Director's Loan Account
posted 22nd October 2021
Director's Loan Account
A director's loan is when you (or close family members) get money from your company that is not:
- a salary, dividend or expense repayment
- money previously paid into or loaned the company
You must keep a record of any money you borrow from or pay into the company.
At the company's financial year end
Include any money you owe the company/owes you on the 'balance sheet'.
You may have to pay tax on director's loans if you owe, depending on how/when you settle the account.
If the loan is more than £10k or you pay interest on the loan below official rate, you may have extra tax responsibilities
If you repay the loan within 9 months of the end of your Tax accounting period
If the loan was more than £5,000 (+ another £5,000 or more up to 30 days before or after you repaid it)
- Pay Corporation Tax at 32.5% of the loan
- After you permanently repay the original loan, you can reclaim the Corporation Tax - but not interest.
If you do not repay the loan within 9 months of the end of your Tax accounting period
- Pay Corporation Tax at 32.5% of the outstanding amount (+ interest)
- You can reclaim the Corporation Tax - but not interest.
If the loan is "written off" (not repaid):
- Pay Class 1 NI (via payroll) and Income tax on the loan (via Self Assessment tax return)
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