What taxes affect your credit score?

Taxes. They’re a big part of most people’s financial life (whether we know it or not) and sometimes it can feel like a lot to keep an eye on. 

You might pay council, income or car tax and as important payments, it could be easy to expect them to make a difference for your credit score, but most of the time, that’s not the case.

Do your monthly payments help towards your credit report? Do missed payments show up on your credit report and make it harder to get a loan? Read on to find out how taxes and credit reports intertwine. 

Hint: it’s not loads. In fact, there are only a few circumstances where your taxes can affect your credit. 

Does paying council tax affect your credit score?

Nope. It doesn’t show up on your credit report, and will not count towards your credit score.

Your credit report is interested in how well you repay loans and manage credit. Paying your council tax is not like a loan repayment, even if you pay it monthly. It  won’t be considered the same as credit agreements that you’re repaying. 

You could seriously help your credit score by making sure you’re registered to vote on the electoral roll. Equifax, Experian and TransUnion (the three credit reference agencies in the UK) are responsible for creating your credit scores, and they look for your address history via the electoral roll. ‍

Register to vote here if you haven’t  already.

Does not paying council tax affect your credit score?

It’s a good idea to make sure you’re on top of your bills but no, lenders don’t have visibility of your council tax payments. This is regardless of whether you pay them, are late paying, or miss them altogether.

Even if your local council takes you to court, it won’t show on your credit report. That’s because non-payment is considered a criminal matter, not a civil one, and it’s dealt with at a magistrates' court.

No penalties or fines that you’re given through the magistrate court proceedings will be revealed on your credit report so they won’t affect your credit score directly either.

You should be aware that if you do go to court, then your local council could be granted a liability order by the Magistrate. 

This means that the amount you owe (plus any fees the court procedure adds on) could be deducted from your wages and would show up on your payslips. It could affect a future credit application, especially if a lender asks to see your payslips.

Does paying car tax monthly affect your credit score?

Car tax is not considered credit. It doesn’t show on your credit report or affect your credit score, whether you pay it or not.

There are many reasons why you might accidentally miss a car tax payment, like an expired MOT, for example. But if you fail to pay your car tax, you could be fined £80 and asked to pay for the time that your car was untaxed. 

If you don’t pay your fine on time, your vehicle could be clamped or even towed and crushed. Your details could also be sent to a debt collection agency, at which point you might find that your credit score could be impacted. 

It’s also worth mentioning that it is illegal to drive an untaxed vehicle so it’s best to make sure you’re on top of all your car payments.

Does not filing taxes affect your credit score?

Good news for self-employed workers (or anyone else who manually files their income tax): this is not considered to be credit and doesn’t show on your credit report.

Your monthly payments won’t appear on your history, and any missed income tax payments will also not be visible to lenders.

If you think you might not be able to pay your income tax, it's important to tell HM Revenue and Customs (HMRC) before deadlines pass. They are more likely to be able to help you at that stage than afterwards. 

You can sometimes get a ‘Time to Pay’ agreement, which gives you an extension to pay off your owed tax in instalments with interest.

If you don’t pay your taxes or tell HMRC, you’ll get penalties at 30 days, six months, and 12 months. The penalties are 5% of what you owe (plus interest if you pay them in instalments).

It’s possible to be prosecuted or even sent to prison for not paying your taxes, but that is usually in extreme situations! 

If you’re experiencing financial difficulties, and feel worried about your income tax, read this helpful page from the HMRC: If you cannot pay your tax bill on time. It can give you some more information about what might happen if you don’t pay your income tax.

The biggest credit-related penalty is that HMRC can make you bankrupt.

The key penalty to keep an eye on in terms of your credit history though is the fact that they can make you bankrupt. 

‍Bankruptcies will show on your credit report and can stay for six years. At that stage you may find that not paying your taxes does actually affect your credit score.

How can I look after my credit?

Loqbox can help with that. We’re a credit-builder that focuses on making you feel a bit brighter about money. If you’re looking for a proven way to improve your credit, take a look at how we can help:A Loqbox membership can help you save and grow your credit at the same time. Learn more about it here.‍

Improvements to your credit score are not guaranteed.