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Q. What is the best way to take a Director’s loan from my company?
A. Director’s loan position is as follows:
- You can take a loan of up to £10,000 without needing to pay any interest to your company.
- If the loan exceeds £10,000 you will be charged 3% per annum and this appears as interest income for your company, so there will be 19% corporation tax on it but also extra profit for you as the shareholder so it is not all bad.
- Any loan needs to be repaid within 9 months after the end of the company year in which the loan is taken. So assuming a company year end date of 31/08/18, if you took a loan now it will need to be repaid within 9 months of 31/08/18, so by 31/05/19. Payment can be by paying money in or offset against salary, expenses or dividends, or a combination of all of these.
- It is best to repay or offset by the company’s year end if possible so HMRC do not see a loan in the accounts.
- If you are taking a loan which is in excess of the retained profit available then you are essentially taking out the companies tax money so you should do so with caution. The tax is also payable 9 months after the year end so as long as the loan is repaid, the tax money should be there.
- If the loan is not repaid by 9 months after the year end HMRC will charge the company Section 455 tax of 32.5% of the outstanding loan.
- In terms of recording it in your company, you just need to show it as Directors Loan in our Monthly Report spreadsheet and we will do the rest.
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