Reply to: Loaning money to yourself to avoid paying out dividends

[TheCyclingProgrammer]

Contrary to what everyone else is saying, you can loan money to your shareholder wife subject to the same rules as any other director's loans. Shareholders can have loan accounts too.

For the purpose of s455 a "director's loan" is really just a "loan to participator" and "participator" in this case includes directors and shareholders. Both loans would need to be repaid within 9 months of the financial year to avoid an s455 tax charge.

The BIK issue is a bit trickier if your wife isn't a director or employee and you should get advice from your accountant - I suspect that any BIK on the beneficial loan may be assessed as if it were loaned to you, therefore for the purposes of of working out the BIK you would need to calculate it on the total loaned to both of you. You could charge interest on the loans at HMRC rates to avoid a BIK charge, or you could declare the total loan as a BIK on your tax return.

I expect your accountant has explained to you the benefits of your shareholding wife also being a company officer?

[Lance]

Better to keep the loan below £10k to avoid BIK/interest charges, no? So smaller loans to multiple directors may make more sense overall.

I suppose if you want to borrow between £10k and £20k. Not sure if that is worth adding a director for though.

Maxing out 2 persons ISAs is £40k anyway.

[SuperLooper]

There is no tax on a DL (as long as it's full repaid within 9 months of company year end)
There is no monetary limit to a DL.
Any tax paid if the DL is not repaid in time is a company tax (32.5%).

Better to keep the loan below £10k to avoid BIK/interest charges, no? So smaller loans to multiple directors may make more sense overall.

[Lance]

Well you and eek both said "not for your wife", so her being a director would make a difference

eh????
There is no tax on a DL (as long as it's full repaid within 9 months of company year end)
There is no monetary limit to a DL.
Any tax paid if the DL is not repaid in time is a company tax (32.5%).

So on what planet does having another director make a blind bit of difference to a DL?
Clue : it doesn't

[WTFH]

OK, do you understand the difference between "Can't" and "Don't want to"?

There are very few reasons why a company can't make someone a director, but there are a multitude of reasons why a company might not want to make someone a director.

[pr1]

You can't make a directors loan to someone who isn't a director.

Which is exactly why I asked

Is there a reason you can't make your wife a director?

[WTFH]

Well you and eek both said "not for your wife", so her being a director would make a difference

You can't make a directors loan to someone who isn't a director.

[pr1]

no reason at all.
It makes no difference for the scenario described. So the correct question would be "Why do you WANT to make your wife a director?"

Well you and eek both said "not for your wife", so her being a director would make a difference

[Lance]

Is there a reason you can't make your wife a director?

no reason at all.
It makes no difference for the scenario described. So the correct question would be "Why do you WANT to make your wife a director?"

[pr1]

Is there a reason you can't make your wife a director?

[cannon999]

yes to you. not your wife. Not that it matters either way as director loans don't attract personal taxation.

Why though???? You're not going to get a cash ISA that pays the 2.5% you need to pay for the loan.
And what happens this time next year when you're run out of personal cash again.


Stop pissing about with tax wheezes. You're gaining nothing here.

It's not about the % it's about the fact that ISA allowance renews in April so I want to make sure that I have used up this year's allowance.

Well hopefully next year I will be more sensible with spending...

[Lance]

yes to you. not your wife. Not that it matters either way as director loans don't attract personal taxation.

Why though???? You're not going to get a cash ISA that pays the 2.5% you need to pay for the loan.
And what happens this time next year when you're run out of personal cash again.


Stop pissing about with tax wheezes. You're gaining nothing here.

[cannon999]

You say you are "short" of money, but then you say it's to put into an ISA, so it's not that you're short, you're just trying to reduce your taxes.

Well... duh?

[WTFH]

You say you are "short" of money, but then you say it's to put into an ISA, so it's not that you're short, you're just trying to reduce your taxes.

[northernladuk]

Can you give your non director wife a directors loan... Hmm.. Lemme think about that one...