Tax funding
HMRC loans: finance to spread a VAT, corporation tax or self-assessment bill
HMRC doesn't lend, but private lenders will fund a tax bill. See how tax loans work for VAT, corporation tax, self-assessment and PAYE, and the alternatives.
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In short
If a tax bill would strain cash flow, there are three main routes: borrow from a private lender that funds tax bills, ask HMRC for a Time to Pay arrangement before the deadline, or use a wider facility such as a revolving credit line.
A tax loan clears HMRC in full and is repaid monthly over a short term, but it adds interest and fees and usually needs a personal guarantee.
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About hmrc loans
"HMRC loans" is the common name for business loans used to pay a tax bill to HMRC, such as VAT, corporation tax, self-assessment income tax or PAYE.
HMRC itself does not lend money. A private lender pays the bill, or funds you to pay it, and you repay the lender in fixed monthly instalments, turning one large payment into a manageable monthly cost.
This page is for business owners facing a tax bill that would drain working capital, or that falls at the wrong point in the trading year. Smart Funding Solutions searches its panel of 300+ lenders, including specialist tax funders, for terms that suit the type of tax and how your business trades.
Funding a payroll tax bill? See PAYE loans.
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A transaction we arranged
£70,000
Unsecured routes had not worked. £70K refinanced HMRC and short-term debts.
Project income was due later; HMRC and short-term debts were due now. We restructured them into one facility.
Read the transaction- Sector
- Building services consultancy
- Structure
- Debt consolidation
- Outcome
- Completed
Explore this section
Choose the right option
Each option suits a different need. Start with the one closest to yours; we will compare the rest for you.
VAT Calculator UK
Calculations are intended as a guide only, you may be offered different terms
VAT loans: pay HMRC on time and spread the cost of your VAT bill
If your VAT bill lands at a bad moment, a lender can pay HMRC in full by the deadline and you repay over the next few months, ideally before the following…
Alternatives to a tax loan
01
HMRC Time to Pay
If you cannot pay on time, HMRC may agree a Time to Pay arrangement to spread the debt. It is at HMRC's discretion, interest still applies and you usually need to contact HMRC before the deadline. See GOV.UK: if you cannot pay your tax bill on time.
02
Budget payment plans
Self-assessment taxpayers can make regular voluntary payments towards their next bill through HMRC's budget payment plan, which avoids borrowing if you plan ahead.
03
Other finance
A revolving credit facility, overdraft or invoice finance can cover tax bills alongside other short-term costs, and may suit a business that needs ongoing headroom rather than a one-off loan.
How tax funding works
- Share the liabilitylenders want to see the VAT return, corporation tax computation, tax calculation or HMRC statement.
- Affordability is assessedthe lender reviews accounts, bank statements and credit history.
- HMRC is paidsome lenders pay HMRC directly; others pay your business account so you can settle the bill.
- You repay monthlyfixed repayments run over a short term matched to the tax type.
Whether the interest can be claimed as a business expense depends on your structure and circumstances; our guide on whether business loans are tax deductible explains the principles, and your accountant can confirm.
Security and personal guarantees on tax loans
Most tax loans are unsecured and backed by a director's personal guarantee. The lender does not normally take a charge over property or equipment, which is one reason tax funding is quicker to arrange than secured borrowing. On larger corporation tax loans, or where the company already has other facilities, some lenders also register a debenture. Sole traders and partners in an ordinary partnership give no separate guarantee because they are already personally liable for the debt; for them, an income tax loan is a personal commitment in its own right. If you are reluctant to give a guarantee, ask about caps and release terms, and read our guide to personal guarantees before signing.
How long does an HMRC tax loan take?
A tax loan is usually one of the faster forms of business finance, often moving from application to decision within a few working days once the lender has the tax return or HMRC statement, accounts and bank statements. Straightforward VAT and corporation tax cases with filed accounts and clean bank conduct move quickest. Cases take longer where accounts are old and management figures are needed, where there are existing HMRC arrears or a Time to Pay arrangement to explain, or where the liability is PAYE, which fewer lenders fund. Some lenders pay HMRC directly on completion, which can add a short step. Timing depends on the lender and the case, so start at least a few weeks before the due date rather than in the final days.
Who qualifies for an HMRC tax loan?
Tax loans are generally available to UK trading businesses with a track record, evidence of the liability and the affordability to repay alongside future tax bills. Lenders look for:
- A UK business with a trading history, usually with filed accounts or tax returns.
- Evidence of the tax liability and the due date.
- Profitability and bank statements showing the repayments are affordable alongside future tax bills.
- Credit history for the business and its owners.
- Any existing HMRC arrears or Time to Pay arrangements; some lenders consider these case by case.
Checklist
Documents to have ready
- The tax return, computation or HMRC statement showing the amount due.
- Latest filed accounts and, if the year end was some time ago, management accounts.
- Recent business bank statements.
- Details and identification for the directors, partners or sole trader.
Benefits and drawbacks
| Benefits | Drawbacks |
|---|---|
| HMRC is paid on time, avoiding late payment interest and penalties | Interest and fees make the tax more expensive than paying from reserves |
| Cash stays in the business for wages, stock and growth | A personal guarantee is usually required |
| Fixed repayments make budgeting straightforward | Loans can overlap if each bill is funded before the last is repaid |
| Usually no property or equipment is pledged | Regular reliance on tax funding can point to a cash flow problem worth fixing |
Side by side
Compare your options
How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.
| Option | How you repay | Security | Often used for |
|---|---|---|---|
| Unsecured business loan | Fixed instalments, usually monthly | No charge over assets; a personal guarantee is usually required | Growth, stock, tax bills and cash flow |
| Secured business loan | Fixed instalments, often over a longer term | A charge over property or other assets | Larger sums, property and refinancing |
| Revolving credit facility | Interest on what you draw; repay and redraw | Varies by lender and case | Recurring or uneven cash flow gaps |
| Merchant cash advance | A share of future card takings | No charge over assets | Card-taking businesses with uneven months |
| Asset finance | Regular payments over the life of the asset | The asset being financed | Equipment, vehicles and machinery |
| Invoice finance | Settled as customers pay their invoices | Your unpaid invoices | Businesses waiting on customer payment |
General information only. Every lender has its own criteria, and all finance is subject to status.
Which tax funding do you need?
| Tax bill | Who usually pays it | How often | Where to read more |
|---|---|---|---|
| VAT | VAT-registered businesses | Usually quarterly | VAT loans |
| Corporation tax | Limited companies | Usually once a year (larger companies pay in instalments) | Corporation tax loans |
| Income tax (self-assessment) | Sole traders, partners and some directors | Balancing payment and payments on account | Income tax loans |
| PAYE and National Insurance | Employers | Usually monthly | Considered case by case |
VAT
A VAT loan is usually repaid over the months before the next quarterly bill, so each quarter's liability is cleared before the next one arrives. It suits businesses whose VAT payment clashes with payroll, stock or a slow month.
Corporation tax
Because corporation tax is often a single annual payment based on a good year's profit, it can arrive when cash is committed elsewhere. Funding spreads it over a longer term than a VAT loan.
Self-assessment income tax
Self-employed people can face a balancing payment and a first payment on account at the same time. Loans to individuals and small partnerships of £25,000 or less can be regulated consumer credit, with extra affordability checks.
PAYE and other liabilities
Some lenders will fund PAYE and National Insurance or other HMRC liabilities, though fewer than for VAT or corporation tax. Underwriters look closely at why payroll taxes cannot be met from cash flow, because missed PAYE payments are often read as a sign of strain. Applying before arrears build up, with payroll figures and bank statements ready, gives the best chance of a lender considering it.
The broker’s view
How we arrange tax funding
Tell us which tax is due, how much and when. We check which lenders fund that type of liability, approach them with your figures, and go through the repayment terms with you before you commit. Contact us well before the payment deadline: decisions can come within a few working days once a lender has everything it needs, and funds can follow shortly after signing. Approval is always at the lender's discretion. It is free to enquire; any broker fee is disclosed separately before you proceed. You can apply online with your tax liability to hand.
Calculator
Run the numbers first
Illustrative figures from the numbers you enter, before you speak to a lender.
FAQs
Questions clients ask
Is a tax loan better than HMRC Time to Pay?
It depends on your circumstances. Time to Pay is agreed at HMRC's discretion, usually needs arranging before the deadline and still charges interest. A tax loan pays HMRC in full and keeps your tax record clean, but costs interest and fees and usually needs a personal guarantee. Compare the total cost and certainty of both with your accountant.
Can I get a tax loan if I already owe HMRC arrears?
Some lenders will consider funding where there are existing HMRC arrears, particularly if the loan clears them and the business is otherwise trading well. Others will decline. Be open about the arrears from the start, as lenders will usually find out, and have a clear explanation of how the position arose and what has changed.
Does HMRC lend money to businesses?
No, HMRC does not lend money. "HMRC loans" is the common name for business loans from private lenders that are used to pay a tax bill such as VAT, corporation tax, Self Assessment or PAYE. The lender pays HMRC, or funds you to pay it, and you repay the lender monthly. The nearest thing HMRC itself offers is a Time to Pay arrangement, which spreads the debt with interest. See VAT loans for the most common type of tax funding.
Can a new business get a loan to pay its tax bill?
It is harder for a new business to get an HMRC tax loan, because lenders usually want a trading history with filed accounts or tax returns, plus bank statements showing the repayments are affordable. A business in its first year may still be considered where the liability is clear and income is steady, but choice is narrower. If you cannot borrow, contacting HMRC early about a Time to Pay arrangement is often the realistic alternative.
Will an HMRC loan application affect my credit file?
It can, because a full credit search on the business and its owners usually happens when you make a formal application. Some lenders use a soft search at the early stage, which other lenders cannot see. Sending your case only to lenders likely to fund your type of tax, rather than applying widely, avoids a run of searches that could make later lenders cautious. Our page on corporation tax loans covers what lenders check for company tax.
Relevant transactions
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£3.37m across seven facilities. Profitable on paper, and liquid when it mattered.
Payroll goes out every week, clients pay on terms and the tax bill lands in between. We funded the gap, seven times.
Tax fundingRead the transaction
£2.2m across six facilities. Large tax bills spread, working capital kept in the practice.
A professional partnership that funds its VAT and HMRC liabilities deliberately, so its working capital stays in the practice.
VAT and HMRC fundingRead the transaction
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