Corporation Tax Loans

Written by Richard Wilcock | October 30, 2024

Table of contents

• What is corporation tax?
• Why would I need a loan to pay corporation tax?
• How does a corporation tax loan work?
• What’s an HMRC Time to Pay (TTP) arrangement?
• Are loan arrangement fees allowable for corporation tax?
• Am I eligible for a corporation tax loan?

Check your eligibility for business funding

Checking won’t affect your credit score

Get Started

What is corporation tax?

Corporation tax is a tax paid by limited companies on their profits, usually annually. If your profits are less than £50,000, you pay a corporation tax rate of 19%, but if your profits exceed £250,000, your rate is 25%.

Learn more about how to calculate corporation tax here.

Why would I need a loan to pay corporation tax?

Paying out a large tax bill can create a significant hole in company finances, leaving you unable to invest in business growth and causing financial stress and worry. Instead, you can apply for a business loan to cover your HMRC corporation tax bill in full, allowing you to repay the loan over manageable fixed monthly instalments.

A corporation tax example:

Let’s say your profits are £45,000 for the year. You’ll pay a rate of 19% of these profits, which is £9,000. That’s a lot of money to pay out in one go, particularly if you’ve had difficulty cash-flow-wise. Losing £9,000 overnight can have a knock-on effect on financial management; that’s why applying for a fast, flexible loan could be worth considering.

In a nutshell, the benefits of applying for a corporation tax loan are:

• You can spread the cost of your tax bill up over the year. By spreading the cost of your tax bill into manageable chunks, you can budget more accurately for the year ahead.
• You maintain a healthy cash flow. Instead of depleting cash reserves, you can hold onto the bulk of your finances, which means you can invest in new opportunities without worrying and focus on growing your business.
• No additional financial worries. You don’t have to worry as your corporation tax bill deadline gets closer. You know you’re covered by a corporation tax loan, so you can breathe easily.
• Pay your tax bill on time. No one wants to receive a fine from HMRC, and you never will if you apply for corporation tax funding because the money is right there for you to use.
• No risk to assets. Corporation tax finance is an unsecured loan, which means you don’t need to risk any of your assets to apply for the loan.

How does a corporation tax loan work?

A business loan for corporation tax is just like any other standard business loan in that it’s delivered to you as a lump sum into your bank account. These loans are unsecured, which means you don’t risk commercial assets to secure them. As there’s no collateral required, these loans are usually approved within 24 hours, with funds in your bank account in as little as 48 hours.

You’ll repay the loan in fixed instalments, with interest, over the pre-agreed period — usually between three and 12 months.

What’s an HMRC Time to Pay (TTP) arrangement?

If you don’t want to apply for a corporation tax loan, an alternative is arranging an agreement with HMRC called a Time to Pay (TTP). If you can show HMRC you genuinely can’t pay your tax bill by its due date, but you have a strong record of tax compliance, they might agree for you to pay in instalments over the coming year.

Are loan arrangement fees allowable for corporation tax?

Yes, loan arrangement fees are deductible from taxable profits as they’re considered "incidental costs of obtaining finance". So as long as you apply for a loan for the purpose of the business, the arrangement fees are an allowable deduction.

Am I eligible for a corporation tax loan?

Although lenders have differing criteria for corporation tax loans, typically, to apply, you’ll have been trading for at least 12 months, be over 18, have a UK-registered limited company and have a good credit rating.

As corporation tax finance is unsecured, lenders will use your credit rating to determine whether lending to you poses a risk to their finances.

If you’re not eligible for a corporation tax loan, don’t worry. We work alongside many UK lenders who offer alternative business funding solutions. So, even if you’re a small business looking for a startup loan to cover initial costs or you’re looking for a limited company loan, for example, we can help you find and compare suitable lenders.

Compare corporation tax loans.

About the author

Written by Richard Wilcock

Money Writer, Director and Co-Founder

Richard is one of the Co-Founders here at Capalona and has over twenty years of experience in the marketing industry, specialising in the finance sector.

Updated: October 30, 2024
Published: October 21, 2024