A substantial tax bill does not necessarily indicate a financial problem.
For a self-employed barrister, it can arrive at a time when their practice is performing strongly, significant fees are outstanding and their wider financial position remains robust.
The challenge can simply be timing.
There is often a gap between work being completed, fees being billed and cash ultimately being received. A tax liability, however, has its own deadline. When those two timelines do not align, even a successful practice can face a temporary liquidity requirement.
The question is therefore not always whether the capital exists.
It is when it will become available, and what is the most appropriate way to bridge the period in between?
The Difference Between Income and Liquidity
Barristers can have a distinctive cash flow profile.
Work may have been completed and fees earned, but that does not necessarily mean the cash has been received. Henry Dannell’s Journey of the Bar guide highlights how the timing of income recognition and receipt can create meaningful fluctuations in a barrister’s financial position, particularly when considering the differences between cash and accrual accounting.
Chambers information may also provide a broader view of the practice, including work undertaken, payments received and aged debt.
This can create a situation where the underlying practice is healthy, but the cash required to meet an immediate liability has not yet arrived.
For me, this is where it becomes important to distinguish between income, wealth and liquidity.
A client can have significant income without having that income immediately available as cash. Equally, they may hold considerable wealth without wanting, or being able, to liquidate assets at short notice.
A temporary shortage of liquidity should therefore be understood within the context of the client’s wider financial position.
A Deadline Should Not Automatically Dictate The Strategy
When a substantial tax liability approaches, the natural reaction may be to generate cash from whichever source is most readily available.
That may not always be the most appropriate response.
A barrister could have investments or other assets that might be capable of providing liquidity, but accessing them may have wider implications. Alternatively, significant fees may be expected shortly after the tax deadline, creating a relatively short mismatch between the liability becoming due and cash reaching the client.
Borrowing should not be the automatic answer.
The starting point is to understand the size and duration of the liquidity requirement, what resources are available and when future capital is reasonably expected.
Only then can the different options be considered properly.
Where the requirement is genuinely short term and there is a clearly identifiable repayment strategy, bridging finance may form part of that conversation.
Where Bridging Finance May Fit
Bridging is short-term borrowing and needs to be approached as such.
In appropriate circumstances, property can potentially be used as security to provide access to capital while the borrower works towards a defined repayment event.
For a barrister facing a timing mismatch, that exit might be connected to expected fee receipts, a subsequent refinance or another clearly evidenced source of capital.
The important word is evidenced.
When I consider a bridging requirement, the ability to raise the initial capital is only one part of the assessment.
The more important question is:
How Will The Borrowing Be Repaid?
A credible exit strategy is fundamental to any short-term lending structure. Without one, borrowing intended to solve a temporary liquidity requirement can create a more significant and potentially expensive problem.
Flexibility Comes At A Cost
One of the attractions of bridging finance is its potential speed and flexibility.
That flexibility generally comes at a higher cost than conventional mortgage borrowing.
Depending on the facility, there may be interest, arrangement fees, valuation costs, legal fees and other charges. The overall cost will depend on the lender, the security offered, the length of the facility and the individual circumstances.
For that reason, available property equity alone is not a sufficient reason to use bridging finance.
The commercial rationale needs to make sense.
How much is required?
How quickly is it needed?
How long is the borrowing realistically likely to remain outstanding?
What is the total anticipated cost?
And, crucially, what happens if the intended exit takes longer than expected?
A higher cost of borrowing may be reasonable where it provides flexibility for a short, clearly defined period and avoids an alternative that is less appropriate for the client. But that conclusion can only be reached after considering the wider circumstances.
Understanding What Sits Behind The Cash Position
Working with barristers requires an understanding that a bank balance at a particular moment does not necessarily tell the complete story of the practice.
A barrister with a strong pipeline of work and substantial aged debt can have a very different underlying position from someone whose income has materially deteriorated, even if both face an immediate liquidity constraint.
Henry Dannell’s existing barrister guidance refers specifically to aged debt, case completion timelines and the importance of helping lenders understand the nuances of barrister income.
That distinction matters in specialist lending.
The purpose is not to ask a lender to disregard risk. It is to ensure that the circumstances behind the requirement are understood so the lender can assess that risk appropriately.
This reflects Henry Dannell’s broader approach to debt advice: looking beyond an isolated financing requirement and considering borrowing alongside liquidity, assets and the client’s wider financial objectives.
Plan For The Liability, Not Just The Deadline
The closer a client gets to a tax deadline, the fewer options they may have time to consider properly.
Where a potential liquidity requirement can be identified in advance, there is greater opportunity to understand the amount required, assess available security, consider expected cash flows and establish a credible repayment strategy.
That does not mean arranging borrowing simply because a tax bill is approaching.
Sometimes bridging finance may be appropriate.
Sometimes another form of borrowing may offer a better solution.
Sometimes using available liquidity may be preferable to borrowing at all.
The role of the adviser is to understand those options in the context of the client’s wider position rather than beginning with a particular product.
As Henry Dannell’s wider debt-advisory philosophy recognises, borrowing is most effective when it is considered as part of a broader strategy around liquidity and flexibility rather than as an isolated transaction.
A Liquidity Requirement Needs An Exit, Not Just A Solution
A substantial tax bill does not automatically mean a barrister is experiencing financial difficulty.
Sometimes it exposes something much simpler: a mismatch between when money is due and when money is received.
Specialist finance can potentially bridge that period, but the existence of a solution does not automatically make borrowing appropriate.
For me, the conversation comes back to three questions:
Why is the liquidity required?
How long is it required for?
Exactly how will the borrowing be repaid?
If those questions can be answered clearly, short-term finance can be considered within the context of the client’s wider financial position.
Because a tax bill has a deadline.
A well-structured response should have a strategy.
This article does not constitute tax advice. Clients should take advice from appropriately qualified tax advisers regarding their tax liabilities and payment obligations.
Bridging finance is typically secured against property. Your property may be repossessed if you do not maintain repayments or otherwise comply with the terms of borrowing. Bridging finance can be more expensive than conventional mortgage finance and should be considered carefully. Lending is subject to individual circumstances, security, status and lender criteria.
