Ask the Accountant

Is there any limit to the amount for a short-term loan from my company to myself?

14/02/2023

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Question

Is there any limit to the amount for a short-term loan from my company to myself as I am the sole director? The loan would be fully repaid with some interest during the current company’s trading year?

Answer

1. There is no particular limit but as a director you should be ensuring that no strain is put on the company finances and that you are happy the loan will be repaid on time.
2. A loan up to £10,000 can be taken with no interest charge. Over £10,000 and interest of 2% pa must be charged on the full amount. The interest rate will be reviewed in April 23.
3. It is best to ensure the loan is cleared in full by your year end.
4. If the loan is not cleared by the year ens then it must be reported to HMRC as part of the corporation tax return and a repayment date confirmed. If the repayment date is more than 9 months after the year end date, the company is charged corporation tax of 32.5% of the outstanding loan. This can be reclaimed from HMRC when the loan is repaid but it is likely to take over a year to get the refund. It is best to avoid repaying more than 9 months after the company year end.