects your credit score. Here is how it works.

What is an HMRC payment plan?

An HMRC payment plan, also called a Time to Pay (TTP) arrangement, lets you pay your tax bill in smaller amounts over time. This option is helpful if you can’t pay your taxes all at once. You can use this plan for different types of taxes, but most people use it for their Self Assessment tax return bill.

This tax return is usually something you have to do if you’re self-employed (sole trader), earn money from investing or selling property, or if you earn over £100,000 from your PAYE job.

How do I set up a payment plan?

To set up a payment plan with HMRC, you need to owe less than £30,000 for self-assessment tax or £100,000 for other types of tax. You also shouldn’t have any other payment plans or debts with HMRC.

If you meet these requirements, you can simply apply online. If not, you’ll need to call HMRC and explain your situation.

When applying, you’ll need your unique tax reference number (UTR number), your bank details so that HMRC can set up a Direct Debit, and some information about your income and expenses, so that HMRC can decide if you can afford paying the tax bill in one go or not.

Does setting up an HMRC payment plan affect my credit score?

The simple answer is no; having a payment plan with HMRC does not directly affect your credit score.

HMRC doesn’t share information about unpaid taxes or payment plans with credit agencies. So, just having a debt with HMRC or setting up a payment plan won’t show up on your credit report.

Since HMRC doesn’t report these plans, they don’t directly change your credit score.

However, if you miss payments on your plan or don’t pay your taxes at all, this could lead to legal actions like court judgments (CCJs). A CCJ would appear on your credit report and lower your score quite a bit.

Also, if you can’t manage your tax debts and go bankrupt, this would also significantly hurt your credit score.

Can I get credit while on an HMRC payment plan?

Yes, you can still get credit while on an HMRC payment plan. However, lenders will review your overall financial health, including how much money you make and spend each month. If you're managing your payments well and have steady income, it may help you get approved for credit.

The type of loan or credit card you're applying for matters too. For example, getting a mortgage might be more challenging if you have ongoing tax debts compared to getting a small personal loan or credit card.

The reality is that what lenders care most about are two things: if you can afford the loan and if you are a responsible borrower. This is why it’s so important to work on your credit history.

There are a number of tools you can use to do this, and one such tool is Wollit.

Wollit is an app that reports your monthly subscription as loan repayment to the credit reference agencies, helping you build your credit history and potentially improving your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian, adding another line in your credit report that shows lenders you're responsible and pay your bills on time.