In the UK, whether you own a business, work for an existing company, or don’t work at all, you have to be conscious of tax bills. VAT, corporation tax, self-assessment payments, and PAYE can often feel like they come out of nowhere, and when they do pop up, they can be a huge financial strain.
Sometimes, individuals experiencing financial difficulties are left with two choices: avoiding tax deadlines or taking a financial hit, but missing HMRC deadlines can often result in penalties, added interest, and stress.
A growing alternative many people choose is short-term finance, which can provide quick financial support to cover tax liabilities without disrupting their business and everyday lives.
At Bridging Finance Solutions, we have helped a range of clients pay their tax bills through our short-term financial solutions. This guide will outline exactly how you can do the same.
Why Businesses and Individuals Struggle with Tax Bills
Over the last year, the country has experienced financial strains that have left individuals and businesses in difficult positions. There are many reasons why someone might struggle with their tax bills, and those include;
Cash Flow Gaps
If you own a business, you will sometimes experience cash flow gaps. Owning a business comes with unpredictability, and you may have times when you’re waiting on invoices or for a big sale to go through. If a tax bill comes through, then you might find yourself in a difficult situation and require short-term cash flow support.
Seasonal or Unexpected Dips in Revenue
Business owners can confirm that businesses experience periods of success and then times when business is slow. This is entirely normal, and though it may be difficult, businesses have plans to allow them to survive these slower periods. Still, these plans can be disrupted by unexpected bills, which may wipe out the little financial security the business has in place.
Large Bills or Unplanned Liabilities
Again, business can be unpredictable, and business owners are often one mistake, breakage or busy day away from a hefty bill. You might have already put the money aside for a bill, only for it to come to a much larger cost than expected.
You may have miscalculated your bill and not be ready to take on the financial burden, which is when tax payment bridging loans are beneficial.
The Risks of Missing HMRC Deadlines
If you are not sure whether or not you should take out a tax payment bridging loan or risk missing an HMRC deadline, you should first consider the risks and analyse whether or not those risks are worth taking, as they may have a substantial impact on your business and your personal financial security.
Penalties and Surcharges
If you miss your tax payment deadlines, penalties will be imposed.
VAT Penalties
HMRC now has a point system for VAT, with each late VAT payment receiving a penalty point. Depending on your filing frequency, you will have a threshold of late fees and receive a £200 penalty if you hit that threshold.
After the threshold has been hit, each late payment will have a £200 penalty.
Corporation Tax
If you operate a business, you must file company taxes and pay corporation taxes. Missing the deadline on these payments has real consequences, and if you are late, you will be charged 5% of the total unpaid tax, which may be high if you have substantial tax costs.
PAYE and National Insurance
Employers should know that missing PAYE and NIC deadlines can incur significant costs. HMRC typically allows a grace period for the first one to three late payments per tax year. However, repeated delays result in penalties between 1% and 4% of the overdue amount, depending on the frequency of missed payments.
If PAYE remains unpaid for more than six months, an extra 5% penalty is imposed, and an additional 5% penalty is imposed if the unpaid amount persists beyond twelve months.
Risk of Enforcement Action
If payment deadlines are not met and you do not contact HMRC to outline exactly when you can make your payments, they have the right to take further enforcement action. Though it is incredibly rare to be prosecuted for late repayment, enforcement may take your possessions, take money from your bank or take you to court.
If your case advances to that point, you will incur additional charges, so seeking quick solutions like tax bill loans is probably a good option. Repaying a bridging loan has fewer stressors than repaying the cost of enforcement action.
Negative Impact on Business Reputation and Credit
As a business owner, it is not uncommon for you to obtain finance for items or equipment or even pay a supplier in instalments to compensate for poor cash flow. Not making tax bills on time can tarnish your reputation and create difficulties when trying to obtain future funding support.
Paying on time can ensure that your business maintains its credibility and will place you in good standing if you experience any future financial difficulties and need financial backing.
How Short-Term Finance Can Help
We hope to clarify the importance of paying your taxes on time. We understand that paying your tax bills on time might prove difficult if you are experiencing financial strain, and this is where short-term finance in the form of tax loans can offer a lifeline.
Bridging loans provide quick access to finance and are repayable when longer-term finance or cash flow stabilises, so you do not have to worry about being tied up in financial commitments that span years.
Fast bridging loans can ensure you meet your tax payment deadlines on time and without fuss until you are more financially secure.
Key Benefits of Using Bridging Finance for Tax Bills
If you are still not completely sure that using bridging finance for your tax bills is the right choice, consider some of the key benefits of using bridging finance for your tax bills.
Speed
One of the main reasons why bridging loans are a popular choice for paying tax bills is their ability to be approved and secured in a very short period of time after the application is submitted. This quick access to funds helps individuals and businesses manage their tax obligations efficiently without long delays.
Avoid Penalties
A bridging loan helps you meet deadlines and avoid additional HMRC interest charges, although you will
incur interest on the loan itself. It also provides extra time to possibly sell your property at full market value instead of hurriedly accepting a below-market offer just to access funds.
Feeling rushed by a tax bill may lead to you making quick decisions that do not benefit you or your business in the long run, so having additional financial support gives you the breathing room necessary to make decisions that help your business grow.
Protect Cash Flow
If your cash flow is steady enough to support your business during unstable times, an unexpected expense could threaten your financial stability, forcing you to use your limited cash flow to pay taxes.
Paying a large bill outright might irreparably damage your business’s finances, so using bridging loans to alleviate the cost and spread out repayments can make a huge difference.
Short-term Solution
One of the advantages of bridging finance loans is that they are short-term, preventing long-term entrapment. Most bridging loans include an exit strategy within a year of the loan approval. Choosing a bridging loan means you will only face temporary, short-term payments.
Avoid Penalty With Bridging Finance Solutions
Tax bills are an inevitable aspect of managing a business or personal finances, and failing to meet HMRC deadlines can swiftly result in penalties, surcharges, and increasing interest charges.
Short-term finance, such as bridging loans, offers an efficient solution to address cash flow problems, enabling you to meet tax deadlines and prevent costly late fees. Acting quickly and working with a trustworthy lender can protect your business from unnecessary financial pressure, supporting seamless operations.
At Bridging Finance Solutions, we have helped countless businesses and individuals meet their tax deadlines and avoid hefty fines or even more severe penalties. If you need quick finance to cover your tax obligations, fill out our application form today.
