Invoice factoring calculator, 2026/27

Invoice factoring hands your sales ledger and collections to a finance company in return for immediate cash. Enter your monthly invoiced sales, the advance rate and the fees quoted to see the cash released and the ongoing cost.

The invoice factoring 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. Factoring fees commonly run at around 1-4% of invoice value, plus a discount charge on the cash advanced, similar in structure to an overdraft. 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 factoring calculator

Your figures

Result, 2026/27

Cash advanced immediately

£34,000

Factoring fee (per month)

2.5% of invoiced sales
£1,000

Discount charge (per month)

8.5% annualised over 50 days
£396

Balance released once customers pay

£4,604

Estimated annual cost of the facility

£16,751

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 factoring advances a percentage of each invoice, typically 80-90%, as soon as it is raised, with the finance company then collecting payment directly from your customer and releasing the remaining balance, less charges, once paid. This calculator applies the advance rate to monthly invoiced sales to show the immediate cash released, then works out the factoring fee on invoice value and a discount charge on the funds actually advanced.

The factoring fee covers the sales ledger management and credit control the finance company takes on, and is usually charged as a percentage of turnover regardless of how quickly customers pay. The discount charge behaves like interest on an overdraft, calculated on the cash drawn down and the number of days it is outstanding, so slow-paying customers increase the cost.

Annualising the monthly cost gives a rough total facility cost for the year, which is the figure most useful when comparing factoring against a bank loan, an overdraft or invoice discounting for the same amount of cash released.

When factoring suits a company

Factoring is often used by younger or fast-growing businesses that lack the in-house credit control resource to chase payment themselves, or that want the finance company's credit checking on new customers as part of the service. It can also be a route to finance for a company that would not yet qualify for a confidential discounting facility.

Because collections are handled by the factor, customers know a finance arrangement is in place, which some businesses are comfortable with and others prefer to avoid, particularly where customer relationships are sensitive.

Weighing the cost against the benefit

The combined factoring fee and discount charge can look expensive next to a low-rate bank loan, but the comparison needs to include what the company saves on credit control staff time and bad debt protection if a non-recourse facility is used, as well as the value of turning sales into cash immediately rather than waiting 30-90 days.

For companies growing quickly, the ability to fund the growing sales ledger without waiting for customers to pay is often worth more than the headline percentage cost, provided margins are healthy enough to absorb the fee.

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

How is invoice factoring different from a bank overdraft?

An overdraft is a general facility secured on the business as a whole, usually with a fixed limit. Factoring is secured specifically against your unpaid invoices and grows automatically as your sales grow, which suits businesses whose main asset is a growing sales ledger.

Who deals with my customers if I use factoring?

The finance company takes over invoicing, statements and chasing payment, usually under your trading name but with customers aware a factor is involved, since payment is typically made to the factor's own bank account.

What is recourse versus non-recourse factoring?

Recourse factoring means your company remains liable if a customer never pays. Non-recourse factoring includes bad debt protection, so the factor absorbs the loss on approved invoices that are not paid, usually at a higher fee.

Is invoice factoring suitable for a very small company?

It can be, but minimum turnover requirements and set-up costs mean it is usually better value once monthly invoiced sales reach a reasonable scale. Smaller or occasional cash needs are often better served by a short-term loan or overdraft.

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.

Key tax terms explained

Talk to an accountant

Tell us what is getting in the way.

Share your next deadline, accounting problem or growth question. We will reply with a clear next step and quote any technical work before it begins.

Chat with ACCOTAX on WhatsApp
Free, no obligation

Book a call

Pick a time that suits you and a qualified accountant will call you about your company, deadlines and fees.

020 3441 1258 WhatsApp us

Appointments run Monday to Friday, 9:00am to 5:30pm. Your confirmation is emailed straight away.

Four London offices

Meet us in Morden, Croydon, Chelsea or Mitcham

Work with us entirely online, or sit down with your accountant at whichever office suits you. Open Monday to Friday, 9:00am to 5:30pm. Office visits are by appointment only, so please book before coming in.

Morden, Surrey12 London Road, Morden, SM4 5BQHead office, two minutes from Morden Underground station.DirectionsRead ACCOTAX Google reviews
Croydon73 Park Lane, Croydon, CR0 1JGCentral Croydon, minutes from East Croydon station.DirectionsRead Croydon Google reviews
ChelseaM-112, 65-69 Lots Road, SW10 0RNWest London base for Chelsea, Fulham and Kensington clients.DirectionsRead ACCOTAX Google reviews
Mitcham141 Morden Road, CR4 4DGServing Mitcham, Tooting and the CR4 postcodes.DirectionsRead Mitcham Google reviews

Free, no obligation

Book a call

Pick a time that suits you and a qualified accountant will call you about your company, deadlines and fees.

Appointments run monday to friday, 9:00am to 5:30pm. Your confirmation is emailed straight away.

WhatsApp