Make sure you are managing your director’s loan account properly

It would be worth here refreshing your memory from our July post “Changes to how your director’s loan account function” … In summary, tax implications apply when a shareholder still owes the company money more than 9 months following the end of a company’s accounting period.

In this case, the company currently pays 25% of the total loan amount to HMRC.  The money is recoverable from HMRC once the loan is repaid in a subsequent year.

The latest from HMRC is that they are looking to potentially increase this rate to 40%! Although in the same breath there is also a rumour of a different method whereby the tax rate will be reduced significantly to 5% but with no option for a tax refund when the loan is repaid (which is the current option). It really means just keeping on top of your director’s loan account and making sure you are recording money in and money out and the sources thereof.