Can I make a loan to myself?

[K20Evo]

I've got a small business of which I am the only director/shareholder with no employees.

I want to purchase something personally, however don't have the full funds to do so at the moment.

From what I understand, as the value would be under £10k, I can create a director's loan that so long as it is fully paid by October 2021 (9 months after year end) it won't be taxable for the company or myself, and doesn't need.to be declared as a benefit in kind.

Can anyone confirm this please? If so, if it just a case of transfering the money, with a "contract" for formalities?

 

[Gordon - Commercial Finance]

No contract required, just send yourself money from the directors loan account.
If you have every intention to repay in the timescales you suggest, no issues.

 

[K20Evo]

No contract required, just send yourself money from the directors loan account.
If you have every intention to repay in the timescales you suggest, no issues.

Thanks, so straight transfer, assign it to Director Loan category in the books and pay it back?

 

[Cloud Accounting]

Yep, credit bank, debit DL account. Simples.

 

[Solly]

If you need to hold the loan over the end of the tax year it is taxed at 25%, but you get that as a credit when it is repaid.

Take a dividend or salary payment and replay the loan and it has zero cash effect.

 

[NicoJ]

@Solly

It's actually 32.5% now, not 25% otherwise everything else is correct.

As noted though as long as it is paid back within 9 months of the year end then there are no tax consequences. This can be physical cash or a credit as Solly is suggesting.

 

[Solly]

Changed since I did it then, thanks for the update

 

[MyAccountantOnline]

Thanks, so straight transfer, assign it to Director Loan category in the books and pay it back?

Yes that's correct.

You may have seen it already but if you want to read HMRC's guidance on directors loans it's here