Business Tax Loans FAQs
Tax loans are business finance products that are designed to aid businesses in paying their taxes on time. For more information on these products and to find out whether a business tax loan is right for you, we've compiled a list of frequently asked questions below - just click on the headings for simple, straightforward answers.
What are tax loans?
Tax loans are simply a form of loan designed to help businesses meet their tax obligations and ensure that payments are delivered to HMRC on time. Some companies find that they struggle to pay huge tax bills in one lump sum and tax loans can give some flexibility by permitting the business to pay off what they owe in monthly instalments to a third-party - which takes on the responsibility of paying HMRC on time.
How do tax loans work?
Some businesses feel as though their tax bills come at the worst time possible, but tax loans allow you to spread the cost of your tax liability over a period usually between six and 12 months. Tax loans or tax funding can be accessed for personal tax purposes, corporation tax, capital gains, inheritance tax, and more.
Essentially, you take out the loan that would be required to pay off your bills, and hand the responsibility of meeting the tax liabilities to a third party. In return, you will be expected to make monthly payments to that company over a set term period. For many organisations, this can make dealing with tax obligations more affordable.
What are the benefits of tax loans?
Tax loans can make it easier for companies to manage their cash flow, by ensuring that no huge lump-sum payments are required for the HMRC. Many companies provide flexible payment terms, and you also get the benefit of knowing that every tax bill will be paid on time, which avoids the risk of fines from HMRC.
Can tax loans be unsecured?
Most tax loans are offered on an unsecured basis, which means that you will not have to offer your assets as collateral against the loan. However, because lenders take bigger risks offering unsecured loans, the chances are that you will need a good credit rating, and the interest rates that you face might be higher than they would be with secured loan options.
How long do tax loan terms last?
Most tax loans will last for up to 12 months at a time. However, some organisations will be willing to offer a "rollover" solution for your finance, which permits companies to manage future tax liabilities as they become due.
What rate can I expect to pay?
The rate of interest that you can expect to pay on your tax loan will depend on the lender that you choose to work with, your credit rating, and a host of additional factors. However, most lenders ensure that the rate you pay is fixed over your borrowing term. In other words, this means that you will pay the same amount every month. Fixed borrowing terms can be particularly useful for companies that prefer to budget their spend to ensure that they can afford loan repayments.
How can I apply for a tax loan?
Applying for a tax loan can be very easy. Most of the time, the process involves filling out an online form that asks for important information including the amount owed on your tax bill and the term you would like to make repayments over. Specialist underwriters will examine your application and determine whether you are too much of a risk to offer finance on or a welcome client.
How will I receive my tax loan money?
If your application is approved, the funds will be paid either into your account or directly to HMRC on an agreed-upon date. Most companies prefer to have the cash paid directly to the HMRC to avoid any chances of late penalties.