Tax loans: borrowing to pay your company's tax bill on time

A tax loan is a business loan your limited company uses to pay HMRC in full by the deadline, then repays monthly. The main alternative, HMRC Time to Pay, usually costs less in interest but needs HMRC to agree. Which suits you depends on how soon the cash for the bill will arrive.

Timing usually decides it. If the shortfall will take months to clear, HMRC can set payments around what your company can afford. If money is due in soon, borrowing pays HMRC on time, and the loan can be cleared once that money lands.

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A tax loan is a business loan you use to pay HMRC

A tax loan isn't a special type of product. It's a business loan your company uses to pay a tax bill by the deadline, then repays to the lender over an agreed term, so the bill becomes a monthly cost instead of one large payment.

Limited companies borrow to pay these taxes:

• Corporation Tax. If your company's taxable profits are up to £1.5 million, Corporation Tax is due as a single payment 9 months and 1 day after the accounting period ends.
• VAT. Borrowing to pay a VAT bill can cover the gap when it falls due before your customers have paid the invoices the VAT came from.
• PAYE. Some companies borrow when a payroll tax bill lands in a month when customer payments are slow.
• An unexpected bill. For example, a Corporation Tax bill that turns out higher than you'd set aside once your accounts are finished.

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What a tax loan costs compared with Time to Pay

On interest alone, HMRC Time to Pay usually costs less than a tax loan, because HMRC charges 7.75% a year on what's unpaid. A tax loan costs the lender's interest and any fees, but it pays HMRC in full and on time.

Here's the same £10,000 bill handled three ways over 12 months. HMRC's figures use its late payment interest rate of base rate plus 4%, which is 7.75% from 9 January 2026 (HMRC interest rates on GOV.UK). The last column is an iwoca Flexi-Loan, our business loan with flexible repayment options, at our representative rate of 3.33% per 30 days.

The rate we offer your company may be higher or lower than our representative rate. For VAT, the penalties for paying VAT late build on top of the interest the longer the bill stays unpaid. Our £10,000 Time to Pay figure assumes 12 equal payments and simple interest on the falling balance.

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Repaying early cuts what a Flexi-Loan costs

You can repay a Flexi-Loan early at any time with no early repayment fee, and you'll pay less interest. So if the customer payments you're waiting for arrive two months after the tax deadline, you can clear the loan then, rather than paying interest for the rest of the term.

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How HMRC Time to Pay works for a limited company

Time to Pay is an HMRC payment plan that lets your company pay an overdue Corporation Tax, VAT, or PAYE bill in monthly instalments, if HMRC agrees the plan is affordable. Late payment interest keeps running on whatever is still unpaid.

To set up a plan, you'll need your tax reference, a UK bank account you can set up a Direct Debit from, and details of your company's income and spending. HMRC expects you to reduce the debt as much as you can first, for example by releasing stock, vehicles, or shares. It may also ask directors to put in personal funds, accept lending, or extend credit (If you cannot pay your tax bill on time on GOV.UK).

Plans usually last a few months, and HMRC's own guidance treats arrangements over 12 months as exceptional (HMRC Debt Management and Banking Manual). If another tax bill comes up that you can't pay, you may be able to add it to the plan. You can't appeal if HMRC turns a plan down, but you can complain. If you can't agree a plan, HMRC will ask you to pay the full amount.

You may be able to set up a plan online. If not, call HMRC's payment line for the tax you've missed, Monday to Friday, 08:00 to 18:00 (Payment problems on GOV.UK):

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Which suits your company: Time to Pay or a tax loan

The right route depends on where the money for the bill will come from, and when. Some options to consider:

• Time to Pay can suit a company that's already past the deadline, or whose shortfall will take several months to clear, as long as it can show HMRC the plan is affordable.
• A tax loan can suit a company that has money coming in, for example from customer invoices or a seasonal peak, but not before the tax deadline. HMRC is paid in full, so there's no plan to agree with HMRC and nothing overdue on your tax account.

Paying a large tax bill from cash reserves can leave less for salaries and suppliers. iwoca research published in April 2026 surveyed 1,005 small business owners: 28% said they had two months or less of cash in reserve, and 38% would need more than 30 days to secure extra funding. If you might borrow to pay HMRC, it helps to look well before the deadline.

A loan or a payment plan only makes sense if the repayments fit your cash flow. Your accountant can help you compare what each would cost your company.

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Paying a tax bill with an iwoca Flexi-Loan

If your tax bill is due before your customers pay you, a Flexi-Loan lets you pay HMRC in full by the deadline and spread the cost over a term that suits your cash flow. We lend to UK limited companies, from £1,000 to £1 million over up to five years, and we'll give you a decision within 24 hours.

Guy Walker, founder of Dovetail and Slate, used a Flexi-Loan to bridge VAT, salaries, and suppliers over the summer. On having a loan he could repay early, he said:

'It buys you time. It takes away the stress and anxiety. You can focus on what you're actually good at; running your business and looking after your people.'

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Tax loan FAQs

Can HMRC give you a loan?

HMRC doesn't lend money. The nearest thing it offers is a Time to Pay arrangement, which spreads a bill that's already overdue into monthly instalments.

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Can my company get a loan if it already owes HMRC?

Your company can still apply for a business loan if it already owes HMRC, but overdue tax can show up in credit checks and count against an application. If the bill is already overdue, you can also ask HMRC about Time to Pay.

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Can you pay a tax bill with a credit card?

HMRC accepts corporate credit cards for Corporation Tax and VAT, with a non-refundable fee, but it doesn't accept personal credit cards (Pay your Corporation Tax bill by card on GOV.UK). Paying by card moves the bill onto your card balance, so compare the card's interest and HMRC's fee with the other options.

Check your figures with an accountant. This is general information about borrowing to pay a tax bill, not tax or financial advice. An accountant can confirm what your company owes, when it's due, and which option suits it.

Sources (all checked 12 October 2026):

• HMRC interest rates for late and early payments – GOV.UK
• If you cannot pay your tax bill on time – GOV.UK
• Payment problems: enquiries – GOV.UK
• How late payment penalties work if you pay VAT late – GOV.UK
• Pay your Corporation Tax bill – GOV.UK
• Bank Rate – Bank of England

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