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Corporation Tax planning with working capital loans

working capital loans

For many businesses the financial year end is on 31st December, and with it comes the need to pay Corporation Tax. Often a large lump sum due immediately after Christmas, for lots of businesses, especially retailers and those in travel or hospitality, it can present a cash flow challenge. In this article we look at how working capital loans can help you with your Corporation Tax planning. 

Corporation Tax and cash flow solutions for SMEs  

While Corporation Tax can, in some instances, be paid in instalments, business owners usually want to get it out of the way to avoid the risk of missing a payment. That said, as the busy Christmas period is followed by the characteristically quieter time in January, the large outlay can disrupt upcoming payments for stock, staff salaries, bills, and investment in business development. 

In addition, the Corporation Tax bill comes at a time of year where many businesses have a lot going on when it comes to cash flow, whether it be finding additional staff for the festive season, buying more stock for the lead up to the holidays and the Black Friday sales, or planning maintenance works for the quieter weeks at the start of the New Year.  

As a result, a lot of business owners feel put upon, and the availability of cash flow solutions for SMEs can offer welcome support and room to breathe. 


How working capital loans can help 

Following the Autumn Budget, the main rate of Corporation Tax remains at 25% (for companies that made more than £250,000 profit) and the small profits rate at 19% (if your company made a profit of £50,000 or less), for the financial year beginning 1st April 2026.  

While there hasn't been a rise in Corporation Tax rates, the increase in National Insurance contributions for employers from 13.8% on salaries over £9,100 to 15% on salaries above £5,000 from next April adds more strain on employers. This creates additional need for financial planning when it comes to cash flow and capital management. Working capital loans are one option. 


Expanding awareness on cash flow solutions for SMEs  

Before the Budget, Purbeck Insurance Services called for tax clarity to help provide surety to small businesses over the medium term. In addition to reassurance over tax, Todd Davison, MD of Purbeck called for better education on loan facilities, saying: “A relatively small investment from the Government in greatly enhanced education surrounding the myriad of SME finance options could work wonders in helping small businesses understand that barriers to investment can be easily overcome.” 

The value of short-term business loans for providing cash flow solutions for SMEs, including Corporation Tax and VAT funding for businesses, is often underestimated. Many businesses are not even aware that the option is open to them. Not intended as a bandage solution for financial difficulty, but as a proactive approach to sensible capital management, they can help businesses to make appropriate provision for large lump sum payments, repaid over a more manageable period, between three and 12 months.  

For example, Rivers Cash Flow Solution Loans are short-term business loans available from £5,000 to £100,000. There are no early repayment penalties, repayments are made at 14-day intervals, and renewals are available after 50% of the original loan has been repaid.  

If you would like to find out more about Rivers short-term business loans and how they can help you plan for Corporation Tax payments, try our UK business loan calculator to see what your repayments might look like, and contact us to check your eligibility.