VAT and corporation tax loans: costs, terms and HMRC plans

Published and reviewed 4 November 2026. General information, not advice. Figures are illustrations, not lender quotes.

The short version

A VAT or corporation tax loan is a short business loan, usually over 3 to 12 months, that pays HMRC on time so the company can repay the lender in instalments. It avoids HMRC penalties, but it is not the only way to spread a tax bill, and often not the cheapest.
Paying HMRC late is expensive and getting more so. Late payment interest is 7.75% a year, and since 2025 a VAT bill paid late without an agreement also attracts penalties of 3% at day 15, another 3% at day 30 and 10% a year from day 31. Paying a £48,000 VAT bill 60 days late costs about £3,890.
An HMRC Time to Pay arrangement agreed before the deadline stops VAT penalties and costs only the 7.75% interest. Spreading the same £48,000 over six months costs about £1,085 that way, against about £1,410 for a bank-style loan at 10%, about £3,080 for a specialist tax lender at 1.25% a month plus a 2% fee, and about £4,290 for an online loan at 2.5% a month.
A loan earns its cost when HMRC will not agree a plan, when the company owes more than it can clear in 12 months or already has an arrangement, or when it wants to keep a clean HMRC record ahead of a mortgage or bank application.
Buying a commercial building with VAT is a separate case. VAT bridging finance covers the VAT at completion until HMRC repays it. On a £900,000 opted-to-tax office, the £180,000 of VAT also adds £9,000 of stamp duty that is never refunded, so check whether the sale can be a transfer of a going concern first.

What VAT and tax loans are

Tax bills are fixed sums on fixed dates, and they rarely arrive in a company’s best month. A VAT loan or corporation tax loan is short-term business finance used to pay HMRC in full on the due date. The company then repays the lender in monthly instalments, usually over 3 to 12 months. Some tax lenders pay HMRC directly. Others pay the company, which pays HMRC.

There is no special legal product called a tax loan. The name describes the purpose. In practice, companies use several kinds of finance to spread a tax bill, and the right one depends on the tax, the size of the bill and how quickly the cash comes back.

Ways UK companies fund a tax bill
Option	How it works	Typical term	Best suited to
HMRC Time to Pay	HMRC agrees to let you pay in instalments. Interest at its late payment rate runs on the unpaid balance.	Often up to 12 months, sometimes longer	A short-term cash problem you can clear from future profits
VAT or tax loan	A lender pays the bill, or pays you to pay it, and you repay monthly. Some lenders specialise in tax funding.	3 to 12 months	A one-off bill when HMRC will not agree a plan, or a clean record matters
General short-term loan or credit line	An unsecured business loan or revolving credit line used for the tax bill.	3 months to 5 years	A business that already has, or wants, a flexible facility
Overdraft	The bank lets the current account go overdrawn up to a limit.	Usually reviewed yearly	A small gap of a few weeks
Corporate credit card	HMRC accepts corporate credit cards for VAT and corporation tax, with a non-refundable fee. Personal credit cards are not accepted.	Until the card statement	A small bill you can clear within the card’s interest-free period
VAT bridging loan	Short-term finance for the VAT charged on a commercial property purchase, repaid when HMRC refunds the VAT.	1 to 6 months	Buying an opted-to-tax commercial building

This guide is about limited companies. It covers VAT, PAYE and corporation tax, and the special case of VAT on a property purchase. Self Assessment for individuals is a separate system with its own rules and is not covered.

When each tax bill falls due

A tax bill is only a surprise if it is missing from the cash flow forecast. These are the dates that matter for most companies.

Company tax payment dates
Tax	When payment is due	Notes
VAT, quarterly returns	One calendar month and seven days after the end of the VAT period	A quarter ending 31 December is due by 7 February. Direct Debit is collected a few days later.
PAYE and National Insurance	By the 22nd of the next tax month if you pay electronically	Tax months run from the 6th to the 5th. Employers paying under £1,500 a month can ask to pay quarterly.
Corporation tax, profits up to £1.5 million	Nine months and one day after the end of the accounting period	A year ending 31 December 2026 is due by 1 October 2027, before the return itself is due.
Corporation tax, profits £1.5 million to £20 million	Four quarterly instalments, starting in the seventh month of the accounting period	For a 12-month period, payments fall in months 7, 10, 13 and 16, based on an estimate of the year’s profit.
Company Tax Return	12 months after the end of the accounting period	Filing late brings penalties, covered below, even if no tax is owed.

Two features make corporation tax hard to plan for. It is paid on profit that may have been earned more than a year earlier and already spent on stock, staff or equipment. And for a growing company the bill rises just as the business needs more working capital, so the money set aside last year is rarely enough.

VAT is different. It is money the company collected from its customers on HMRC’s behalf, so a VAT shortfall usually means that cash has been used to run the business. Lenders and HMRC both read it that way.

What paying HMRC late costs in 2026

Before comparing any loan, work out what doing nothing would cost. Since 2025 the answer is a lot more than it used to be.

Late payment interest: 7.75%

HMRC charges late payment interest at Bank Rate plus 4%, which has been 7.75% since 9 January 2026. The margin was raised from 2.5% to 4% in April 2025. Interest runs daily from the due date until the tax is paid, including while a Time to Pay arrangement is in place. The rate moves with Bank Rate, and the Bank of England’s next decision is due on 5 November 2026.

VAT: penalties at day 15, day 30 and every day after

For VAT periods starting on or after 1 January 2023, late payment penalties work like this. The rates were increased in 2025 from 2%, 2% and 4%.

VAT late payment penalties
How late	First penalty	Second penalty
Up to 15 days	None	None
16 to 30 days	3% of the VAT unpaid at day 15	None
31 days or more	3% of the VAT unpaid at day 15, plus 3% of the VAT unpaid at day 30	10% a year, charged daily on the unpaid VAT from day 31

Asking HMRC for a payment plan changes this. A request made in the first 15 days stops the first penalty. One made by day 30 stops the second 3%. One made after that stops the daily penalty growing. If the arrangement later breaks, HMRC can charge the penalties as if it had never been agreed.

PAYE: penalties that grow with each late month

For employer PAYE and National Insurance, the first late payment in a tax year does not count as a default. After that, HMRC charges 1% of the late amount for 1 to 3 defaults, 2% for 4 to 6, 3% for 7 to 9 and 4% for 10 or more. A further 5% is charged on anything still unpaid after six months, and another 5% after 12 months. On a £22,000 monthly PAYE bill paid late for the fourth time in a year, the penalty is £440, plus interest.

Corporation tax: interest, and penalties for late returns

There is no penalty for paying corporation tax late, only interest at 7.75%. Filing the return late is different. From April 2026, late filing penalties doubled to £200 at one day late and another £200 at three months, or £1,000 each after three late returns in a row. At six and 12 months HMRC adds 10% of any unpaid tax each time. So file on time even if you cannot pay.

Worked example: a £48,000 VAT bill paid 60 days late

A company’s VAT for the quarter to 31 December 2026 is £48,000, due on 7 February 2027. It pays nothing until day 60 and does not contact HMRC.

First penalty: 3% at day 15 plus 3% at day 30 = £1,440 + £1,440 = £2,880.
Second penalty: 10% a year for 30 days, from day 31 to day 60 = about £395.
Late payment interest: 7.75% a year for 60 days = about £612.
Total: about £3,890 to borrow £48,000 for two months, an annual cost of roughly 49%.

Penalties are not deductible for corporation tax, so the whole £2,880 comes out of taxed profit. One phone call to HMRC before day 15 would have removed every penalty in this example.

HMRC Time to Pay: how it works and its limits

A Time to Pay arrangement is HMRC agreeing to let a business clear a tax debt in instalments. It is not a loan and there is no fee, but late payment interest runs on the unpaid balance throughout. HMRC agrees plans when it believes the business has a short-term problem and can pay in full over time. It does not have to agree.

Setting a plan up online

HMRC lets businesses set up some payment plans online without speaking to anyone. For VAT and employer PAYE, the online service is generally available when the business owes £100,000 or less, can clear it within 12 months, has filed its returns and has no other HMRC payment plans or debts. VAT debts must relate to periods starting in 2023 or later, and businesses using the cash accounting or annual accounting schemes, or making payments on account, need to call. Check the current conditions on the service before relying on them.

Larger debts and corporation tax

For larger debts, corporation tax, or a business that does not qualify online, call HMRC’s Payment Support Service before the due date. HMRC will ask how much you can pay now, how much each month, what other taxes you owe and about the company’s income, spending and assets. Its guidance says a company must reduce the debt as much as possible before a plan is agreed, and HMRC may ask whether directors can put in money or whether the company can borrow. In other words, HMRC may expect you to have looked at a loan first.

What HMRC expects in return

Every future bill paid on time alongside the instalments. A new missed payment can end the arrangement.
Payment by Direct Debit, on the agreed dates.
A realistic plan. Offer an amount you can keep paying in a bad month, not your best month.

If a business does not engage, HMRC can use debt collectors, take money from bank accounts, take goods, go to court and, for business taxes, petition to close the company down. That is why the timing of the first call matters far more than the wording of it.

Time to Pay against a VAT loan, in pounds

Here is the same £48,000 VAT bill, due on 7 February 2027, spread over six months in six different ways. The loan rates are illustrations of the range in the market, not quotes. HMRC’s rate is assumed to stay at 7.75%.

£48,000 VAT bill spread over six months
How it is paid	Monthly payment	Total cost	Equivalent annual rate
Paid in full on time from cash	£48,000 once	£0	None
HMRC Time to Pay agreed before the due date, six instalments	£8,000	About £1,085 of interest, no penalties	7.75%
Bank or tax funder at 10% a year, no fee	About £8,235	About £1,410	About 10.5% APR
Specialist tax lender at 1.25% a month plus a 2% fee	About £8,354	About £2,122 interest plus £960 fee = about £3,080	About 24.5% APR
Online lender at 2.5% a month, no fee	About £8,714	About £4,290	About 34.5% APR
Six payments of £8,000 without telling HMRC	£8,000	About £2,880 penalties, £1,050 daily penalty and £1,120 interest = about £5,050	About 35%

Three things stand out. An agreed HMRC plan is the cheapest way to spread the bill, by a margin that grows with the lender’s rate. A cheap loan is not far behind, so if HMRC will not agree, or would want a shorter plan than you can afford, a well-priced loan is a sensible answer. And the worst option is the one many businesses drift into: paying late in instalments without an agreement, which costs more than any loan in the table.

Published rates vary widely. As one example, iwoca, an online lender, quoted a representative rate of 3.33% per 30 days on its VAT loan guide in November 2026, with no fee on terms of 12 months or less, amounts of £1,000 to £1 million and a personal guarantee on every new loan. For context, the Bank of England puts the average rate on new bank loans to small and medium-sized businesses at 6.63% in August 2026. Tax loans from banks and specialist funders can sit close to that for strong businesses; fast online money costs much more.

Use the business loan calculator to turn any rate into a monthly payment and total cost, and our guide to business loan interest rates to convert monthly, flat and factor rates into an annual figure.

When a loan is worth more than it costs

HMRC says no, or will only agree a plan shorter than the business can afford.
The debt is too big or too old for the online service, and a negotiated plan would take weeks.
The company already has a Time to Pay arrangement and a second one is unlikely.
A clean HMRC record matters soon. Lenders ask about arrangements with HMRC, and a commercial mortgage or bank facility application in the next few months may go more smoothly without one.
Several taxes fall together, such as a corporation tax bill and a VAT quarter, and one facility is simpler than several HMRC plans.

Funding a corporation tax bill

Corporation tax bills are usually bigger than VAT bills, arrive once a year and cannot be negotiated down. The main rate is 25% on profits over £250,000 and the small profits rate is 19% on profits up to £50,000, with marginal relief between the two.

Worked example: an £85,000 corporation tax bill over 12 months

A company with a year ending 31 December 2026 owes £85,000 of corporation tax on 1 October 2027. Its profit went into new stock and a second van, so it wants to spread the bill over 12 months.

HMRC Time to Pay, 12 instalments: about £7,083 a month, about £3,570 of interest at 7.75%, if HMRC agrees.
Bank or tax funder at 10% a year: about £7,473 a month, about £4,670 of interest.
Specialist tax lender at 1.25% a month plus a 2% fee: about £7,672 a month, about £7,060 of interest plus a £1,700 fee, about £8,760 in all.
Online lender at 2.5% a month: about £8,286 a month, about £14,440 of interest.

The gap between the cheapest and dearest route is about £10,900, roughly an eighth of the bill. That is why the rate is worth more attention than the speed of the decision.

The tax treatment

Interest on a loan the company takes for its business is normally deductible when working out its taxable profit, under the loan relationships rules. At 25%, the £4,670 of interest on the 10% loan above costs the company about £3,500 after tax relief. HMRC penalties are not deductible. Ask your accountant how HMRC’s own late payment interest is treated for your company before comparing the after-tax figures.

Large companies paying by instalments

Companies with taxable profits over £1.5 million pay quarterly instalments during and just after the year, based on an estimate. A sudden jump in profit can leave the early instalments short. HMRC charges interest on underpaid instalments, and finance for a large company’s tax is usually arranged through its existing bank facilities rather than a standalone tax loan.

Corporation tax is not a preferential debt if a company becomes insolvent, while VAT and PAYE are. That matters to lenders, as the next sections explain, but it is not a reason to fall behind. HMRC can still petition to wind up a company over unpaid corporation tax.

VAT on a commercial property purchase: VAT bridging loans

Buying a commercial building can bring a very large VAT bill that is refundable but has to be paid first. Most sales of commercial property are exempt from VAT, but a seller who has opted to tax the building must charge 20% VAT, and the sale of a new commercial building within three years of completion is always standard-rated. A VAT-registered buyer who uses the building for taxable business, or opts to tax it too, can usually reclaim that VAT on its next VAT return.

Commercial mortgage lenders normally lend against the price excluding VAT, so the VAT has to come from the buyer’s own cash or from a VAT bridging loan: short-term finance repaid from the HMRC refund. Lenders typically take an assignment of the refund, a second charge behind the mortgage lender, a director’s guarantee or a combination. Monthly rates are often in the range of about 0.6% to 1.25%, plus an arrangement fee of around 1% to 2%, and our guide to commercial bridging loans explains how that pricing works.

Worked example: a £900,000 office with VAT

A company buys a freehold office for £900,000 plus £180,000 VAT, completing on 15 January 2027. Its mortgage lender lends 70% of the net price, £630,000.

Cash needed at completion: the £270,000 deposit, the £180,000 VAT and the stamp duty, plus legal and lender fees.
Stamp duty: non-residential stamp duty is charged on the price including VAT, so it is about £43,500 on £1,080,000 rather than about £34,500 on £900,000. The extra £9,000 is never refunded.
The VAT bridge: £180,000 at 0.85% a month with a 2% fee costs about £4,590 of interest over three months plus £3,600, about £8,190. If the refund takes five months, it is about £11,250.

Timing drives the cost. On quarterly returns, VAT paid in mid-January is reclaimed on the return for the quarter to 31 March, filed by early May, and HMRC usually repays within 30 days of receiving the return. That is four to five months. A business that expects regular repayments can ask HMRC about monthly returns, and a buyer can ask its adviser whether the purchase date or return period can be aligned so the claim goes in within weeks.

Check for a transfer of a going concern first

If the building is let and is sold with its tenancy, the sale may qualify as a transfer of a going concern. Then no VAT is charged at all, provided the buyer is VAT-registered, opts to tax the building and notifies HMRC in time, among other conditions. In the example, that would remove the £180,000 bridge, its cost of £8,000 or more, and the £9,000 of extra stamp duty. Ask your solicitor and accountant to confirm the conditions before exchange.

Our upcoming introduction service is limited to UK limited companies and excludes residential-property security, so buildings with flats fall outside it, though the VAT principles above still apply.

What lenders check, and typical terms

Tax lending is quick, often decided in days, because the amount is known and the purpose is clear. But a tax shortfall is also a warning sign, so lenders look hard at why the money was not there.

Tax funding by lender type, November 2026
Lender type	Typical terms	What to watch
Specialist tax and premium funders	Terms of 3 to 12 months, often matched to the next VAT quarter or a year of corporation tax. Some pay HMRC directly. Usually unsecured.	Arrangement fees, guarantees above a set size, and whether the rate is flat or on the reducing balance.
Online business lenders	Decisions in hours or days, amounts from £1,000 into the millions, terms up to several years. Often no fee on short terms.	Monthly rates that look small but equal APRs of 30% or more. Personal guarantees are standard.
High street banks	Short loans or overdraft increases for existing customers, often at the lowest rates.	Slower decisions. The bank sees your account and may ask why the tax was not reserved.
Revolving credit and invoice finance providers	Draw on an existing facility to pay the bill and repay as customers pay.	Invoice finance lenders often hold back a reserve for VAT and PAYE arrears.
Bridging lenders	VAT on property purchases, repaid from the HMRC refund.	Rolled-up monthly interest, exit fees and the cost of a delayed refund.

What they will ask

Trading history: often at least 6 to 12 months, and for specialist funders sometimes two years of filed accounts.
The tax bill itself: the VAT return or corporation tax computation, and any HMRC correspondence.
Your HMRC position: other tax owed, any Time to Pay arrangement, and whether returns are filed. Disclose an arrangement up front. Lenders find it in bank statements anyway.
Bank statements and management accounts, to see that the monthly repayment fits alongside the next tax bills.
Why the shortfall happened, and why it will not recur. A one-off cause, such as a big stock purchase or a late-paying customer, reads very differently from a pattern.

Why VAT and PAYE arrears worry lenders

Since 1 December 2020, unpaid VAT and PAYE rank as secondary preferential debts in a company insolvency, ahead of lenders that rely on a floating charge and of unsecured lenders. Every pound of VAT or PAYE arrears therefore reduces what a lender could recover. That is why invoice finance and asset-based lending providers often reserve against tax arrears, and why paying HMRC on time can make the next facility easier to get.

Personal guarantees

Most unsecured tax loans to smaller companies ask directors for a personal guarantee. Some specialist funders waive it below a set amount. Read our guide to personal guarantees before signing. A Time to Pay arrangement with HMRC does not normally need one.

Which option suits which situation

Choosing how to fund a tax bill
Situation	Usually the best first step	Why
A one-off VAT or PAYE bill under £100,000, clearable within a year	HMRC’s online payment plan, set up before the due date	Cheapest by a distance, and stops VAT penalties if requested in time.
A large corporation tax bill after a strong year	Call HMRC, and get a loan quote alongside	HMRC may expect the company to borrow, so having a quote helps the conversation.
HMRC refuses, or wants a shorter plan than you can afford	A short tax loan from a bank or specialist funder	Pays HMRC in full on time and fixes the monthly cost.
Repeated shortfalls on every VAT quarter	Fix the cash flow first: a reserve account, the cash accounting scheme, or a working capital facility	Borrowing for each quarter adds cost and becomes a pattern lenders dislike.
A tax bill landing while customers owe you money	Invoice finance or a revolving credit line	Draws on money already earned and repays as customers pay.
VAT on a commercial property purchase	Check for a transfer of a going concern, then a VAT bridging loan or cash	The VAT is refundable, so the cost is the time until HMRC repays.
The company cannot see how it will pay this bill or the next ones	Independent advice before borrowing	A loan can make a problem bigger if the business is insolvent.

If the bill is part of a wider cash flow gap, our guide to working capital finance covers overdrafts, credit lines and invoice finance in depth, and our guide to short-term business loans explains how to read every kind of short-term quote.

How to stop the tax bill becoming a crisis

The cheapest tax funding is money set aside as you go. A few simple habits remove most of the need to borrow.

A separate tax account. Each week, move the VAT you have charged into it. At the 20% standard rate, VAT is one sixth of every VAT-inclusive pound you invoice, less the VAT you pay on your own costs.
A corporation tax reserve. Each month, set aside 19% to 25% of profit, depending on your rate, from management accounts rather than waiting for the year end.
The cash accounting scheme. If taxable turnover is £1.35 million or less, you can pay VAT when customers pay you rather than when you invoice, which helps if customers pay slowly.
A 13-week cash flow forecast with every tax date in it. If a bill will not fit, you will know weeks ahead, when HMRC and lenders have the most options.
File on time even when you cannot pay. Late filing brings its own penalties and closes off the online payment plan service.
Watch for growth. A company growing quickly needs more working capital and pays tax on last year’s higher profit. Plan finance for growth before the tax bill makes the decision for you.

Borrowing for one tax bill is normal. Borrowing for every VAT quarter is a sign that the business is using HMRC’s money as working capital, and lenders and HMRC will both treat it that way.

Risks, directors and getting help

A tax loan replaces one creditor with another. If the business is fundamentally sound, that is fine. If it is not, a loan with a personal guarantee can turn a company problem into a personal one.

Check solvency first. If the company cannot pay its debts as they fall due, directors must put creditors’ interests first. New borrowing to pay one creditor may not be the right step. Speak to an accountant or a licensed insolvency practitioner, and the free, independent Business Debtline can help smaller businesses.
Directors can sometimes be made personally liable for tax. This is limited, for example where National Insurance went unpaid through fraud or neglect, or in some repeated insolvency cases, but deliberately not paying HMRC is never a safe strategy.
Do not stack tax debts. A plan for one tax only works if the next bills are paid on time. Build the next VAT quarter and the next PAYE months into the repayment schedule before agreeing anything.
Read the loan terms. Look for arrangement fees, early repayment charges, whether the rate is on the reducing balance, and what happens if you miss a payment.

Lending to a limited company for business purposes is generally outside FCA consumer credit rules, so you have fewer protections than with personal borrowing. Many business lenders follow the Lending Standards Board’s Standards of Lending Practice for business customers, and smaller businesses may be able to take a complaint to the Financial Ombudsman Service. Check any lender or broker on the FCA Register.

Step by step: funding a tax bill

Confirm the figure and the date. Get the VAT return or corporation tax computation from your accountant. File the return on time whatever happens.
Work out what you can pay now and what you can pay each month without missing the next VAT quarter or PAYE month.
Get one or two loan quotes. Ask for the monthly payment, the total cost in pounds, the fee, any guarantee and whether the lender pays HMRC directly. Put them into the business loan calculator.
Contact HMRC before the due date, online for VAT or PAYE debts that qualify, or by phone. Explain the cause, what you can pay and how you will keep up with future bills.
Compare in pounds. HMRC’s interest at 7.75% against each loan’s total cost, and weigh any benefit of a clean HMRC record.
Pay HMRC in full or start the plan, by Direct Debit, and keep every future bill on time.
Open the tax account and start the reserve, so the next bill is already covered.

Where Business Loan Advice fits

We are not a lender or a broker and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders, including for short-term and working capital finance. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you.

In the meantime, the business loan calculator and these guides are free to use with no sign-up. If your limited company expects to need finance, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.

Common questions

What is a VAT loan?

A short-term business loan used to pay a VAT bill to HMRC on time, then repaid to the lender in monthly instalments, usually over 3 to 12 months. Some lenders pay HMRC directly. It avoids HMRC penalties, but an HMRC payment plan agreed before the deadline is often cheaper.

Can I get a loan to pay corporation tax?

Yes. Specialist tax funders, banks and online lenders offer loans to spread a corporation tax bill, commonly over up to 12 months. Lenders will look at your accounts, bank statements and other tax owed. Ask HMRC about a payment plan too and compare the cost.

Is a VAT loan cheaper than HMRC Time to Pay?

Usually not. HMRC charges 7.75% a year on a payment plan, with no fee. On a £48,000 bill over six months that is about £1,085, against about £1,410 for a loan at 10% and about £4,290 at 2.5% a month. A loan helps when HMRC will not agree a plan.

What happens if I pay my VAT late?

HMRC charges late payment interest at 7.75% a year from the due date. Without an agreement, it adds a 3% penalty at day 15, another 3% at day 30 and a daily penalty of 10% a year from day 31. Contacting HMRC for a payment plan early reduces or stops the penalties.

Is there a penalty for paying corporation tax late?

There is no late payment penalty for corporation tax, but interest runs at 7.75% a year from the due date, and HMRC can take enforcement action. Filing the return late does bring penalties: £200 at one day, another £200 at three months, then 10% of unpaid tax at six and 12 months.

Can I set up an HMRC payment plan online?

For VAT and employer PAYE, generally yes, if the business owes £100,000 or less, can clear it within 12 months, has filed its returns and has no other HMRC plans or debts. Otherwise, and for corporation tax, call HMRC’s Payment Support Service before the deadline.

Does HMRC charge interest on Time to Pay?

Yes. Late payment interest at Bank Rate plus 4%, currently 7.75%, runs on the unpaid balance for the whole plan. There is no arrangement fee, and an agreement made early stops VAT late payment penalties.

Can I pay HMRC with a credit card?

You can pay VAT and corporation tax with a corporate credit card, but HMRC charges a non-refundable fee. Personal credit cards are not accepted. It only makes sense for a bill you can clear within the card’s interest-free period.

How long does a VAT loan last?

Most run for 3 to 12 months. Some lenders set a three-month term so the loan is repaid before the next VAT quarter. Online lenders offer longer terms, up to several years, but a tax bill spread for too long overlaps with the next ones.

Do I need a personal guarantee for a tax loan?

Usually, for smaller companies. Most unsecured lenders ask directors to guarantee the loan, though some specialist tax funders waive it below a set amount. An HMRC Time to Pay arrangement does not normally require one.

Is the interest on a VAT or tax loan tax deductible?

For a limited company, interest on a loan used for the business is normally deductible for corporation tax. HMRC penalties are not. Ask your accountant how the rules, including HMRC’s own interest, apply to your company.

What is a VAT bridging loan?

Short-term finance for the VAT charged on a commercial property purchase, repaid when HMRC refunds the VAT. It is needed because mortgage lenders usually lend on the price excluding VAT. Check whether the sale can be a transfer of a going concern, which would mean no VAT is charged.

Will a Time to Pay arrangement affect getting a business loan?

Lenders will ask about it, and some are more cautious, partly because VAT and PAYE arrears rank ahead of many lenders if a company fails. A plan that is being kept reads far better than arrears HMRC has not agreed. Always disclose it.

What if my company cannot pay its tax bill or a loan?

Contact HMRC before the due date and take advice. If the company cannot pay its debts as they fall due, directors must consider creditors’ interests before taking on new borrowing. An accountant, a licensed insolvency practitioner or Business Debtline can help.

Sources, checked 4 November 2026

GOV.UK: HMRC interest rates for late and early payments, 7.75% from 9 January 2026

GOV.UK: how late payment penalties work if you pay VAT late

GOV.UK: increasing VAT and other taxes late payment penalties

GOV.UK: what happens if you do not pay PAYE and National Insurance on time

GOV.UK: Company Tax Returns, penalties for late filing

GOV.UK: increases to Corporation Tax late filing penalties from 1 April 2026

GOV.UK: if you cannot pay your tax bill on time, setting up a payment plan

GOV.UK: if you do not pay HMRC

GOV.UK: VAT return and payment deadlines

GOV.UK: pay employers’ PAYE

GOV.UK: pay your Corporation Tax bill