Is it always cheaper to fund the VAT myself?

In direct cost, yes — there is no interest or arrangement fee. Whether it is cheaper overall depends on what else that capital could do during the one to three months it sits with HMRC.

How do I put a number on the opportunity cost?

Identify the next best use of the money. If it is a deposit on another acquisition, the cost is the return on that deal. If it would sit in a deposit account, the cost is close to the interest foregone.

What if I am not sure how long the reclaim will take?

Model it across a range. The difference between a six-week and a fourteen-week reclaim is substantial, and the main driver is how close your completion date is to your VAT quarter end.

Does self-funding carry any risk?

The main one is concentration. If an HMRC enquiry delays the refund and that capital was needed elsewhere, you have a liquidity problem with no facility in place to solve it.

Costs, SDLT and tax

The True Cost of Funding the VAT Yourself

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Self-funding the VAT has an obvious appeal: no lender, no fee, no interest. For many buyers it is the right answer.

But "free" is doing a lot of work in that sentence. The money is not free — it is just that the cost does not appear on an invoice.

What you are actually deciding

On a £1.5m purchase where the seller has opted to tax, the VAT is £300,000. You will get it back. The question is only what that £300,000 does in the meantime.

	Self-fund	VAT bridge
Interest and fees	None	Roughly £5,400 over 60 days at 0.03%/day, plus arrangement fee
Capital committed	£300,000 for 1–3 months	Minimal
Capital available for other uses	None of it	All of it
Exposure if HMRC is slow	Your own liquidity	Facility term, agreed in advance

Putting a number on it

The cost of self-funding is the next best use of that money over the reclaim period. Be specific about what that is:

If it is a deposit on another acquisition. The cost is whatever that deal would have returned — or, if the deal is lost because the capital was unavailable, the whole opportunity. This is usually the largest number by a wide margin.

If it is working capital in a trading business. The cost is the margin on the activity it would have funded, or the cost of the overdraft you draw instead.

If it would sit in a deposit account. The cost is close to the interest foregone, which is modest. In this case, self-fund.

If it is the difference between completing and not completing. This is not an optimisation question at all. Fund it however you can.

The useful discipline is refusing to answer in the abstract. "Capital is valuable" is not a number. "This £300,000 is the deposit on the unit we are buying in March" is.

The reclaim period is not fixed

The comparison depends heavily on how long the money is out, and that is partly within your control.

A purchase completing shortly before your VAT quarter ends might see the refund in around six weeks. The same purchase completing shortly after a quarter end can wait close to five months.

So the honest version of the calculation is a range, not a point. Work out both ends before deciding.

What self-funding does not cover

Two costs are the same either way, and both get forgotten:

SDLT on the VAT. Stamp duty is calculated on the VAT-inclusive price. That additional stamp duty is permanent and unrecoverable, whether you bridge the VAT or fund it yourself.
The reclaim admin. Registration, the option to tax, the return, the HMRC evidence pack. These have to happen regardless.

When self-funding is clearly right

The VAT is small relative to your free cash
The money has no competing use in the next quarter
Your completion falls just before a VAT quarter end, so the reclaim is short
The entity has a clean filing history, making a fast repayment likely

When it clearly is not

The capital is already allocated to another deal
You are buying at auction with a fixed completion and limited headroom
A newly formed SPV is making a large first claim, where HMRC verification is likely
Losing access to the money for a quarter would constrain the business

The question worth asking

Not "can I afford to fund the VAT?" — most buyers can. The better question is:

What is the best thing this money could do over the next three months, and is leaving it with HMRC better than that?

If the answer is yes, self-fund without hesitation. If it is no, the financing cost is buying you something more valuable than it costs.

This guide is general information, not financial advice. The right structure depends on your circumstances — discuss it with your accountant or adviser.

Frequently asked questions

Is it always cheaper to fund the VAT myself?: In direct cost, yes — there is no interest or arrangement fee. Whether it is cheaper overall depends on what else that capital could do during the one to three months it sits with HMRC.
How do I put a number on the opportunity cost?: Identify the next best use of the money. If it is a deposit on another acquisition, the cost is the return on that deal. If it would sit in a deposit account, the cost is close to the interest foregone.
What if I am not sure how long the reclaim will take?: Model it across a range. The difference between a six-week and a fourteen-week reclaim is substantial, and the main driver is how close your completion date is to your VAT quarter end.
Does self-funding carry any risk?: The main one is concentration. If an HMRC enquiry delays the refund and that capital was needed elsewhere, you have a liquidity problem with no facility in place to solve it.

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