Can you lend your LTD money and pocket the interest

[Old Greg]

With 10k to play with, the OP could get a 20% return through the Oude Joris Max 120 Carousel product.

[Lance]

He'd then pay tax on the money he made from the interest as well.....

It was a ******* stupid question from a ******* stupid idiot.
Who probably only posted to tell you where to go (it seems you didn't
Maybe he's after a record for being banned fastest. Or for being banned the most in a certain amount of time.

Or he's a pr1ck

[northernladuk]

He'd then pay tax on the money he made from the interest as well.....

[WordIsBond]

Let me think about this for just a few seconds.

Ok, I thought about it.

You can loan £10K to YourCo, and pay yourself 3% interest for a year. You are now £300 richer and YourCo £300 poorer. If you actually could save the CT, YourCo would recover £57, so YourCo would only be £243 poorer. Great deal, you extracted a few hundred quid from YourCo.

Alternatively, you could loan £10K to Marcus and get 1.45%. If you are willing to lock it away for a year, you could loan it to Metro Bank and get 1.8%, but let's use Marcus. So in this case, you are £145 richer, YourCo is neither richer nor poorer, and Marcus is £145 poorer (if you care).

You can loan the money to YourCo and make YourCo poorer, or you can loan the money to a bank and make the bank poorer. If you want the full £300, pay yourself a bigger dividend, you'll still be ahead by putting the money in savings, even if you pay higher rate dividend tax.

If YourCo needs a loan, and you have the money and want to do it, by all means make the loan. And if you do, yes, by all means pay interest on it, if you want the bureaucratic hassle of it, you'll save a little on taxes that way. But if the company doesn't need the loan, this is a money-loser. Put the money in savings instead.

This comment is not for the benefit of OP, but for anyone else who reads this thread. OP is banned again, I see. Commendable.

[ChimpMaster]

Higher rate tax payers get £500 interest, tax free.

The (ever convoluted) rules are that when the company pays interest to you, it has to deduct 20% tax at source and pay it to HMRC. You will then need to make a claim for that tax on your self-assessment, to retrieve the 20%.

A specific form has to be submitted too HMRC.

I have actually lent personal funds to our Property SPV, but not bothered claiming interest because HMRC make such a meal out of these simple things.

BTW I have an awesome accountant if you ever need to go beyond the basics of contractor accounting.

[craigy1874]

Test it against the general rule: would the loan be "wholly and exclusively" for business purposes? Would you be able to convince HMRC in the event of an inspection? If the answer to either of these is no, then the interest you charge YouCo would not be tax deductible for CT purposes.

The £1000 personal savings allowance is only available if you're a basic rate tax payer and I suspect it would not cover interest that you have charged a company you own for a loan:

Tax on savings interest - GOV.UK



Does this answer your question?

Your first part is exactly what I was getting at. If the loan wasn't used for a business purpose then the loan interest is not deductible.

You can, however, use the savings allowance against any type of interest, including from your limited company.

[pscont]

Test it against the general rule: would the loan be "wholly and exclusively" for business purposes? Would you be able to convince HMRC in the event of an inspection? If the answer to either of these is no, then the interest you charge YouCo would not be tax deductible for CT purposes.

The £1000 personal savings allowance is only available if you're a basic rate tax payer and I suspect it would not cover interest that you have charged a company you own for a loan:

Tax on savings interest - GOV.UK



Does this answer your question?

Yes, thanks.

[TheCyclingProgrammer]

Re CT I am not sure. Hence asking.
2. Nothing really. Should not be a problem to take a loan and not utilize it asap, should it?

Test it against the general rule: would the loan be "wholly and exclusively" for business purposes? Would you be able to convince HMRC in the event of an inspection? If the answer to either of these is no, then the interest you charge YouCo would not be tax deductible for CT purposes.

The £1000 personal savings allowance is only available if you're a basic rate tax payer and I suspect it would not cover interest that you have charged a company you own for a loan:

Tax on savings interest - GOV.UK

Savings covered by your allowance
Your allowance applies to interest from:

bank and building society accounts
savings and credit union accounts
unit trusts, investment trusts and open-ended investment companies
peer-to-peer lending
trust funds
payment protection insurance (PPI)
Your allowance also applies to interest from:

government or company bonds
life annuity payments
some life insurance contracts

Does this answer your question?

[pscont]

Will the company save the CT though? Does the loan interest qualify for CT relief? What will the company do with the funds you give to it ?

More questions than answers at this stage for me.

Re CT I am not sure. Hence asking.
2. Nothing really. Should not be a problem to take a loan and not utilize it asap, should it?

[craigy1874]

You know me - I always try to find a way to pay less taxes, lawfully. <modsnip>

Now, a question for the knowledgeable. If have some personal money can I lend it to my LTD and the LTD to pay me interest at say 3% (2.5% is the HMRC's official average rate).

What will I achieve? Well LTD will save 19%(17%) on the interest amount, I will get some interest and if it is <£1000, no personal tax. First part is not much, £1000 in my pocket is a nice holiday.

Will the company save the CT though? Does the loan interest qualify for CT relief? What will the company do with the funds you give to it ?

More questions than answers at this stage for me.

[pscont]

You know me - I always try to find a way to pay less taxes, lawfully. <modsnip>

Now, a question for the knowledgeable. If have some personal money can I lend it to my LTD and the LTD to pay me interest at say 3% (2.5% is the HMRC's official average rate).

What will I achieve? Well LTD will save 19%(17%) on the interest amount, I will get some interest and if it is <£1000, no personal tax. First part is not much, £1000 in my pocket is a nice holiday.