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.
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.
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:
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.
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.
Corporate financing and lender introductions are unregulated.
Islay Robinson, a founder of Enness, is widely regarded as one of the UK's leading mortgage brokers. He has been instrumental in delivering some of the most complex and high value mortgages in the UK.