The Intermediary – March 2026 - Flipbook - Page 75
S E C O N D C H A RG E
Opinion
A practical answer
to a timing problem
A
s we move closer to
the end of the UK
tax year, a familiar
paern starts to show.
Clients who have
been busy running
a business, managing a portfolio,
or simply keeping day-to-day costs
under control, sit down with their
accountant and realise the tax bill will
be higher than expected.
For some, it is not a lack of income,
it’s timing. Cash may be tied up in
the business, savings tucked away in
an ISA, fixed rate bond or invested
in their homes. However, HMRC
deadlines do not wait.
When the numbers do not stack up,
brokers and clients need options. Over
the past 12 months, there have been
several changes and announcements
that can push tax bills higher or make
late payment more costly.
Dividend tax rates are due to rise
from April 2026. From 6th April
2026, the ordinary dividend rate
will increase from 8.75% to 10.75%,
and the upper rate from 33.75% to
35.75%. That maers for directors
and shareholders who take income
this way, and it can change the size
of the bill they need to cover.
Income Tax thresholds are staying
frozen for longer. The 2025 Budget
confirmed the freeze will continue
until April 2031. When thresholds
stay still and incomes rise, more
people end up paying more tax, even
if the rates do not change.
Furnished holiday lets lost their
special tax treatment from April
2025. For clients who have run
holiday lets as part of their wider
plans, this can change the tax
position and, in some cases, increase
what they owe.
Late payment interest is more
punishing than it used to be.
HMRC links interest to Bank Rate,
and from 6th April 2025 the late
payment interest rate moved to
Bank Rate + 4% (up from +2.5%
before then). That makes ‘I’ll catch
up next month’ a much more
expensive choice.
The end result is that more clients will
have tax bills they did not fully set
aside for, or they will want to protect
cash for other reasons.
A second charge is not a ‘tax fix’, but
it can be a prudent way to raise funds
against property when the client has
equity but does not want to touch their
main mortgage.
In practical terms, it can help in
situations like:
A self-assessment client who is
planning ahead for the next cycle
of payments.
A business owner facing a
corporation tax bill, where cash is
tight at the wrong time.
A property investor with a Capital
Gains Tax (CGT) bill due,
where they do not want to sell
assets quickly.
A client who simply needs a lump
sum to sele HMRC, rather than
leing interest and penalties build.
We already see second charges
used well beyond the usual
debt consolidation and home
improvements reasons, from school
fees to business spend and other major
costs. A tax bill is oen another case of
the same issue, as the client has value
in the property, but needs funds at the
right time.
According to the Finance & Leasing
Association (FLA) data reported in
February, the second charge market
surpassed £2.14bn in new lending
in 2025, up 24% year-on-year, with
more than 41,700 new agreements
completed. Average loan sizes have
also risen, up to £51,198 in 2025.
Figures that demonstrate the
increased reliance being placed on this
form of finance.
The wider rate backdrop is also
changing. The Bank of England held
Bank Base Rate at 3.75% in its February
EDDIE LAU
is broker account manager
at Norton Broker Services
announcement, following a long run
of cuts since 2024.
As rates fall and stabilise, it
supports product pricing across
secured lending. It also helps brokers
hold clearer conversations about
affordability, because clients are not
dealing with the same level of rate
shock we saw earlier in the cycle.
At the same time, the number of
lenders is expanding and some of the
new names will be familiar – such
as Admiral.
More lender names, more product
choice, and stronger service standards
all help in the same way, as they
make it easier for advisers to feel
comfortable recommending second
charges when it is the right fit for
the client.
The new tax year should act as a
simple prompt for more second charge
conversations in the coming weeks.
For example:
Ask clients if they have had an
initial tax estimate for the year,
and whether any payment dates are
coming up.
Encourage them to speak to their
accountant early, not in the week
the money is due.
If there is a gap, map the options:
remortgage, unsecured borrowing,
Time to Pay, and second charge.
Treat the second charge like
any other secured lending
recommendation with clear
suitability, clear affordability, and
clear client understanding.
Second charges will not suit every
client, but for the right borrower, they
can provide a practical way to raise
funds for a tax bill while keeping the
first mortgage in place. ●
March 2026 | The Intermediary
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