Limited Company accounts

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Limited Company accounts

Postby chickenboy » Sat Aug 13, 2016 8:26 pm

Does anyone run their own Limited company?

I'm new to it, and as the sole shareholder and director, I believe that I can perfectly legally loan money to and from myself - as long as the books balance ideally at the end of the tax year.

So, If I have a large balance in my Ltd company bank account (0 interest), can I loan it to myself, collect the interest (obviously I'll end up paying tax on the interest in my personal tax return) and then return the load near the end of the tax year?

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Re: Limited Company accounts

Postby Sarah » Mon Aug 15, 2016 12:05 pm

I've no idea, but perhaps it would be liable for tax as a 'benefit in kind' unless you pay a market rate to borrow it? Just guessing...

Presumably you've already looked here?

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Re: Limited Company accounts

Postby chickenboy » Wed Aug 17, 2016 7:22 pm

Thanks Sarah, reading the link I think I can, and that it doesn't mean any extra tax liability...

You must keep a record of any money you borrow from or pay into the company - this record is usually known as a ‘director’s loan account’.

At the end of your company’s financial year

Include any money you owe the company or the company owes you on the ‘balance sheet’ in your annual accounts.

So if all is returned to the company accounts before the end of the tax year... Owings are ZERO.
-- This suggests no tax.

However, page 2 says...

If the loan was more than £10,000 (£5,000 in 2013-14)
If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:

    treat the loan as a ‘benefit in kind’
    deduct Class 1 National Insurance
You must report the loan on your personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest.

So... If i loan myself £9,999 and then repay before April, nil to pay.
If I loan myself £10K or over, I would have to pay the company back an additional 0.25% (BoE base rate), but can collect 3-5%

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Re: Limited Company accounts

Postby joker » Wed Aug 17, 2016 8:51 pm

No. The benefit in kind means you need to pay take on it if it less than the official rate. That's 3% currently. So you pay tax at your marginal rate between the official rate and the rate you have to pay the company.

Eg a loan at base rate 0.25%, if your marginal rate is 40%, then you would get 1.35% tax owed as well. Basically that would against the average rate if it is over 10k during the year at any point. Under 10k I don't have details on.

Please do your own research etc though, this is not tax advice and I'm definitely not qualified to comment officially.

All that said, where do you put the cash... I'm seriously thinking of mortgage overpaying now with places drying up.

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