directors loan

[Joop123]

Hi
Was just wondering if by lending my ltd company say £80k borrowed from a personal bank loan that I have just taken out , could I then charge the company the interest that I am being charged from the bank ? And if so is this interest payment to me liable to be taxable from a personal point ?

many thanks
Joop

 

[Arch Stanton]

Yes and yes.

The company can pay you interest less tax at 20%. The tax deducted is declared and paid to HMRC quarterly using form CT61. The amount of gross interest and tax should be declared on your tax return.

 

[Joop123]

Thanks for the reply, at present I pay myself a salary of £585 / month and dividends ...enough just to keep me under 40%. Am I correct in assuming that I can lower my salary to offset the interest income and thus pay no tax

joop

 

[Arch Stanton]

I think it might be better to keep your salary as it is and lower your dividend. But it is late and I may not be thinking straight.

 

[Truemanbrown]

You may find this blog useful!!!

 

[Joop123]

thanks guys

 

[SBlundell]

I don't know the specifics, but I have heard of someone using the same arrangement. However, they then claimed the interest they suffered personally on the bank loan as a tax allowable expense (against the interest they received from the company), resulting in no profit & therefore no liability on the interest income itself.

Effectively, Ltdco pays you interest for you to pay the bank the same amount of interest. Obviously it would have to satisfy the usual purposes of trade etc.

May be worth looking into?


Don't think I can link to HMRC, but try SAIM10000 and specifically SAIM10210 - may be time for your bean counter I think!