Some self-employed homeowners consider raising money through a remortgage to clear an outstanding self-assessment bill or an existing Time to Pay arrangement in one go. It is one option, not the only one, and it changes an unsecured tax debt into borrowing secured against your home.
This page looks specifically at using a remortgage this way. For whether HMRC debt shows on your credit file and how a Time to Pay arrangement is generally treated in an application, see self-employed and owing HMRC. Our debt consolidation remortgage page covers the wider risks of securing any unsecured debt on your home.
On this page
This page covers
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
- Employment
- Self-employedLenders commonly ask for tax calculations and accounts covering one or more years.
In short
- Clearing HMRC debt through a remortgage secures a previously unsecured liability against your home.
- A Time to Pay arrangement kept up to date is an alternative that does not involve your home at all.
- Lenders will usually want evidence of the amount owed and any existing arrangement, regardless of which route you choose.
- A regulated adviser must consider whether using a remortgage for this is appropriate for your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
Why some self-employed homeowners consider this
A large self-assessment bill, sometimes combined with a payment on account for the following year, can arrive at an awkward time for anyone whose income varies. Where a Time to Pay arrangement is already in place, some people would rather clear the whole amount in one go through their mortgage than keep making monthly payments to HMRC on top of everything else.
This is a choice between two ways of paying the same debt, not a way of making it disappear. Whichever route you take, the money owed to HMRC still has to be repaid, either to HMRC directly or, if consolidated, as part of your mortgage.
Remortgaging to clear HMRC debt compared with a Time to Pay arrangement
| Point to compare | Time to Pay arrangement with HMRC | Clearing it through a remortgage |
|---|---|---|
| Security | Unsecured, agreed directly with HMRC | Secured against your home |
| Typical length | Often up to 12 months, sometimes longer | Usually spread over the rest of the mortgage term |
| What happens if you fall behind | HMRC may cancel the arrangement and pursue the debt, potentially through the courts | Your home could be at risk if mortgage payments are missed |
| Effect on future tax bills | Does not affect other borrowing directly | Increases your mortgage balance and monthly payment for years |
General information, not advice. GOV.UK sets out what to do if you cannot pay your tax bill, including how to ask for more time to pay.
A Time to Pay arrangement kept up to date does not put your home at risk in the way a remortgage does, but it does add a monthly commitment that a lender will usually count in any future affordability assessment.
What does this mean for the amount you can raise?
Raising money to clear a tax bill works in the same way as consolidating any other debt: you need enough equity, and the larger mortgage still has to pass an affordability check. Self-employed income is usually assessed from 2 years of accounts or SA302s and tax year overviews, sometimes 1 year with some lenders, so the same tax return that shows the liability may also be used to assess whether the new mortgage is affordable.
If the underlying reason for the tax debt was a genuinely difficult trading year, it is worth being upfront about this with an adviser, alongside evidence that trading has since stabilised. See self-employed bad credit remortgages for how income is generally evidenced.
Tax debt owed directly to HMRC is unsecured. Once it is cleared through a remortgage, that amount becomes secured against your home, and missing mortgage payments afterwards could put your home at risk.
Alternatives worth considering first
- Agreeing or extending a Time to Pay arrangement directly with HMRC, which keeps the debt unsecured.
- Paying from savings or income, if this is realistic without borrowing more against your home.
- A second charge mortgage, which leaves your existing mortgage deal untouched but still secures the debt on your home.
- Speaking to an accountant about the underlying cash flow issue, not just the current bill, if tax debt has recurred.
If the tax debt sits alongside wider financial difficulty, free advice from MoneyHelper, StepChange and National Debtline can help you see the full range of options.
What may shape using a remortgage to clear HMRC debt
| Factor | Why it matters |
|---|---|
| Amount owed to HMRC | Sets how much extra you need to borrow, alongside any other debts being consolidated. |
| Whether a Time to Pay arrangement already exists | An arrangement kept up to date is an alternative that does not need your home. |
| Whether HMRC has taken court action | A CCJ obtained by HMRC over unpaid tax shows on your credit file like any other CCJ. |
| Underlying trading performance | Whether the tax debt reflects a one-off difficult year or an ongoing decline in income. |
| How self-employed income is evidenced | Commonly 2 years of accounts or SA302s and tax year overviews, sometimes 1 year with some lenders. |
| Other credit issues | Whether the same period also led to defaults or missed payments elsewhere. |
| Loan to value | How much equity is available to raise the amount needed. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- The amount owed to HMRC and whether it relates to income tax, VAT or another liability
- Details of any existing Time to Pay arrangement and your payment history under it
- Your SA302s and tax year overviews for the relevant years
- Your credit reports from Experian, Equifax and TransUnion
- Your mortgage balance, deal end date and any early repayment charges
- An explanation of what caused the tax debt and your current trading position
Frequently asked questions
Is it better to remortgage or keep paying HMRC through a Time to Pay arrangement?
Neither is automatically better. A Time to Pay arrangement keeps the debt unsecured but adds a monthly commitment, while a remortgage clears the debt at once but secures it against your home. A regulated adviser must consider which is appropriate for your circumstances.
Can I remortgage to pay off HMRC if I already have a Time to Pay arrangement?
It can be possible. A lender will usually want to know the arrangement is up to date and understand why you want to clear it early rather than continue with the agreed payments.
Does paying off HMRC through a remortgage affect my credit file?
Unpaid tax on its own is not usually a standard credit file entry, so clearing it does not remove something visible in most cases. If HMRC has already obtained a CCJ, paying it marks the judgment satisfied but it still stays on your file for 6 years from the judgment date.
What if my tax debt is only part of a wider consolidation?
It is common to combine an HMRC liability with other debts, such as personal loans or credit cards, in one remortgage. Each amount you want to clear increases the total you need to borrow and your resulting loan to value.