Director Loan Account

What is a Director Loan Account

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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.

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

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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.

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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.

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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.

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Dividends

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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%