April 7th, 2015
Can I take a loan from my company?
The short answer is ‘yes’.
However, as with anything in life, there are consequences to be aware of – you or your company may have to pay tax. In overview:
If the directors’ loan account is more than £10,000 at any time in the year:
- Treat the notional interest on the loan as a benefit in kind – currently the official rate is 3.25%
- You must include this on your tax return
- Pay Class 1A NI on the value of the benefit
- Report the value of the benefit on a P11D
You’ll need to have good enough records so that you actually know your loan account is overdrawn. If you find out too late then you may already have missed the deadlines.
If the directors’ loan account balance is less than £10,000:
- If you repay the loan within 9 months of your company year end:
- you must show the outstanding balance at the year end on your Company Tax return
- you have no personal responsibilities
- you can’t just repay the loan and borrow it back again. Special ‘matching’ rules apply.
- If the loan is still outstanding 9 months after your company year end:
- you must show the outstanding balance at the year end on your Company Tax return
- pay 25% of the outstanding amount as Corporation Tax (this will be repaid to you once the loan is repaid)
If you are considering taking a loan from the company please contact us for advice before you do so to ensure the correct reporting requirements are in place and you are certain of the effects for the company and for yourself personally.
