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Benefits Of Income Tax Loans For High-Net-Worth Individuals

13th Dec 22 - 4 MIN READ
Income Tax Loans For High-Net-Worth Individuals

It's 'tax season' and income tax payments are due in the coming weeks. Paying your liability as a lump sum can effectively eat into your available capital reserves. You can use income tax loans to raise the capital required to settle a associated bill with HMRC. This can help you to optimise personal cash flow, maintain capital reserves or avoid late-payment penalties and interest charged by HMRC if you can't make their income tax payment on time. 

What Are Income Tax Loans?

Income tax loans are a relatively niche and sometimes little-known financing tool. However, this type of finance is one of the most helpful lending products for high-net-worth individuals. 

Income tax financing products allow individuals to take out a loan to cover their income tax liability. Lenders will usually pay HMRC directly, and you will pay your lender back in fixed monthly amounts over the loan term – usually between 3-12 months. The more significant your income tax liability, the more useful these loans can be. 

How long you borrow for will depend on your financial position and reason for taking out the loan. Lenders are open to various scenarios, provided you have a solid settlement plan and income to support repayments comfortably. It might make sense for you to opt for a shorter loan term if you have a short-term and non-critical gap in income that means you haven't been able to accrue the required amount to pay off your income tax bill. Alternatively, you can choose longer loan terms (six months or more tends to be the norm) if you want to spread the cost of your income tax bill over several months to retain liquidity and optimise personal cash flow, rather than making a lump-sum payment to HMRC. Most high-net-worth individuals elect to take this route.

Overview: Key Benefits of Income Tax Loans For High-Net-Worth Individuals

  • Cover a UK income tax liability, paying it off in monthly tranches to a lender
  • Facilitates cash-flow management and removes the burden of paying a tax bill as a lump sum. This, in turn, can also support your ability to retain liquidity for other investments, projects or manage your day-to-day living expenses more effectively
  • Large loans of £100,000 or more are possible
  • Income tax loans are niche but quick to arrange: we can negotiate these in just a couple of days
  • Simple process: a lender will settle your liability with HMRC directly, and you will pay the lender back on a monthly basis. Costs are fixed with the lender, so you know what you need to pay back each month 
  • Available if you are in a good financial position overall but lack the immediate liquidity to pay their income tax bill by the deadline, therefore avoiding penalties and interest from HMRC
  • Competitive rates available
  • If you have already paid their income tax bill, reimbursement is available

When To Consider Income Tax Loans

Income tax loans can be used for almost any reason, provided you can show rationale for borrowing and demonstrate that they are doing so responsibly. These loans are especially advantageous if, over the last fiscal year, you have:

  • Have generated significant income
  • Have sold investments at a substantial profit
  • Have disposed of assets and generated significant capital from them
  • Have generated considerate taxable income from various projects or ventures
  • Don't want to (or can't) currently pay your income tax liability as a lump sum, but you are in a good financial position overall

Options For Clients That Have Already Paid Their UK Income Tax Liability

If you have already paid your income tax liability, we can arrange these loans on a reimbursement basis up to 28 days after you have settled the outstanding income tax liability with HMRC. 

In these cases, a lender will effectively reimburse you the amount you paid in income tax. You will then repay the lender over the loan term in monthly repayments. We typically work with clients to deliver this solution if you want to retain a pool of capital or if it supports your ability to manage your cash flow more effectively. 

Who Can Benefit From Income Tax Loans?

Enness arranges income tax loans of £100,000 or more, and we can do this at pace. We can arrange offers in as little as 1-2 days, which is critical as the payment deadline approaches. If you need a large loan because of a significant income tax liability, you will benefit from a negotiated deal and working with a broker like Enness that can deliver a solid presentation of facts to lenders, especially if your client has complex income structures. 

Income tax loans can be ideal for high-net-worth individuals, business owners and successful entrepreneurs because they often can have substantial liabilities in this respect. If you have significant income tax liabilities you may also benefit from managing cash flow and retaining liquidity – potentially for acquisitions, asset purchases or high return-on-investment projects, making this type of finance especially advantageous.

If you have a good asset base and significant overall wealth that we can show to give lenders comfort, we may also be able to arrange income tax loans even if you don't currently have the capital available to cover the income tax liability before the upcoming HMRC deadline. We regularly work with individuals faced with this scenario, which can occur if you have a short-term gap in income or you have needed to pay other expenses, creating a non-critical shortfall of capital to put towards your HMRC payment. Here, we can present all the case facts to the lender, underlining your broader financial position to support lending. We can usually arrange access to a loan just as quickly as we can if you are opting for this type of finance to manage cash flow, even if you want to borrow £100,000 or more.

 

 

 

 

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