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Director Loan Account

On Cloud 9 Accounting Director Loan Account, getting the balance right

What is a Direct Loan Account (DLA)

  • They money you take out goes into the DLA

  • You can borrow up to £10,000 without any tax implications

  • When your DLA is over £10,000 it is reduced back down by Dividends

What is a Director Loan Account

The Direct Loan Account is like a pot in that money taken out the company goes in as a liability; when you declare cash taken out, e.g., salary or divided, that pot goes down.

Equally, when you put money into the company, the put goes down.

You can let the pot build-up to £10,000 with no tax implications; however, when it goes over £10,000, you must pay Interest on the “Loan” from the company.

If you can’t pay off the money you have borrowed at Year-End, the Government will tax on it as if you had taken it as a dividend.

This Tax is called Section 455 and is payable along with your Corporation Tax; however, once you have paid back the money, you get your Sec 455 back.

Dividends

Dividends are payable after tax on your profit, so if you made £100k after-tax,£81k is available to take as a dividend after tax.

 

As a Limited company, you do not need to take it all out, thus saving you money in tax and giving you control of when you take your money out, a vital advantage of a Limited company.

 

You can take out up to £50k before hitting the higher rate tax threshold. Dividends are taxed at 8.75% up to £50k then 33.75%