Invoice discounting calculator, 2026/27

Invoice discounting lets a company borrow against its unpaid invoices while keeping collections in-house and confidential from customers. Enter your outstanding sales ledger, the advance rate and the charges quoted to see the cash you could release.

The invoice discounting calculator runs on the rates and thresholds HMRC has published for the 2026/27 tax year, so the figures you see reflect the position your company is actually filing on rather than a historic set of bands. Change any input and the result recalculates immediately, with no sign-up and nothing sent anywhere.

If you are a director of a UK limited company, use it as a first look before a decision rather than as the decision itself. Advance rates typically run at 80-90% of approved invoice value; the remaining balance is released, less charges, once the customer pays. Real company positions bring in other income, reliefs, group structures and prior year adjustments that a single page of inputs cannot see, which is why the workings are written out below under business finance & profitability. Read those, then check the numbers against your own accounts, and speak to us if anything looks materially different from what you expected.

Last reviewed 12 September 2026 for the 2026/27 tax year. Reviewed by Waqas Sagar, Member of ICAEW, Fellow of ACCA, Fellow of AAT.

Invoice discounting calculator

Your figures

Result, 2026/27

Cash released against invoices

£85,000

Service fee

0.5% of the sales ledger
£500

Discount charge for the period

8.0% annualised over 45 days
£838

Net cash after charges

£83,662

Total cost of funding

£1,338

Illustration only, figures are based on the rates you have selected and the information entered. Please check your own position with us before acting.

Estimates for the 2026/27 tax year using published GOV.UK rates. Switch between 2026/27 and 2025/26 above.

How this is calculated

Invoice discounting releases an agreed percentage of your approved sales ledger, typically 80-90%, as soon as invoices are raised, with the balance paid over once the customer settles, less charges. This calculator multiplies your outstanding ledger by the advance rate to show the cash released, then applies a service fee on the ledger value and a discount charge, essentially interest, on the funds actually drawn, prorated for how long invoices typically stay outstanding.

The discount charge is usually quoted as an annual percentage, often referenced to Bank of England base rate plus a margin, and is only charged on the amount actually advanced and for the days it is outstanding, which is why average collection days materially affects the total cost.

Unlike invoice factoring, discounting is confidential: your company keeps running its own credit control and collections, and customers are typically unaware a finance arrangement exists, which suits companies with an established credit control function that do not want customers redirecting payments to a factor.

When invoice discounting suits a company

It tends to suit established businesses with a track record of managing their own collections, a reasonably diversified customer base, and a genuine need to release cash tied up in a growing sales ledger rather than to fund a struggling business. Lenders typically look for a minimum turnover and a robust credit control process before offering confidential facilities.

It is commonly used to fund growth, smooth seasonal cash flow, or bridge the gap between paying suppliers and staff and collecting from customers on 30, 60 or 90 day terms.

Comparing the real cost

The headline advance rate is only part of the picture. The service fee, discount charge, any minimum fee commitments and arrangement fees all reduce the net benefit, so it is worth comparing the effective annual cost across providers rather than the advance rate alone.

Because charges are linked to how quickly customers pay, tightening your own credit control can materially reduce the cost of the facility over time, since funds are drawn for fewer days.

What this means for your company

Treat the result as a planning figure for the 2026/27 tax year. If it changes what you were about to do, take a director's salary, a dividend, a large asset purchase or a filing decision, check it against your own accounts first. We can review the position with you and confirm the tax treatment before you commit.

Frequently asked questions

What is the difference between invoice discounting and invoice factoring?

Discounting is confidential: you keep control of credit control and collections and customers are unaware. Factoring involves the finance company taking over collections and often disclosing the arrangement to customers, usually at a somewhat higher fee.

What advance rate can I expect?

Most facilities advance 80-90% of approved invoice value upfront, releasing the balance, less charges, once the customer pays. The exact rate depends on your sector, customer concentration and credit control track record.

Does invoice discounting show up to my customers?

No, that is the main distinction from factoring. Invoices, statements and collections continue under your own company name, and the finance arrangement is not disclosed to customers.

What does invoice discounting actually cost?

Typically a service fee of around 0.2-1% of turnover plus a discount charge similar to an overdraft rate, applied only to funds drawn and for the days they are outstanding, so faster-paying customers reduce the overall cost.

These calculators are provided for general illustration and do not constitute tax or financial advice. Results depend on the accuracy and completeness of the information entered, and on circumstances this tool cannot capture, including residence, other income, reliefs, group structures and prior-year positions. Rates and thresholds are those published by HMRC for the tax year selected and may change. You should not act, or refrain from acting, on the basis of these figures alone. For advice specific to your company, book a free consultation.

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