How to Pay Your VAT Tax Bill

Quarterly VAT returns and payments often coincide with other seasonal expenses, placing added pressure on cash flow. For many business owners, managing these obligations means considering alternative ways to settle their VAT liabilities. Whether you are facing a larger-than-expected VAT bill or want to spread payments to safeguard working capital, a range of smart solutions are available to meet your VAT commitments and protecting cashflow.

In this quick guide, we’ll explain what VAT is, why it’s crucial to pay on time, the different ways you can pay your VAT bill - and why a business loan might be the smartest option to fund your VAT obligations.

What Is a VAT Tax Bill?

VAT (Value Added Tax) is a tax charged on most goods and services sold in the UK by VAT-registered businesses.
If your turnover exceeds the £90,000 VAT threshold, or you’ve voluntarily registered, you must submit VAT returns and pay any VAT due to HMRC.

Your VAT bill reflects the difference between:

• The VAT you’ve collected from customers

• The VAT you’ve paid on business purchases

If the VAT you’ve collected is higher, you owe HMRC the difference.

VAT must be reported every quarter through your VAT return - and payment deadlines are strict.

Who Needs to Pay VAT?

If you’re VAT-registered, you must:

• File VAT returns every three months

• Pay VAT due to HMRC by the payment deadline

• Keep digital records under Making Tax Digital rules

Most limited companies, partnerships, and sole traders above the threshold will be VAT-registered, but voluntarily registering is also common for growing businesses.

VAT Key Deadlines

VAT deadlines depend on your VAT accounting period, which runs quarterly.
However, the rule is the same for everyone:

Your VAT return and payment must reach HMRC 1 month and 7 days after the end of your VAT quarter.

Example VAT deadlines for upcoming quarters

Most businesses filing at this time of year have VAT deadlines between 7 January and 7 March, depending on their VAT period.

Why VAT deadlines catch businesses off guard

• VAT is often due at the same time as Corporation Tax, PAYE, or year-end costs

• Seasonal fluctuations can reduce cash reserves

• Stock-heavy or project-based businesses may pay VAT before receiving payment from customers

• VAT bills rise when sales increase - even when cash hasn’t yet been collected

Missing a VAT deadline comes with immediate interest and penalties, so planning ahead is essential.

What Happens If You Don’t Pay Your VAT Bill on Time?

Failing to pay your VAT bill can result in:

• Immediate interest charges on late payments

• Penalty points under the VAT Penalty System

• Escalating penalties if multiple returns are filed or paid late

• HMRC enforcement action, including debt recovery

• Difficulty securing future business loans or finance

VAT is one of the most tightly enforced UK taxes - so ensuring you can pay on time is crucial.

Ways to Pay Your VAT Bill

If you’re wondering how to pay your VAT tax bill, here are the most common options - each with its own pros and cons.

1. Business Loan for VAT Funding

Using a business loan to pay your VAT bill allows you to:

• Preserve cash flow for payroll, suppliers, and operating expenses

• Avoid interest, penalties, and VAT penalty points

• Spread the cost with fixed monthly repayments

• Keep personal funds separate from business liabilities

• Secure funding quickly - often within 24 hours

Business loans for VAT are particularly helpful for:

• Seasonal businesses

• High-growth businesses

• Companies waiting for customer payments

• Businesses facing temporary cash flow gaps

Specialists like Millbrook can arrange funds quickly, even if traditional lenders say no.

2. Pay from Cash Reserves

If you have strong cash flow, paying your VAT bill directly is the simplest option.

Pros

• No interest or borrowing costs

• No paperwork or agreements needed

Cons

• Can drain working capital

• May impact ability to purchase stock, pay wages, or fund growth

• Reduces your financial buffer at a time of year when costs are higher

Even profitable businesses prefer to spread VAT costs to avoid tying up liquidity.

3. HMRC VAT Direct Debit

You can set up a VAT Direct Debit for recurring payments.
This doesn’t change the amount due - it simply collects it automatically on the due date.

Pros

• Prevents missed deadlines

• Useful for predictable VAT cycles

Cons

• Doesn’t help with cash flow

• Doesn’t allow payment extensions

• VAT is still due in full on the same date

4. Time to Pay Arrangement with HMRC

HMRC may allow a Time to Pay (TTP) arrangement, enabling businesses to spread VAT payments over several months.

However:

• You must prove affordability

• It’s assessed case by case

• HMRC may decline if you’ve had repeated issues

• Setting up TTP can take time

• You still incur interest

It’s best for one-off shortfalls or temporary issues - not ongoing VAT funding.

5. Use Personal Borrowing

Some directors use personal overdrafts or credit cards to pay VAT.

This is rarely advisable because it:

• Blurs personal and business finances

• Increases personal credit risk

• Is usually more expensive than business borrowing

• Doesn’t provide a long-term solution for VAT cycles

A Quick Comparison: Ways to Pay Your VAT Bill

Why Choose a Business Loan to Fund Your VAT Bill?

There are several compelling reasons many directors choose to fund VAT through a business loan:

• Protect working capital: Keep cash free for wages, suppliers, buying stock, and growth opportunities.

• Avoid penalties: Late VAT payments can be costly under the new points-based system.

• Predictable budgeting: Fixed monthly repayments improve cash flow forecasting.

• Fast decisions and funding: Often completed within 24–48 hours.

• No personal risk: Keep personal finances separate.

Typical Business Loan Criteria at Millbrook Business Finance

Here’s what we usually look for when funding VAT tax bills:

Every case is looked at individually - even if your bank has declined you.

How Millbrook Business Finance Can Help

VAT obligations can create cash flow pressure at the worst possible time. At Millbrook, we specialise in fast, flexible funding solutions to ensure you meet your VAT deadlines without disrupting your business.

Need funding for your VAT bill?

If you’d like help covering your VAT obligation or want to explore your funding options, our team is ready to support you.

Interested to see how much you could borrow? Get a quick quote from Mark Paddock today.

Make an Enquiry Today

Contact Mark Paddock, Professional Services Finance Specialist

For professional-services firms looking to move to the next phase - whether that’s growing the team, investing in infrastructure, acquiring premises or upgrading systems - securing the right funding strategy is vital. At Millbrook Business Finance we understand how consultancies, accountancy practices, legal firms and similar professionals operate, and how their funding needs differ.

We specialise in helping professional-services firms:

• access tailored business loans to support recruitment, training and expansion

• structure asset and equipment finance for office technology or premises investment

• optimise cash-flow and working-capital arrangements so you can focus on service delivery

If your firm is ready to invest in growth  - not just in what you do today but in what you’ll become - then let’s discuss the best finance options to support your ambitions.

Contact Mark Paddock  today to explore how we can partner with your professional-services business:

• Submit a quick enquiry
• Send me an email
• Speak to me now on: 0333 015 3301

Read My Other Blogs:

Smart Ways to Fund Your Self-Assessment Tax Bill

How to Pay Your Corporation Tax Bill