Bridging Loans for Tax Bills & Business Use: HMRC deadlines don't move. We do.

A business purpose bridging loan is short term finance secured on property and used for a commercial need: a tax bill, stock, equipment, payroll, an acquisition deadline, or buying out a partner. The security is usually property the business owner already holds, including, in many cases, their own home.

The deadline is what makes this product different from most bridging. There is no negotiating with a VAT quarter, and an HMRC payment date arrives whether the money does or not.

But the honest starting point is this: HMRC is cheaper money than a bridging loan, and where HMRC will agree instalments you should usually take them. This page sets out the arithmetic on both sides, and the specific circumstances where a bridge genuinely beats the alternative.

One thing to say before any of it. We are mortgage brokers, not accountants or tax advisers. The figures below are current at the date shown and are here so you can see the shape of the decision. Your own position should go to your accountant.

The HMRC deadlines

Self assessment. The balancing payment for the previous tax year and the first payment on account are both due 31 January. The second payment on account is due 31 July. For anyone with a January cash flow problem, those two dates are the whole year.

Corporation tax. Due nine months and one day after the end of the accounting period. Larger companies pay by quarterly instalments instead, with the first falling due before the accounting period has even ended.

VAT. Due one month and seven days after the end of the VAT quarter. Four hard deadlines a year, and the most common reason a business needs money at short notice.

PAYE and National Insurance. Monthly, due by the 22nd where paid electronically.

What it costs to miss one

Two separate charges apply, and conflating them is how people underestimate the cost.

Interest

HMRC late payment interest is 7.75%, from 9 January 2026. It is set at the Bank of England base rate plus 4%, and that margin was raised from 2.5% on 6 April 2025, which made late payment materially more expensive than it had been for years.

Repayment interest, the rate HMRC pays you, is base rate minus 1%, currently 2.75%. Underpaid corporation tax quarterly instalments carry a lower 6.25%.

On its own, 7.75% is cheaper than any bridging loan. If interest were the only consequence of paying late, the commercial case for a bridge would be very weak.

Penalties, which are the real cost

Self assessment: 5% of the outstanding tax at 30 days, a further 5% at 6 months, and a further 5% at 12 months. Fifteen per cent in total, on top of interest.

VAT: a first penalty of 3% of the outstanding VAT at day 15, a further 3% at day 30, and from day 31 a second penalty accruing daily at an annual rate of 10% until the balance is cleared. These rates were increased from 1 April 2025, having previously been 2%, 2% and 4%.

Corporation tax: no automatic late payment penalty. Interest only. The penalties on corporation tax are for late filing, not late payment, which makes a late corporation tax payment considerably less punitive than a late VAT or self assessment payment.

The arithmetic: three ways to handle a £100,000 bill

The bridging figures assume 1% a month and a 2% arrangement fee, with the facility sized so that the net advance after the fee and the retained interest actually clears the £100,000 bill, plus £2,100 of valuation and legal costs paid separately. On a six month term that means borrowing £108,696 to settle £100,000, which is the part most illustrations leave out.

Three conclusions, in order of importance:

Time to Pay is roughly five times cheaper than a bridge. If you can get one, take it.

A bridge does beat doing nothing, by £3,079 over six months and £4,371 over twelve. So where a Time to Pay is not available, a bridge is the rational choice rather than letting penalties run.

On VAT the case for the bridge is stronger, because the penalties front-load. A £100,000 VAT bill six months late costs around £13,985 against £10,796 for the bridge, so the bridge saves about £3,189.

Time to Pay, honestly

HMRC agrees instalment arrangements routinely and they are the cheapest option on the table by a wide margin.

The online self-serve thresholds:

Above those limits you contact HMRC and negotiate manually, which takes longer and requires more supporting information, typically income and expenditure, cash flow and an explanation of the difficulty.

What it costs: interest continues to accrue on the outstanding balance throughout, at the same 7.75%, calculated daily and reducing as you pay down. There is no arrangement fee.

What it prevents: further late payment penalties, provided the arrangement is in place before they accrue and you keep to it. That is the single biggest financial benefit, because the penalties cost multiples of the interest.

Typical duration: six to twelve months, with longer available in exceptional circumstances.

What happens if you default: the arrangement is usually cancelled, penalties can restart on the outstanding balance, and HMRC may move to enforcement. HMRC will often renegotiate if you contact them before missing a payment rather than after.

A point to be accurate about: a Time to Pay arrangement is not itself recorded on your credit file. What damages your position is enforcement action, such as a winding-up petition or distraint, and an unpaid HMRC liability appearing in due diligence on a sale or refinance.

So when does a bridge genuinely beat a Time to Pay?

Eight situations, and outside them the honest answer is to call HMRC first.

When a Time to Pay would be refused. HMRC requires all outstanding returns to be filed, no existing arrangement, a genuine temporary difficulty, and a plan it considers realistic. A business that has defaulted on a previous arrangement, or cannot demonstrate it can meet the instalments, will not get one.

When the debt is above the self-serve limits and there is no time to negotiate. A £300,000 corporation tax liability requires a manual negotiation that takes weeks. If enforcement is imminent, weeks is not available.

When the deadline is days away. A bridge can complete in a week or less on clean security. A negotiated arrangement on a large debt cannot.

When enforcement has started. Distraint, a winding-up petition, or a statutory demand changes the position entirely. A winding-up petition in particular is public, it can cause the bank to freeze the company account, and it makes almost everything else impossible. Clearing the debt outright is frequently the only route.

When the business cannot guarantee future compliance. HMRC expects every tax falling due during a Time to Pay to be paid in full and on time. A business with a lumpy VAT profile that misses the next quarter sees the whole arrangement collapse and the penalties restart. A bridge clears the slate and removes that risk.

When a transaction depends on a clean tax position. A business sale, a refinance, a funding round or a major contract tender. An outstanding HMRC liability shows up in due diligence and in a company's filed accounts as a creditor, and it can reduce the price, delay the deal or kill it. The cost of a bridge against the cost of a discounted sale is usually not a close call.

When the money is needed for more than the tax bill. A bridge can fund the liability and the working capital need in one facility. A Time to Pay deals only with the tax, and a business short of money for one is usually short for the other.

When the instalments HMRC will agree are ones the business cannot actually meet. An arrangement you will default on is worse than no arrangement, because it burns the relationship and restarts the penalties.

Why this is never a regulated loan

This widens the lender panel enormously and it is worth stating plainly.

A loan is normally a regulated mortgage contract where the borrower is an individual and at least 40% of the security is used as a dwelling by the borrower or a close family member. So a loan secured on your own home would ordinarily be regulated.

There is an exemption for business purposes. A loan of more than £25,000 entered into wholly or predominantly for the purposes of a business carried on by the borrower falls outside the regulated regime, provided the borrower makes the prescribed declaration.

So a bridge secured on your own home, used to pay a business tax bill, is not a regulated loan. It is available from the large unregulated market rather than from the 12 lenders on our index who offer regulated bridging, which means more choice, better pricing and a faster process.

Three caveats worth understanding before you sign the declaration:

The "wholly or predominantly" test is real. A loan that is half business and half personal may not qualify. If part of the money is for a personal purpose, say so, because getting this wrong affects the validity of the whole arrangement.

You give up the consumer protections. No advised sale requirement, no reflection period, and no recourse to the Financial Ombudsman Service in the same way. That is the trade for the wider market.

Your home is still at risk. The loan being unregulated does not make the security any less real. If it is not repaid, the property can be repossessed, and the process is faster than on a regulated loan.

Security and structure

What lenders will take:

The business owner's own home, under the business purpose exemption above. Common and straightforward.

A commercial property, whether trading from it or held as an investment.

Investment property or a portfolio. Often the cleanest, because there is no residential occupation question at all, and our portfolio bridging page covers multi-property structures.

The point most pages miss: this is usually a second charge. The business owner's home or commercial property normally has a mortgage on it already, and the bridge sits behind it.

That matters because it brings the consent timeline with it. The first charge lender has to agree, by way of a deed of priority or a letter of consent, and that process routinely takes one to six weeks depending on the lender. On a deal driven by an HMRC deadline, that is the constraint, not the bridging lender's underwriting.

Practical consequences:

• Start the consent request on day one, before anything else. It is nearly always the longest item
• Combined leverage drops on a second charge, commonly to 65% to 70% of value including the existing mortgage, which is frequently less headroom than the owner expects
• Budget £750 to £1,500 for the consent process, including the first lender's consent fee, the deed of priority fee and their solicitor's costs
• Where speed is critical and the first lender is slow, an equitable charge is sometimes used instead. It avoids the consent requirement but carries weaker enforcement rights and may still breach a negative pledge in the existing mortgage

Our second charge bridging page covers the consent process, deeds of priority and equitable charges in full.

What the lender needs to see

The HMRC demand, statement of account or assessment. This is the core document. It evidences the amount, the deadline and the liability, and it is what turns a vague funding request into a defined one.

Evidence of the business. Accounts, management figures, VAT returns or bank statements, depending on the size of the facility and the lender.

The exit, in detail. Covered below, and it is the part that decides the case.

Proof the liability is genuinely the borrower's or the borrower's business, not a third party's.

Do lenders pay HMRC direct?

Some do and some do not, and it is worth asking.

Paying HMRC directly from the lender's solicitor on completion gives everyone certainty that the money has gone where it was supposed to, and some lenders prefer it for exactly that reason. It also removes any question about the business purpose of the loan.

Others advance to the borrower or the borrower's solicitor in the normal way and leave the payment to you.

Where payment is direct, confirm the HMRC reference carefully before completion. A payment made with the wrong reference sits unallocated and the penalties keep running while it is traced.

The exit, and the risk underneath it

Trading income. The most common exit and the one lenders scrutinise hardest. The honest question, which a good lender will ask and a good broker should ask first, is whether a business that could not fund this tax bill will generate enough to repay a bridge plus interest within the term. Sometimes clearly yes, where the shortfall was a timing problem, a late-paying customer or a seasonal trough. Sometimes clearly no.

A property sale. Clean and verifiable. If a property is already on the market with offers, this is the strongest exit available.

A refinance. Onto a commercial mortgage, a buy to let, or a longer term business facility. The lender will want to see that the refinance is actually achievable, which usually means an agreement in principle.

The next VAT quarter or a known receipt. Where the money is genuinely coming on a known date, a short bridge is exactly the right tool.

An asset sale or an invoice finance facility replacing the bridge.

The honest risk

A business short of cash for one tax bill is frequently short for the next. The bridge solves January and the next VAT quarter arrives in April.

That is the question to confront at the outset rather than at the end of the term. If the shortfall is structural rather than timing, a bridge converts a tax problem into a secured debt problem with a deadline attached, and the property is now at risk where previously only the business was.

Where the underlying problem is structural, the right advice is usually not a bridge. It is a conversation with an accountant or a licensed insolvency practitioner about the business as a whole, and a broker who arranges the bridge without raising that has not done the job properly.

The other business uses

The same product, the same security, different triggers.

Stock purchase. A bulk buying opportunity, a supplier discount for early settlement, or seasonal stock that must be bought months before it sells. The exit is the sale of the stock, which makes this one of the cleanest cases, provided the margin genuinely covers the finance cost. Check that: a 15% gross margin on stock funded at 1% a month over four months is thinner than it looks once the arrangement fee is counted.

Equipment and machinery. Usually better served by asset finance, which is cheaper and secured on the equipment itself. A bridge makes sense where the equipment is unusual, where asset finance cannot move fast enough, or where the purchase is part of a larger transaction.

Payroll. The most urgent and the most serious. A business that cannot meet payroll has a problem beyond cash flow, and lenders look at it that way. It is fundable where the cause is a specific identifiable gap, such as a large customer paying late, and the receipt is evidenced. Where it is not, the structural warning above applies with more force.

An acquisition deadline. Buying a business, a competitor or a book of clients where the seller will not wait for conventional funding. The exit is a refinance onto a commercial term loan once the acquisition is complete and the combined accounts exist. This is a strong use of bridging, because the deadline is real and the exit improves on completion.

A partnership or shareholder buyout. Funding the exit of a partner or director, frequently on a deadline set by an agreement or a dispute. Security is typically the business owner's property rather than the company's, because the company may not have any. The exit is usually a refinance or retained profits over time.

A contract or tender requiring working capital up front. Where a won contract needs funding before it pays. The exit is the contract receipts, and the lender will want to see the contract.

VAT on a commercial property purchase, which is a distinct and common case with its own very short list of lenders, covered on our commercial bridging page.

Settling a dispute or a court judgment on a deadline.

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