Directors Loan partially repaid in following year

[DavidHoul52]

In the Corporation Tax return for the end of my companies last tax year I declared an amount as a director's loan. I also stated that this would be converted to dividends after 9 months. However, as the company is not earning any income in the present tax year and no provision was made for funds to pay Corporation Tax I have paid it out of my own pocket. I have also paid in money to cover the companies admin expenses. If my company makes a loss in the current year will I still have to pay personal income tax on the whole dividend even though a portion has (in effect) subsequently been paid back into the company?

 

[MyAccountantOnline]

If my company makes a loss in the current year will I still have to pay personal income tax on the whole dividend even though a portion has (in effect) subsequently been paid back into the company?

Directors loans and dividends are two very different ways of extracting funds from a company and just because you repaid a loan personally that doesn't effect dividends or tax on the dividends.

Do bear in mind a company can only pay a dividend if it has sufficient after tax profits to do so, and that you dont actually pay any Income tax on dividend income personally unless you are a higher rate tax payer.

 

[MyAccountantOnline]

Just a thought are you thinking of the 25% tax charge on an overdrawn directors loan and if that is repayable when you repay the loan?

 

[bmminiparts]

Your directors loan is an account set up that all personal payments get transferred into. if you lend your business £10k, then the directors loan would then be £10k and you can withdraw this whenever the company has any available funds.

This will not be taxed and is separate from dividends as advised above. If your company make a profit and you chose to accept dividends these can be added to the directors loan, you don't need to draw them unless you want too.