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Boost Your Business Cash Flow - Free Money From HMRC

small business cash flow

In this blog post, I'm excited to share three super quick and easy ways to instantly boost the cash flow in your business. The best part? It's cash from HMRC, absolutely free! Let's dive in.

1. Take Advantage of the VAT Direct Debit

One of the most overlooked opportunities in business finance is the VAT Direct Debit. Typically, when you pay your VAT bill to HMRC, the payment is due at the end of your VAT quarter, giving you one month and seven days to make the payment.

However, many small businesses tend to set up the payment a few days before the deadline to ensure it clears on time. This means most businesses end up paying their VAT bill around the 3rd or 4th of the month.

But here's the trick: HMRC usually takes the payment via direct debit around the 10th to the 12th of the month. By switching to the VAT Direct Debit scheme, you get to keep that cash in your business for an extra week. It's like getting a week's worth of free cash! Setting this up is straightforward—just log into your HMRC account and sign the direct debit mandate.

2. Switch to Annual Payroll for Directors

If your business has directors and you're running a monthly payroll, consider switching to an annual payroll. This approach has multiple benefits, both from a tax and cash flow perspective.

From a tax standpoint, running an annual payroll allows you to see all your personal income and business profits at the end of the year. This enables you to make the most tax-efficient decisions regarding salary, dividends, and possibly lump-sum payments into pensions.

Financially, you save on the costs of running monthly payroll since you only need to process it once a year. More importantly, it means you only pay any PAYE and National Insurance due to HMRC annually. This can significantly improve your cash flow throughout the year. If you haven't set up your payroll yet, you can do this when you register with HMRC. Otherwise, ask your accountant to contact HMRC on your behalf.

3. Utilize the VAT Cash Accounting Scheme

The VAT Cash Accounting Scheme is a fantastic yet underutilized method to boost cash flow. This scheme is available to businesses with a turnover of less than £1.35 million and is incredibly easy to implement.

Normally, VAT is calculated based on invoice dates, meaning you may need to pay VAT on sales before your customers have paid you. However, under the VAT Cash Accounting Scheme, you only account for VAT once the invoice has been paid. This means if you offer payment terms to your customers, or if you have overdue invoices, you won't need to pay VAT until the money is actually in your bank account.

Switching to this scheme can instantly add significant cash to your business. For some larger businesses I've worked with, the impact has been as much as £50,000 to £60,000 in immediate cash flow. There are no fees for using this scheme, and you don't even need to notify HMRC. Simply change the setting in your bookkeeping system, and you're good to go.


These three strategies—using the VAT Direct Debit, switching to annual payroll for directors, and utilizing the VAT Cash Accounting Scheme—are simple, effective ways to boost your business's cash flow instantly. Implementing these tips can provide you with extra cash that you can reinvest into your business or use to improve your financial stability.

Feel free to share your experiences or any additional tips in the comments. Let's keep the conversation going on how we can all improve our business finances!

By implementing these strategies, you can significantly enhance your business’s cash flow with minimal effort. If you have any questions or need further assistance, don’t hesitate to reach out!



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