How Much Does Tax Bridging Cost?
Tax bridging finance has three cost components: the monthly interest rate, the arrangement fee, and legal fees. Understanding all three - and comparing the total cost to the HMRC penalty and interest alternative - is the only way to make an informed decision about whether bridging is right for your tax situation.
Full Cost Guide 2026
This guide breaks down every cost at typical tax bill sizes.
Tax Bridging Total Cost - Worked Examples August 2026
| Tax bill size | Rate | Term | Interest | Arrangement fee | Legal fees | TOTAL COST |
|---|---|---|---|---|---|---|
| £25,000 VAT | 0.75%/month | 2 months | £378 | £375 (1.5%) | £1,500 | £2,253 |
| £50,000 VAT | 0.75%/month | 2 months | £757 | £750 (1.5%) | £1,500 | £3,007 |
| £75,000 Corporation Tax | 0.75%/month | 4 months | £2,267 | £1,125 (1.5%) | £2,000 | £5,392 |
| £100,000 SA + POA | 0.75%/month | 3 months | £2,267 | £1,500 (1.5%) | £2,000 | £5,767 |
| £200,000 IHT bridge | 0.70%/month | 12 months | £20,000 (approx, rolled) | £3,000 (1.5%) | £3,000 | £26,000 (approx) |
| £500,000 CT (large company) | 0.65%/month | 3 months | £9,891 | £7,500 (1.5%) | £3,000 | £20,391 |
Indicative rates - August 2026. Rates change daily. Actual rate depends on LTV, security, credit profile, loan size, and exit strategy. Contact our team for a live rate comparison for your specific case. All rates sourced from lender product sheets and publicly available market data.
What determines your rate
Monthly interest rate
Tax bridging rates for property-backed loans typically run 0.65%-0.85%/month (7.8%-10.2% per annum) for standard cases. The rate depends on the LTV (loan-to-value ratio against the security property), the property type, and the borrower's profile. Very low LTV cases (under 20%) can access 0.55%-0.65%/month. Rate is the smallest cost component for short-term bridges.
Arrangement fee
The arrangement fee is typically 1%-2% of the loan amount and is charged at the outset (it can usually be rolled into the loan rather than paid upfront). On a £50,000 bridge, a 1.5% arrangement fee = £750. This is the fixed cost that makes short-term bridges more expensive on an annualised basis - but it is a one-time charge regardless of the bridge duration.
Legal fees
Both the borrower and the lender incur legal fees. The borrower's solicitor reviews the loan documentation; the lender's solicitor registers the charge against the property. Combined legal fees typically run £1,500-£3,000 for a standard case. For urgent cases or complex security, legal fees may be higher. Legal fees are the largest non-negotiable component of bridging cost.
Rolled vs serviced interest
Interest can be rolled (accruing without monthly payment - added to the outstanding balance and repaid with the loan) or serviced (paid monthly). For tax bridging where the immediate cash flow is the problem, rolled interest is more common - no monthly payments are required. However, rolled interest compounds, making total cost slightly higher than straight-line interest calculations suggest.
Exit fee
Some lenders charge a small exit fee (0.5%-1% of the loan) when the bridge is repaid. Many lenders have moved away from exit fees as a competitive differentiator. Check whether the lender's product includes an exit fee when comparing total costs.
Worked cost example
Total cost comparison: £80,000 VAT bill. Bridge at 0.75%/month for 2 months vs HMRC penalty.
BRIDGING TOTAL COST:
Interest (2 months, rolled): £80,000 × 0.75% = £600/month × 2 = £1,212 (compounded)
Arrangement fee (1.5%): £1,200
Legal fees: £2,000
TOTAL: £4,412
HMRC PENALTY COST (if paid 35 days late):
First 3% penalty (day 15): £2,400
Second 3% penalty (day 30): £2,400
Interest (7.75% p.a., 35 days): £593
TOTAL: £5,393
Bridge (£4,412) is £981 CHEAPER than HMRC penalties at 35 days.
At 60 days late, HMRC cost rises to £6,800+. Bridge is increasingly advantageous.
Rate context and outlook
Tax bridging costs have remained broadly stable through 2026 as the specialist bridging market is competitive for property-backed tax finance. The key cost driver is the arrangement fee rather than the interest rate for very short-term bridges (under 3 months). The arrangement fee as a percentage of total cost is highest for the shortest bridges - a 1-month bridge has interest of approximately 0.75% of the loan but a 1.5% arrangement fee, making the effective cost 2.25% for one month.
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Independent, whole-of-market advice across 130+ specialist lenders. Doulton Money Ltd is authorised and regulated by the Financial Conduct Authority, FRN 814533.
Frequently asked questions
Can I roll all fees into the bridging loan?
In most cases, yes - interest can be rolled into the loan (accruing without monthly payment) and the arrangement fee is often deducted from the advance rather than requiring upfront payment. Legal fees are typically paid separately by the borrower to their solicitor. The net advance is the gross loan minus arrangement fee.
Is there a minimum loan size for tax bridging?
Most specialist bridging lenders have minimum loan sizes of £25,000-£50,000. Below this threshold, the legal and valuation costs become disproportionate relative to the loan amount. For smaller tax bills (under £25,000), a business loan, overdraft extension, or HMRC Time to Pay may be more cost-effective than bridging.
Can I get a quote without committing?
Yes - we provide indicative terms at no cost and with no obligation. A formal Agreement in Principle is also typically provided at no cost. Costs are only incurred once a formal offer is accepted and the legal/valuation process begins. There is no cost to getting a quote.
Does the type of property affect the cost?
Yes significantly. Standard residential property (house, flat) attracts the widest lender pool and lowest rate. Commercial property adds 0.10%-0.30%/month. Land attracts higher rates. Unusual construction or very short leasehold adds further premium. The property type also affects valuation cost.
Are there any hidden costs I should know about?
The main costs are rate, arrangement fee, legal fees, and valuation. Less commonly charged: exit fee (check lender terms), telegraphic transfer fee (usually small - £25-£50), and broker fee (DBF does not charge client-facing broker fees - we are paid by the lender as procuration fee). Always request a full illustration from the lender before accepting any offer.
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