The tax bill
- Which tax it is, and the amount due
- The payment deadline
- Your VAT registration number, for a VAT facility
- Whether anything is already outstanding with HMRC
VAT and business tax loans
Spread a VAT or corporation tax bill over monthly payments instead of one large outflow, and keep your working capital where it earns.
- Spread a VAT or corporation tax bill over monthly payments
- Keeps working capital in the business through the quarter
- Also called VAT funding, tax loans or business tax finance
- Independent commercial finance broker
Last updated: August 2026
What is a VAT loan?
A VAT loan is short-term business funding used to settle a VAT bill. Instead of paying HMRC the full amount in one go, the lender pays it and you repay in monthly instalments, usually spread across the following quarter.
The same structure covers other liabilities, which is why you will see it called a tax loan, VAT funding, VAT finance, corporation tax funding or business tax finance.
For example, a company faces a £60,000 VAT bill in the same month it has to pay for stock and wages. Funding the VAT spreads it across the next three months, so the bill is settled on time and the cash stays available for trading through the quarter.
One thing to be straight about. This is borrowing to pay a bill you already owe. It buys you timing, not capacity. Before taking it, check whether HMRC's own Time to Pay arrangement would cost you less, because it often does. We would rather tell you that than sell you a facility you did not need.
How a VAT loan works
Five steps from a confirmed bill to a spread payment.
- 01
Your tax bill is confirmed
You know the amount due and the deadline, usually from your VAT return or your corporation tax computation.
- 02
Apply before the deadline
Timing matters. Arranging funding before the due date is straightforward. Arranging it after you have already defaulted is considerably harder and more expensive.
- 03
The lender pays HMRC
On most facilities the funds go straight to HMRC rather than through your account, which keeps the payment clean and on time.
- 04
You repay monthly
The bill is spread across the months that follow, typically aligned to your VAT cycle so one facility is clearing as the next quarter builds.
- 05
Repeat or step away
Many businesses roll a VAT facility each quarter. Others use it once to get through a difficult period and then stop. Both are normal.
What you'll need
Straightforward cases move quickly, which matters when a deadline is close.
Your business
- Companies House number and trading name
- Date of incorporation and length of trading
- Annual turnover and sector
- Last 6 months of business bank statements
- Most recent year-end accounts, or management accounts if newer
Context the lender will ask about
- Why the bill cannot be met from cash this quarter
- Whether this is a one-off or a recurring pattern
- Any existing finance facilities and their monthly cost
- Whether directors will provide a personal guarantee
We do not run a credit search at the enquiry stage. A formal search happens only once you accept a lender's offer.
Which tax bills can be funded
VAT is the most common, but it is not the only liability lenders will cover.
- VAT
- The most commonly funded bill. Quarterly, predictable in timing but not always in size, and it lands whether or not your customers have paid you yet.
- Corporation tax
- Annual, and often larger. Terms can run longer than a VAT facility because the payment cycle is longer.
- PAYE and National Insurance
- Monthly employer liabilities. Some lenders will fund arrears alongside a wider working capital facility rather than as a standalone product.
- A backlog across several bills
- Where more than one liability has built up, funding is usually arranged as a single facility rather than product by product. These cases need care and are best raised early.
Tax loan vs HMRC Time to Pay vs revolving credit facility
Three routes to the same outcome, with different costs and different consequences.
| Feature | Tax loan | HMRC Time to Pay | Revolving credit facility |
|---|---|---|---|
| Who provides it | A commercial lender | HMRC directly | A commercial lender |
| Cost | Interest and usually an arrangement fee | HMRC late payment interest | Interest on drawn funds, plus fees |
| Effect on HMRC record | Bill paid on time | Recorded as a payment arrangement | Bill paid on time |
| Certainty of getting it | Subject to credit assessment | At HMRC's discretion | Subject to credit assessment |
| Reusable | New facility each time | Not designed to be routine | Yes, draw and redraw |
| Speed | Days | Depends on HMRC | Once in place, immediate |
| Best for | A known bill, funded deliberately | Genuine short-term difficulty | Recurring, unpredictable timing |
Indicative. Time to Pay is HMRC's own arrangement and is often the cheaper route. It is worth exploring before taking commercial funding.
Should you use HMRC Time to Pay instead?
Most pages selling tax funding do not mention this. It belongs here, because for a lot of businesses it is the better answer.
Time to Pay is HMRC's own instalment arrangement. It lets a business spread a tax bill it genuinely cannot pay in full. HMRC charges late payment interest on the outstanding balance, but there is no arrangement fee and no broker in the middle.
It is often cheaper. No arrangement fee, and HMRC's late payment interest, 7.75% from 9 January 2026, is frequently below commercial lending rates. If cost is your only consideration, start here.
But it is discretionary. HMRC decides whether to grant it and on what terms. You cannot plan around it with certainty, and it is intended for genuine short-term difficulty rather than as a routine working capital tool. Repeated arrangements can affect how HMRC treats later requests.
Where commercial funding wins is certainty and timing. It is arranged in advance, on terms you know before you commit, and the bill is settled in full on the due date rather than recorded as an arrangement. For a business that can pay but would rather not do it in one lump, that is a legitimate commercial choice.
Speak to your accountant before deciding. If Time to Pay is the right route for you, take it. We will tell you when we think it is.
Is a tax loan right for your business?
Best suited to solvent companies managing timing, not to businesses covering a structural shortfall.
-
You are a limited company
FundingLinks arranges tax funding for UK limited companies, LLPs and PLCs.
-
You have trading history
Lenders typically want at least 12 months of filed or management accounts to assess affordability.
-
The bill is quantified
A submitted return or a computed liability. Lenders fund known amounts, not estimates.
-
The business is fundamentally solvent
Tax funding smooths timing. It does not fix a business that cannot generate enough to meet its liabilities, and taking on debt in that situation usually makes things worse.
-
You can support a personal guarantee
Most tax facilities are unsecured, so directors are commonly asked to guarantee them.
Pros and cons of a tax loan
A sensible cash flow tool used deliberately, and a warning sign used repeatedly.
Pros
- Keeps cash in the business through the quarter instead of a single large outflow
- The bill is paid on time, so no late payment interest or penalties accrue with HMRC
- Repayments are predictable and can be aligned to your VAT cycle
- Usually quick to arrange, which matters against a fixed deadline
- Leaves existing facilities free for trading rather than tax
Cons
- You are borrowing to pay a bill that has already crystallised, so it adds cost without adding capacity
- HMRC Time to Pay may be cheaper, and is worth checking first
- Rolling a facility every quarter can mask a deeper cash flow problem
- Usually requires a director personal guarantee
- Arranging it after a default is harder and more expensive than arranging it before
How much does a VAT loan cost?
Short terms make headline rates misleading. On a three month facility, the arrangement fee often costs more than the interest.
Typical term
3 months
VAT facilities usually run across the quarter, so one is clearing as the next bill builds. Corporation tax is commonly 6 to 12 months, occasionally longer.
HMRC late payment
7.75%
What HMRC itself charges on tax paid late, from 9 January 2026. Set at Bank of England base rate plus 4%. This is the number any commercial facility has to be compared against.
Two charges apply: interest on the balance, and a one-off arrangement fee at drawdown. Most tax lenders do not publish their rates, so we are not going to invent a range here. We will give you the real numbers on your actual bill.
Facility sizes across the market run from around £5,000 to several million, depending on the bill and the business.
Compare in pounds, not percentages. Ask each lender for the total amount repayable on your actual bill over your actual term. On a three month facility the arrangement fee is frequently the larger part of the cost, so comparing on rate alone is misleading.
Then compare it to Time to Pay. HMRC charges 7.75% late payment interest and no arrangement fee. Work out what that costs over the same period and put the two side by side. Sometimes the facility wins on certainty, sometimes HMRC wins on cost.
Exact pricing depends on the bill size, the term, your trading history and credit profile. We set out the all-in cost before you commit.
Rates change. HMRC's late payment interest is set at base rate plus 4% and moves when the base rate moves. The 7.75% figure applies from 9 January 2026. Check the current rate on GOV.UK before relying on it.
How FundingLinks arranges tax funding
Deadline-driven, so the priority is a straight answer quickly.
- 01
Tell us the bill and the deadline
Which tax, how much, and when it is due. Deadlines drive everything here.
- 02
We check Time to Pay first
If HMRC's own arrangement is the cheaper answer for your situation, we will say so, even though there is nothing in it for us.
- 03
Compare lenders on total cost
Rate plus arrangement fee across the actual term, so you can see what the facility really costs against paying HMRC directly.
- 04
HMRC gets paid on time
The lender settles the bill, and you repay across the following months.
Why businesses choose FundingLinks
Specialist support for UK SMEs managing tax timing.
- 100+
- UK lenders compared
- 500+
- SMEs funded
- 35+ years
- Combined commercial finance experience
Whole-of-market panel
100+ UK lenders, including high-street banks, challenger banks, specialist lenders and alternative finance providers. We are an independent broker, not tied to any single lender.
Specialist, founder-led support
Founded by Sam Wells and Chris Findlow, with 35+ years' combined experience in commercial finance. You speak to specialists, not a call centre.
Clear process, secure portal
Track your enquiry, review lender offers and exchange documents in one secure portal. No email chains, no spreadsheets, full visibility from enquiry to drawdown.
Free to compare, success-based fees
No upfront charge to use FundingLinks. Fees apply only if you proceed with a facility, and they are agreed in writing before you commit.
VAT and tax loan FAQs
Direct answers, including when not to use one.
What is a VAT loan?
A VAT loan is short-term business funding used to pay a VAT bill to HMRC. Rather than settling the full amount in one payment, the lender pays HMRC and you repay in monthly instalments, usually spread across the following quarter. It is also called VAT funding, VAT finance or a business tax loan.
Can I get a loan for a corporation tax bill?
Yes. Corporation tax funding works the same way as VAT funding: the lender settles the bill with HMRC and you repay monthly. Terms are often longer than on a VAT facility, because corporation tax is annual rather than quarterly, so there is a longer window before the next bill arrives.
What is HMRC Time to Pay?
Time to Pay is HMRC's own instalment arrangement, letting a business spread a tax bill it cannot pay in full. HMRC charges late payment interest on the outstanding balance, 7.75% from 9 January 2026, but does not charge an arrangement fee. It is granted at HMRC's discretion and is intended for genuine short-term difficulty rather than as a routine cash flow tool. It is very often the cheaper option, so it is worth exploring before taking commercial funding. Check the current rate on GOV.UK, as it is set at base rate plus 4% and moves with it.
Is a tax loan cheaper than Time to Pay?
Frequently not. Time to Pay has no arrangement fee and HMRC's interest rate is often lower than commercial lending rates. Where a tax loan can win is on certainty and record: it is a commercial decision made in advance rather than an arrangement negotiated with HMRC after the fact, and the bill is settled on time. Compare the total cost of both before deciding, and speak to your accountant.
Will a tax loan affect my relationship with HMRC?
The bill is paid in full and on time, so from HMRC's perspective the liability is simply settled. That is the practical difference from a Time to Pay arrangement, which is recorded as a payment arrangement against your account. Neither is a black mark in itself, but a pattern of arrangements can affect how HMRC views future requests.
How quickly can a VAT loan be arranged?
Straightforward cases can complete within a few working days, which is usually fast enough to hit a deadline if you start before it passes. Applying after the due date is a different conversation: penalties may already be accruing and the lender is assessing a business that has already missed a payment, so it costs more and takes longer.
What happens if I miss a VAT payment?
HMRC applies late payment interest from the due date, and the penalty regime for repeated late payment escalates. Funding becomes harder and dearer once you are in arrears, because lenders can see the default. If you know a bill is going to be difficult, dealing with it before the deadline gives you far better options than dealing with it after.
Is a VAT loan secured?
Most are unsecured, with a director personal guarantee instead of collateral. Larger facilities, or facilities for a business with a weaker profile, may require security over assets. We flag what each lender expects before you commit.
Can I use a revolving credit facility instead?
Yes, and for a business with recurring tax bills it is often the better structure. A revolving credit facility is arranged once and drawn whenever you need it, so you are not applying afresh each quarter. Interest is charged only on what you draw. If tax is a recurring pinch point rather than a one-off, this is worth comparing.
Does taking a tax loan mean my business is in trouble?
Not necessarily. Plenty of profitable, well-run businesses fund tax deliberately, because a large quarterly outflow is a poor use of working capital when that money could be funding stock or wages. It becomes a warning sign when the facility is rolled every quarter and the underlying gap keeps widening. We will tell you honestly which situation we think you are in.
Which businesses can FundingLinks arrange tax funding for?
UK limited companies, LLPs and PLCs.
Is a business tax loan regulated?
Commercial lending to limited companies for business purposes is typically unregulated. FundingLinks works only on unregulated commercial finance for UK businesses.
This is general guidance, not tax advice. Tax deadlines, penalty regimes, interest rates and the deductibility of finance costs all depend on your circumstances and change over time. Always speak to a qualified accountant or tax adviser before deciding how to deal with a tax liability.
Related products
Other funding that works alongside, or instead of, a tax loan.
Common questions
- What is a VAT loan?A VAT loan is short-term business funding used to pay a VAT bill to HMRC. Rather than settling the full amount in one payment, the lender pays HMRC and you repay in monthly instalments, usually spread across the following quarter.
- What is HMRC Time to Pay?Time to Pay is HMRC's own instalment arrangement, letting a business spread a tax bill it cannot pay in full. HMRC charges late payment interest on the outstanding balance but no arrangement fee. It is granted at HMRC's discretion and is intended for genuine short-term difficulty.
- How much does a revolving credit facility cost?Three charges usually apply. Interest of roughly 7% to 25% a year on the drawn balance only, an arrangement fee of 1% to 5% of the limit at setup, and with some lenders a non-utilisation fee of 0.5% to 1.5% a year on the undrawn portion. Where you land depends on facility size, security and your trading profile.
- Can a startup or new company get business finance?It is harder, but not impossible. Many lenders want a trading history, so the newest businesses have fewer options and pay more. Invoice finance can work earlier than most products, because it looks at the strength of your customers rather than your own track record. We will give you a straight read on what is realistic at your stage.
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Written by
Chris Findlow
Director, FundingLinks
Chris Findlow co-founded FundingLinks after more than 15 years across commercial lending, invoice finance and fintech partnerships, including senior leadership roles at Kriya. He brings deep lender-side experience across sales, partnerships and account management to help SMEs access the right funding.
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