A corporation tax loan is a short-term business loan that pays your tax bill to HMRC on the due date, after which your company repays the lender in monthly instalments, usually over 6 to 12 months. It is usually unsecured and quick to arrange. It costs interest, and sometimes fees, so it is worth using when the alternative is paying HMRC late, and worth questioning when you could simply pay from cash. The alternative is an HMRC payment plan (Time to Pay), which has its own conditions and is not interest-free.
Key Takeaways
- Corporation tax is normally due 9 months after the end of your accounting period. A loan lets you pay on time and repay over the following months.
- Typical terms are 6 to 12 months, with some lenders starting at 3 months. Most are unsecured, but a director's personal guarantee may be required.
- Illustratively, borrowing £40,000 at 12% over 9 months costs roughly £2,000 in interest. Get the all-in cost in writing, including fees.
- HMRC's payment plan is the alternative, but HMRC checks affordability, expects you to use assets first, and charges interest on the balance.
- Arrange finance 30 to 60 days before the due date, not the day before.
What a corporation tax loan is and how it works
The mechanics are simple. The lender advances the amount of your tax bill, and either pays HMRC directly or puts the money in your business account so you can pay it. Some lenders do one, some the other. You then repay the lender in fixed monthly amounts.
The point is timing. A corporation tax bill lands as one large payment, often bigger than the owner expected because profits grew faster than cash reserves. A loan turns that single payment into a monthly cost spread across the months after the deadline, rather than a hole in your bank balance on one day. It also means you do not have to draw on an existing overdraft or bank facility.
These loans are generally provided by specialist and digital lenders rather than high-street banks. Many can give a decision within 24 hours, and funds can follow within a couple of days, though some take 24 to 72 hours to approve. That matters, because the loan has to complete before the HMRC deadline, not after it.
When the tax is due, and the rates behind the bill
For most profitable companies, corporation tax is due 9 months after the end of the accounting period. Very large companies pay in quarterly instalments instead. HMRC calculates the bill from your profits, so the due date is predictable well in advance. That is one reason a loan can be planned rather than improvised.
For context, the rates since the 2023/24 tax year are:
| Company profits | Rate |
|---|---|
| Smaller companies (under £50,000 of profit) | 19% |
| Larger companies | 25% |
Profits that fall between the small and main rate levels are dealt with by marginal relief, which your accountant works out as part of the computation. The figure on your bill is the one that matters for borrowing. Your accountant should be able to tell you the likely number 60 to 90 days before it is due, and that warning is what gives you time to arrange funding sensibly.
Corporation tax applies to limited companies, and also to members' clubs, trade associations, housing associations and groups of individuals operating as a business outside a partnership.
What late payment costs
Paying late is where the cost of doing nothing starts to build. HMRC charges interest from the first day a payment is overdue until it is paid in full. For VAT, HMRC's rule is the Bank of England base rate plus 4%. In HMRC's own worked example, a base rate of 4.5% gives 8.5%, and £8,340 paid seven days late attracts £13.60 of interest (£8,340 × 8.5% × 7 ÷ 365).
That is the VAT rule. Check the current rate and penalty position for corporation tax directly with HMRC rather than assuming they match, because the rate floats with the base rate and the penalties are separate from interest.
The larger risk is not the interest. If tax stays unpaid and no plan is agreed, HMRC can use a debt collection agency, collect from wages or pension payments, take goods and sell them, take money from bank accounts, go to court, make an individual bankrupt, and close down your company where the tax is a business tax. For a limited company, a large unpaid tax debt is a solvency problem, not an admin one.
Terms, amounts and cost
Terms vary by lender and by how the facility is structured, but the pattern is consistent:
- Term: usually 6 to 12 months for corporation tax, with some lenders starting at 3 months. General business loans from the same lenders can run much longer, some up to 60 months or even seven years, which suits a tax bill combined with other funding needs.
- Amount: lenders size the loan to the bill and your cash flow. General business loans run from a few thousand pounds to £1 million with some lenders, so the amount is rarely the constraint. Your trading and bank account performance is.
- Security: usually unsecured, because the loans are short and the amounts modest. Secured versions exist and tend to have better rates and terms if your credit history is weak.
- Repayment: fixed monthly amounts, and some lenders allow early repayment with no fee, which lowers the interest you pay.
On price, a tax finance loan at roughly 10% to 15% APR over nine months is a sensible illustrative range. Your actual quote will vary with your credit profile, the lender and any fees, so ask for the total repayable in pounds, not just the rate.
A worked example
Take a £40,000 corporation tax bill, borrowed over 9 months. Treat the APR as a nominal annual rate divided by 12, for a rough comparison.
| 12% APR | 15% APR | |
|---|---|---|
| Monthly rate | 1.00% | 1.25% |
| Monthly repayment | about £4,670 | about £4,727 |
| Total repaid over 9 months | about £42,030 | about £42,540 |
| Interest cost | about £2,030 | about £2,540 |
So on a £40,000 bill, spreading the payment costs somewhere around £2,000 to £2,500 in interest, before any arrangement fee. Whether that is worth paying depends on what the cash would otherwise do. If keeping £40,000 in the business funds stock or payroll that earns more than the interest, the loan is cheap. If you have idle cash and no cash flow pressure, it is just a cost. Our piece on cash flow versus profit explains why a profitable company can still be short of cash on the day the tax falls due.
Eligibility
For a solvent UK limited company, getting a corporation tax loan is usually possible, but the lender still has to be comfortable. In practice they look at:
- Trading history and bank account performance: consistent turnover and healthy balances matter more than a single good year.
- Business credit rating: a strong rating makes approval simple. A thin or damaged one narrows the options.
- Personal guarantees: where the business's credit history is not enough, lenders may require a guarantee from one or more directors. That is a personal liability sitting behind a company loan, so read it carefully before signing.
- Terms adjusted for risk: where a lender is less comfortable, the interest rate and other terms may be adjusted rather than the application declined outright.
If credit is the obstacle, there are other routes. A secured loan uses assets as collateral and tends to be cheaper. Debt-service coverage loans are assessed on current company finances rather than historic credit reports, which suits newer companies. A director can also lend personally to the company, though that moves the risk onto you.
HMRC Time to Pay as the alternative
If you cannot pay in full, HMRC may agree a payment plan letting you pay in instalments. It is the main alternative to a commercial loan, and the full detail is in our guide to HMRC Time to Pay. The points that matter when comparing it with a loan:
- Affordability is tested. HMRC checks whether a plan is affordable. If you cannot agree one, it will ask for the full amount.
- Expect scrutiny of the company. HMRC asks how you will clear the debt as quickly as possible, expects you to reduce it first by releasing assets such as stock, vehicles and shares, and may ask directors to put personal funds into the business, accept lending or extend credit.
- The monthly figure is set by HMRC. It is based on what is left after fixed outgoings, and you will usually be asked to pay around half of what you have left over each month.
- There is no fixed maximum term. The length depends on what you owe and what you can afford.
- It is not interest-free. HMRC charges interest on the outstanding balance until the tax is paid in full, so paying faster means paying less in total.
- It is not guaranteed. It is not available to every business, and it does not wipe out penalties that have already built up.
A plan is arranged online or by contacting HMRC, and you will need your tax reference, UK bank details authorised for a Direct Debit, and details of the company's income and spending.
Loan or payment plan
| Corporation tax loan | HMRC payment plan | |
|---|---|---|
| Who sets the terms | The lender | HMRC, based on affordability |
| Typical length | 6 to 12 months | No fixed limit |
| Interest | Lender's rate, plus any fees | HMRC interest on the balance |
| Credit and guarantees | Credit checks; personal guarantee possible | Financial scrutiny; directors may be asked to inject funds |
| HMRC paid on the due date | Yes | No, the tax is overdue |
| Availability | Depends on lender approval | Not guaranteed |
The last two rows matter most. A loan means HMRC is paid on time and the relationship stays clean. A payment plan means the tax is already overdue when you set it up. If you can borrow sensibly, doing so before the deadline is usually the cleaner route. If you cannot be approved, or the cost makes no sense, HMRC is the next call, and it is better to contact them before the deadline than after. The same logic applies to quarterly bills, as we cover in our guide to VAT loans.
Planning it properly
The best time to arrange tax finance is 30 to 60 days before the payment is due. Applying early leaves time for the lending decision, the paperwork and the transfer of funds. It also means you apply when the business is not under obvious pressure, which tends to improve the offer you receive.
In practice:
- Ask your accountant for the likely corporation tax figure 60 to 90 days before the deadline.
- Compare what you can pay from cash with what you would rather keep in the business.
- Get quotes showing the total repayable in pounds, including fees, and whether early repayment is free.
- Check whether a personal guarantee is required.
- Make sure completion falls before the HMRC due date.
Frequently Asked Questions
Does the lender pay HMRC directly?
It depends on the lender. Some pay HMRC directly, others advance the funds to your business account for you to pay. Either way, the tax is paid on the due date and you repay the lender monthly.
How long can I spread a corporation tax bill over?
Usually 6 to 12 months, with some lenders offering from 3 months. A wider business loan can run longer if you are borrowing for other purposes as well.
Do I need to give a personal guarantee?
Not always. Where the company's credit history is thin or weak, a guarantee from one or more directors may be required. Check it before signing.
Is an HMRC payment plan cheaper than a loan?
Not necessarily. HMRC charges interest on the balance until it is paid, and the tax is already overdue when the plan begins. Compare the total cost of each in pounds for your own bill.
How quickly can I get the money?
Decisions often come within 24 hours, and funds can follow within about 48 hours, though some lenders take 24 to 72 hours to approve. Start well before the deadline.
If you want a second pair of eyes on the numbers before you commit, Deplexifi compares tax finance across lenders and shows you the full cost before you sign.
Comparing only the interest rate. Fees, early repayment terms and a personal guarantee change the real cost, and the loan has to complete before the HMRC deadline.