Borrowing Money to your Ltd Company

[finest123]

Hi All

I was watching a video from an accountant who seems to think that you can borrow your company money and provided your personal income is under the tax threshold then you can take advantage of getting an additional 5,000 Tax Free interest allowance. Which I already knew about if its interest from savings but this is interest from a loan?

His video is here: https://www.youtube.com/watch?v=kT-6hP9cbGU&t=1s

Just wondering what other peoples thoughts were

 

[UK Contractor Accountant]

this is interest from a loan?

Still classed as non earned income.

plus you have to mess around filling in CT61, deduct tax from the loan interest paid and pay oveer to HMRC.

 

[finest123]

so it would be ok to claim up to 6000 tax free interest on this kind of arrangement?

 

[UK Contractor Accountant]

Starting rate for savings​

You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings.

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.

If your other income is £17,570 or more​

You’re not eligible for the starting rate for savings if your other income is £17,570 or more.

If your other income is less than £17,570

Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.


Example
You earn £16,000 of wages and get £200 interest on your savings.
Your Personal Allowance is £12,570. It’s used up by the first £12,570 of your wages.
The remaining £3,430 of your wages (£16,000 minus £12,570) reduces your starting rate for savings by £3,430.
Your remaining starting rate for savings is £1,570 (£5,000 minus £3,430). This means you will not have to pay tax on your £200 savings interest.

Personal Savings Allowance​

You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you’re in. This is your Personal Savings Allowance.


To work out your tax band, add all the interest you’ve received to your other income.

Income Tax band	Personal Savings Allowance
Basic rate	£1,000
Higher rate	£500
Additional rate	£0

 

[Newchodge]

I am totally confused. Your title is borrowing to a ltd comaony. You borrow from or lend to. Who do you think is lending to whom?

 

[UK Contractor Accountant]

You borrow from or lend to

the latter he is talking about

 

[japancool]

I am totally confused. Your title is borrowing to a ltd comaony. You borrow from or lend to. Who do you think is lending to whom?

Oh, I dunno - round these parts, people often say "borrow" instead of "lend" and vice versa. Though this is Yorkshire.

 

[finest123]

It would be a director of a company lending the company money.

Would a CT61 need to be filled in every quarter? @UK Contractor Accountant

 

[BusterBloodvessel]

Oh, I dunno - round these parts, people often say "borrow" instead of "lend" and vice versa. Though this is Yorkshire.

One of my biggest pet hates! "Can I lend a pound off you?"

No. You can borrow a pound....or I can lend you a pound!

 

[UK Contractor Accountant]

Would a CT61 need to be filled in every quarter? @UK Contractor Accountant

yes if you paid interest monthly or quarterly

 

[Argentum Tax]

yes if you paid interest monthly or quarterly

It would be the company paying the interest surely, and the company would need to file the CT61.

 

[finest123]

deduct tax from the loan interest paid and pay oveer to HMRC.

Would the tax be reclaimable? If the interest paid is under £6,000

 

[UK Contractor Accountant]

yes if you paid interest monthly or quarterly

"You" meaning your personal service company (PSC).

 

[UK Contractor Accountant]

Would the tax be reclaimable? If the interest paid is under £6,000

via you Personal Tax Return filing - yes.

That's assuming you don't have other income for the year not taxed at source which will eat away at the tax already paid.