Using a Mortgage to Pay a Tax Bill – Expert Solutions for HMRC Debt
This is an article about Mortgage to Pay a Tax Bill that has been unpaid, and you are looking for a resolution through property finance.
It used to be that using property finance, such as mortgages or remortgages, did not allow a Mortgage to pay the Tax Bill. This was because the lenders we’re very nervous about taking on applicants that we’re not on top of the taxes as this is one of the most important bills to pay, if not the most important bill to pay, their concern was that if you left the tax bill unpaid you would also not be too concerned about paying your mortgage on time. The further complication was when coming to assess mortgage affordability, with unpaid taxes, it becomes difficult to decipher what you are actually earning and therefore how much you can afford to pay on the mortgage.
It still remains that the repayment of a tax bill is still a taboo subject for a lot of UK Mortgage Lenders however the good news is there is still multiple solutions to overcome the hurdle of unpaid tax bills through property finance; although it is strongly recommended do you seek the support of a Mortgage Broker that is familiar with handling search cases such as Niche Advice as not only will they help present the case in the most favourable light they will also filled the inevitable difficult questions which will come back from the Mortgage Lenders.
Frequently Asked Questions on Mortgage to Pay a Tax Bill
Q) What type of tax bills can Niche Advice help with?
A) The type of tax bill that is unpaid will determine the lender selection it’s not a case of this Mortgage Lender can consider remortgages for the payment of tax bills. Also there could be a combination all different overdue taxes and again this will mean only certain Mortgage Lenders can help. The good news is we are yet to encounter a tax type that we have been unable to help with.
- Income tax/self-assessment.
- Arrears due to the wrong PAYE tax code.
- Capital gains tax
- Corporation tax.
- Inheritance tax (IHT).
- Value Added Tax (VAT)
This list is not finite but covers the main ones that occur due to bad planning or accountancy errors.
Q) Does the reason for the unpaid Tax Bill matter when getting a mortgage?
A) It almost certainly does. More Mortgage Lenders will come into play if there is a sensible explanation for what went wrong. Situations where the tax bill has come out of the blue such as the inheritance already property which you have been unable to cover the inheritance tax on is understandable whereas provide a bland statement such as “I did not know I had to pay income tax”, in a country that loves to charge taxes merely is not going to wash. Before attempting to answer this question, you should seek professional mobile advice to give a comprehensive, rounded explanation of what went on and the lead up to what happened, and importantly, the steps you have taken to ensure it will not surface again.
Q) What sort of equity will I need for a mortgage to repay a tax bill?
A) This is a complex question to try to provide a simple answer to. Some mortgage lenders will see this as debt consolidation and apply rules accordingly, which could result in them determining a minimum of 25% equity is needed or limiting the amount to a monetary sum, for instance £50,000. However, in theory, you can get away with his little, it’s 5% equity. I’m of the belief that 15% equity will provide a far better outcome for you when it comes to remortgages. There are also other property finance solutions, such as second charge secured loans, which again operate similarly but with lower loan-to-values, and for extreme tax problems, short-term bridging finance, which will typically cap out with 25 to 30% equity.
Q) Can the tax bill span multiple years?
A) If the tax bill is across multiple tax years, it brings into question whether this was unfortunate or a calculated decision not to pay tax. For some Mortgage Lenders, they simply will not lend on the basis, irrespective of whether the reason for the unpaid tax is good. With this being the case, unfortunately, you will be ruling out some of the most competitively priced mortgage products for tax purposes available, including a couple of major High Street banks. In reality, if the text has gone on for longer than a year, you are looking at mid-range building societies and specialist lenders, so the rates will be higher.
Q) When the mortgage goes through, can there be any tax liability remaining?
A) No, the Mortgage Lender will want the tax bill to be fully paid.
Q) HMRC, I’ve started legal proceedings. Can property finance still help?
A) Potentially but obviously it’s time sensitive so short term finance such as bridging is likely to be the only viable option the case really needs to be discussed with your professional mortgage broker I will be subject too specific individual agreement.
Q) Does the size of the tax bill matter?
A) Absolutely, this will determine the suitability of the property finance type selected and the Mortgage Lender to go to for a solution.
Q) What will improve my chances of success?
A) If the problem can be isolated, for example, you were running a self-employed company that has now been shut down, causing the tax bill, and you are now fully employed on a good salary with an otherwise excellent credit record.
Q) I own a house jointly with my partner can I consolidate my tax bill onto this property?
A) From a mortgage perspective this is doable we would need to be sure that your partner realises that they are going to become jointly liable for your debt and which strongly recommend that they seek independent legal advice in this regard.
Q) Does my credit score matter when it comes to repaying a tax bill?
A) Credit scores from credit agencies give you an indication of your borrowing potential, however, they do not provide the full answer, as the Mortgage Lender will run their own checks.
Q) I have consolidated a tax bill using property finance before can I do this for a second time?
A) There are certain lenders that do not lend for repeat debt consolidation. Your success is probably more likely if you do not return to the same bank. You should ultimately be guided by the professional Mortgage Broker.
Q) The UK tax issue occurred whilst I was living outside the UK, so does that matter?
A) Yes any tax liability needs to be declared to your mortgage lender the fact you were abroad may help with your explanation but does not completely exonerate you from the commitment.
If you’re facing the stress of an unpaid tax bill, don’t let it spiral further. With the right approach and lender, securing a mortgage to pay a tax bill is not only possible—it can be the most efficient route to financial stability. At Niche Advice, we specialise in complex cases like yours and work with lenders who understand the real-life challenges behind HMRC debt.
Let us present your case in the best possible light and guide you through the process from start to finish.
For more information on Tax, please visit the official government website at HMRC
