How can a business pay a VAT or corporation tax bill in instalments?

Quick answer: there are two main routes. You can ask HMRC for a Time to Pay arrangement, which lets you pay what you owe in instalments with interest added. Or you can use a tax funding loan to pay HMRC in full on time, then repay the lender in monthly instalments, typically over 3 to 12 months. The most important thing is to act before the deadline.

Option 1: HMRC Time to Pay

If your business can’t pay a tax bill in full, you can contact HMRC to ask for a payment plan. For some smaller VAT and other debts, HMRC lets businesses set up a plan online; otherwise you call HMRC’s Payment Support Service.

• HMRC will want to understand your finances and why you can’t pay in full
• Interest is charged on the amount outstanding
• HMRC decides whether to agree and on what terms
• Late payment penalties may apply if you miss the deadline before agreeing a plan

See GOV.UK guidance on paying HMRC in instalments for the latest rules.

Option 2: Tax and VAT funding

A lender pays your bill to HMRC (or lends you the money to do so) by the deadline, and you repay the lender in fixed monthly instalments.

• Your tax is paid in full and on time, so your record with HMRC stays clean
• You know the total cost and the repayment schedule upfront
• It can also spread a quarterly VAT bill or annual corporation tax payment to match your cash flow
• It is subject to a lender’s credit assessment, like any business finance

Comparing the two

	HMRC Time to Pay	Tax funding loan
Who decides	HMRC	A lender
Cost	HMRC interest	Lender’s interest and fees
Impact with HMRC	You have an arrangement with HMRC	HMRC is paid in full
Speed	Depends on HMRC	Often days

Plan ahead

Corporation tax is usually due nine months and one day after the end of your accounting period, and VAT returns usually have to be filed and paid one month and seven days after the end of each VAT period. Talking to your accountant and lining up funding early gives you more choice.

How Bridgemead Finance can help

We are a UK commercial finance broker, not a lender. We can compare tax and VAT funding options so you can decide alongside your accountant. Tell us what you need.