Business Loans Guide
Tax Refund Loan
What is a tax refund loan?
A tax refund loan is a fast form of lending which has been increasing in popularity in the UK.
A tax refund advance is available to those who have overpaid their income tax, but do not want to wait for HM Revenue & Customs (HMRC) to process their tax refund. The short-term loan offered will depend on the expected tax return refund amount, which a tax preparation company will be able to advise upon.
Who is eligible for a tax refund?
Almost every working person in the UK has to pay tax, which can often put a strain on personal finances. A person’s taxable income can include everything from employment earnings and state benefits, to rental income and benefits received through employment such as your annual bonus.
These earnings are calculated based on the tax year which starts on 6th April and runs to the 5th April the following year. However, there are many situations which can result in tax being overpaid, such as not working for the full tax year, only working for a short-term contract, being made redundant, paying through an emergency tax code, or incurring work-related expenses.
The vast majority of individuals pay their taxes via the PAYE system, which does not always take into account your earnings for the full year when calculating tax owed. It is very common for employment situations to change over the course of the year, often resulting in substantial tax refunds. It is estimated that one in three tax payers in the UK are able to claim a tax refund each year.
If you think you may have paid too much tax, there is a simple tool available on the HMRC website. The tool will only take a few minutes to use and will calculate the amount of tax you should have paid, using documents such as your bank statements and payslips. If you have overpaid tax during the previous tax year, you will be eligible for a refund of the overpaid amount from HMRC.
Receive your refund early with a tax refund loan
If you are looking for a cash advance on your taxes, there are a variety of lenders who specialise in this service. The process of applying for a tax refund loan varies between each lender, although the most common first step will involve an appointment with a tax professional. Most tax return loans are offered by companies which specialise in tax preparation services, they partner with lenders who then loan you the funds.
Once the professional has assessed the taxes you have paid you will be advised whether a tax return advance is available. The loan application will then be passed to the underwriters to evaluate whether your application meets their criteria. In many situations the cash advance tax refund loan can be paid within 24 hours, with many tax specialists offering same day payments.
The time it takes to process the loan will depend on your individual circumstances, as the company will need to review your tax payments. When the tax refund is received by the tax specialist, they will then repay the tax return advance and issue any remaining refund to you.
What are the benefits of a tax refund loan?
If you are looking to unlock cash for personal or business expenses, a quick or almost instant tax refund loan is a great option. In many situations a large refund is due, but it can be inconvenient to wait until HMRC process the return, especially during the busy end of year period. Whether you want to unlock a small amount of the refund owed or release all of the cash early, a tax refund loan can be a low-cost solution.
A tax refund loan is an ideal option if you have a poor credit rating and are unlikely to be accepted for a standard bank loan. As the lender knows that the loan is almost guaranteed to be repaid, a tax refund loan is a low-risk option for them.
What are the disadvantages of taking out a tax refund loan?
There are many companies which advertise tax refund loans with no fees or interest charges, but it is important to remember that they are still classed as loans, so you should always read the fine print. In many circumstances the tax preparation company will charge a fee to prepare your accounts, a percentage of this will be used to cover the cost of the loan.
If you are only expecting a small tax refund amount, it may be worth taking out an alternative form of credit. If you are likely to be charged fees for arranging the refund application, the amount you receive could be significantly reduced. There are a variety of providers of competitive loans which could suit your personal circumstances, whether you are self-employed or have a poor credit history, our panel of lenders could provide you with the cash you need quickly.
What happens if my tax refund is less than the tax refund loan?
Although the lender will perform a series of checks to ensure the amount they lend can be covered by the tax refund, it is not uncommon for the final refund to be less than expected. Whether the original tax return was miscalculated or HMRC declined a deduction, you will still be responsible for repaying the amount borrowed.
There are some lenders which will provide lenient terms if the estimated tax refund is less than the refund received, but you should always check their terms before agreeing to the loan.
How can a tax refund loan help self-employed people?
If you are self-employed you will be required to pay your income tax to HMRC through the self-assessment process. If you are new to the process it is not uncommon for your annual tax return to be miscalculated, which can result in an overpayment of tax. Working with a tax specialist can help you rectify any mistakes, so that you can claim back every penny you are owed.
If you are waiting upon a refund and your business falls into financial difficulties, a tax refund loan could provide you with the finance you need to continue trading. If you are looking for a low-cost short-term loan, a tax refund loan could be an ideal solution. However, we partner with a range of lenders which specialise in business loans so can always put you in touch with quick and competitively priced loans.
Can I compare tax loans?
We specialise in comparing a variety of business loans and products, so our team can provide expert advice to help you with your tax loan comparison. We can help with advising upon the ideal tax preparation service to suit your individual requirements, while also explaining the fees and costs involved with any tax anticipation loans you are considering.
If you decide that a tax refund loan is not the right solution for you, our useful business loan comparison tool can provide you with instant access to a variety of lenders. Our panel of lenders can provide loans in as little as 24 hours with highly competitive interest rates. To find out more about income tax loans or discuss the options available to you, please use our tax finder tool.