New research from Premium Credit reveals a significant rise in the number of businesses and individuals utilizing credit to cover their tax bills. This trend underscores a growing reliance on financial products to manage tax liabilities, allowing companies and business owners to spread the cost of VAT, corporation tax, and self-assessment tax payments.
Increasing Demand for Tax and VAT Funding
Premium Credit’s findings indicate a substantial increase in both the volume of funding provided and the number of customers supported through their tax and VAT funding services. The data highlights a nearly doubled total amount of money lent to fund clients’ VAT bills in 2023 compared to 2021, marking a 98% increase. Funding for non-VAT tax bills also surged by 83% over the same period, demonstrating robust growth and heightened awareness of the benefits of spreading tax costs among SMEs.
In the first quarter of 2024 alone, Premium Credit provided 16% more funding than the same period the previous year, with funding for non-VAT tax bills rising by 25%. This upward trajectory reflects the increasing need for financial flexibility in managing tax obligations.
Growth in Customer Base
The number of clients utilizing Premium Credit’s tax and VAT funding proposition has also seen remarkable growth. Between 2022 and 2023, there was a 58% increase in clients, following a 51% rise from 2021 to 2022. This expanding customer base highlights the growing acceptance and reliance on credit solutions to manage significant financial commitments.
Last year, the average loan size to assist with VAT tax bills was £101,352, while loans for non-VAT tax bills averaged £73,625. These figures illustrate the substantial financial burden that taxes can impose on businesses and the crucial role that credit solutions play in mitigating this pressure.
Market Insights
Jennie Hill, Chief Commercial Officer of Premium Credit (Specialist Lending), provided further context on the market dynamics:
“The Tax and VAT marketplace is currently worth around £190 billion annually, and we estimate that between £3 billion and £5 billion is financed each year. We are one of the leading funders of Tax and VAT finance in the UK, offering flexible VAT, corporation tax, and self-assessment solutions, allowing businesses and business owners to spread the cost of their liabilities for up to a year.”
The Benefits of Tax and VAT Funding
Using credit to cover tax bills offers several advantages:
- Financial Flexibility: Spreading tax payments over time helps businesses maintain cash flow and avoid large, lump-sum payments that could disrupt operations.
- Budget Management: Predictable monthly payments make it easier for businesses to manage their budgets and financial planning.
- Access to Funds: Businesses can access necessary funds without depleting their reserves, ensuring they have capital available for other critical expenses or investments.
Conclusion
The growing use of credit to cover tax bills reflects a broader trend towards financial solutions that offer flexibility and ease of management for substantial financial obligations. Premium Credit’s research highlights the increasing demand for such services and the benefits they provide to businesses and individuals facing significant tax liabilities. As the financial landscape continues to evolve, the ability to spread tax payments will likely become an even more integral part of business financial strategies.
